THE
ETHICAL
VA L U E
CHAIN
INTRODUCTI
ON
• The real purpose of ethical
business is to create value
(satisfying society’s needs and
wants)
• The process of creating value
requires a considerable
investment of time and effort.
INTRODUCTION
• Ethical value chain:
• looks at generic activities that run across the
business model and cover every function and
activity.
• Considers value created for the company and
value creation for stakeholders (everyone
affected by the company’s operation in some
way .
C O M PA N Y I N F O C U S : TATA G R O U P
• Founded
by
Jamsetji
Nusserwanji
Tata in 1868 and headquartered in India,
the
Tata
group
is
a
global
business conglomerate operating in over
100 countries across 6 continents.
• Tata group today has a strong presence
across diverse industries such as
agrochemicals, automotive, chemicals,
construction, finance, consumer products,
and hospitality.
TATA G R O U P ’ S C O D E O F C O N D U C T
The following stakeholders who are
deemed to be importance:
• Employees
• Joint venture partners
• Customers
• Financial stakeholders
• Communities and the Environment
• Governments
• Value chain partners – suppliers, service
providers, distributors, sales rep,
contractors, consultants, intermediaries
and agents
• Individual companies with the Tata
Group
• ALL STAKEHOLDERS are treated
with EQUAL FAIRNESS.
• We treat our customers well and
ensure they are looked after does
not mean we can MISTREAT our
employees with impunity.
• Delta Airlines employees shifted
from being famous for “serving with
a smile” to being unhappy and
grumpy when they cut training
budget and squeeze on wages.
• John Patterson who turned the
National Cash Register into a
world class company because he
was caring and compassionate to
his employees but hostile and
ruthless to his rivals in the
market.
• NCR paid a heavy fine, while JP
could have been imprisoned if
not because of his extensive
record as a philanthropist.
ESTABLISING THE ETHICAL POSITION
COMMUNICATING VALUES AND STANDARDS
MONITORING ETHICAL PERFORMANCE
ENSURING CONTINUITY
FIGURE 2 The ethical value chain
E S TA B L I S I N G T H E
ETHICAL POSITION
• Review the Four Ethical
Lenses for DecisionMaking in Business
FOUR
ETHICAL
LENSES FOR
BUSINESS
DEONTOLOGY
Focuses on rules, duties, and obligations.
Morality is judged by adherence to principles.
Actions are right or wrong, regardless of outcomes.
Key philosopher: Immanuel Kant
UTILITARIANISM
• Focuses on outcomes and
consequences.
• Morally right action maximizes
overall happiness.
• Greatest good for the greatest
number.
• Key philosophers: Bentham & Mill
PRAGMATISM
• Ends and means cannot be separated
• No hard and fast rules
• Each situation is different
• Make decisions you believe that will have the
best possible outcomes
• Key philosopher: John Dewey
VIRTUE ETHICS
• Focuses on moral character and virtues.
• Ethical behavior stems from virtuous traits.
• Emphasizes being a good person, not just following rules.
• Key philosopher: Aristotle
E S TA B L I S I N G T H E E T H I C A L P O S I T I O N
Establishing the ethical position means:
• What its values are
• What it stands for and believes in
• What activities it is willing to tolerate
• What is unacceptable
E S TA B L I S I N G T H E E T H I C A L P O S I T I O N
Existence of deontology, utilitarianism, pragmatism and
virtue ethics
• Deontology – establishing principles of right and wrong (Code of
conduct)
• Utilitarianism – examine the value it creates for each of the stakeholder
groups above
• Pragmatism – how we do things is just as important as what we do, or
what our objective is.
• Virtue ethics – What kind of organization do we want to be?
M O N D R A G O N C O M PA N Y
• Founded by a priest Jose Maria
Arizmendiarrieta in Basque, Spain
• A group of worker-owned cooperatives
• When individual cooperatives do well, their
members share in the profits.
• When times are hard, the cooperatives
collectively support one another, sharing
funds and reallocating workers among
themselves to preserve jobs.
FOUNDING
PRINCIPLES
• Democratic organization
• Sovereignty of labour
• The instrumental and subordinate nature of capital
• Participatory management
• Inter-cooperation between the firms within the group
• Social transformation
• Education
C O M M U N I C AT I N G VA L U E S A N D
S TA N D A R D S
LEAD BY EXAMPLE (walk your talk /
practice what you preach)
• We admire people who behave ethically
• We tend to support them and draw closer to them
• Social learning - We even model our behavior on
theirs
C O M M U N I C AT I N G VA L U E S A N D
S TA N D A R D S
AUTHENTICITY – being genuine and communicating
who you really are rather than trying to pretend who
you are not
• Saying “Thank you” to people in a professional context is
extremely powerful.
• Leading by example and authenticity to ALL
stakeholders (employees, customers and
shareholders)
C O M M U N I C AT I N G VA L U E S A N D
S TA N D A R D S
• PROMULGATING THE CODE OF CONDUCT
• Communicating the code of conduct can serve as a
signpost for staff and stakeholders
• Letting people know what you stand for, what you believe
to be right or wrong is essential
• It involves DESIRED and PROHIBITED behaviors
C O M M U N I C AT I N G VA L U E S A N D
S TA N D A R D S
• TALKING AND LISTENING
• An “I talk, you listen” approach can breed resentment and passive
resistance
• Consider also the ethics of other people
• We argue logically, with dignity and respect for opposing points of
view
• We need to explain what is in it for them
COMMUNICATING ETHICAL VALUES AND PRINCIPLES SHOULD
TAKE THE FORM OF A DIALOGUE.
C O M M U N I C AT I N G VA L U E S A N D
S TA N D A R D S
• Deontology: communicate the required standards and code
of conduct
• Consequentialism: explain and discuss the value being
created and the consequences of business activity
• Pragmatism: build multiple relationships with different
stakeholders to hear diverse points of view
• Virtue Ethics: be the kind of person you want to be, and
courage others to do the same
MONITORING ETHICAL PERFORMANCE
Ethical performance should be a matter of:
a. Getting an overall feeling for whether the business is
moving towards its goals and creating a maximum of
value with a minimum of externalities
b. Whether any individuals are, through either error or
deliberate action, behaving in an unethical manner.
WHEN BUSINESS FAILURES HAPPEN, IT IS
IMPORTANT TO RESPOND WITH KINDNESS AND
COMPASSION.
C O M P A N Y I N F O C U S : M A L AY S I A
AIRLINES
• Incident of Malaysia Airlines MH370
• Malaysian Airlines management message:
“Malaysia Airlines deeply regrets that we have to
assume beyond any reasonable doubt that
MH370 has been lost and that none of those on
board has survived. As you will hear in the next
hour from Malaysia’s Prime Minister, we must
now accept all evidence suggests that plane
went down in the southern Indian Ocean.”
C O M PA N Y I N F O C U S : M A L AY S I A A I R L I N E S
• The lack of sympathy in their message was
one of the reasons of the company’s downfall.
IN CONTRAST TO:
• 228 died of the plane crash from
Rio de Janeiro to Paris in 2009
• Air France executives speaking to
families’ victims comforting them
and offering sympathy.
• They did everything they could to
ease the suffering of the grieving
people
• The company’s share price
dipped briefly after the accident
but recovered its full value within
a week.
IN CONTRAST TO:
• 21 died linked to food contamination
• The CEO offered an immediate
apology to everyone affected and
taking full responsibility
• Resumed production when the
production lines were clear
• Financial impacts were severe but
returned to profitability a year later
They were failures pure and simple,
accidents that could happen anytime
to anyone.
But the response to failure does
have an ethical dimension.
How we take responsibility, how we
move to help those with whom we
have relationships and to whom we
are responsible, will be guided by our
own ethical standards.
ENSURING CONTINUITY
• Quality is a journey; ethics is much the same
(Deming)
• No matter how ethical we and our organizations may
be, we must keep raising the bar.
• Kaizen – continuous improvement – a concept in quality
management that favors constant, evolutionary change,
making small adjustments as often as possible with the goal
of constantly improving quality.
ENSURING CONTINUITY
Kaizen key principles:
1.Feedback and reflection to examine what we are
doing now and how we could do it better
2.Encouraging people to take ownership of problems
and work out solutions rather than waiting for
someone else to do it.