Business Ethics
The Basics
Jayadeva de Silva
Some
Scandals..


Promoting Sales of a harmful product to
school children through exclusive contracts
with schools.
Negative implications of Advertisements on
School Children.


Moral and Ethical obligations of a company
to be honest about its product and services.
Understanding religious, moral and health
concerns of different classes of customers
across the entire product range and
geographic operations by a fast food
company.


The concept of monopolistic practices
Forming an opinion on whether Microsoft’s monopolistic
behavior is ethical or not.


Maltreatment of employees and sweatshop
conditions in Nike’s Asian Factories
Role of non-profit organizations/special
interest groups in creating awareness of
malpractices of a multinational company.


Music piracy and its impact on the music industry
Legal and ethical aspects of how Super Cassettes built up a
successful business empire by promoting music piracy.


Role of Government of India and Madhya
Pradesh government in the Bhopal Gas
Disaster.
Response of Union Corporation after the
disaster.


Political, Economic and social consequences of liquor on
society
Ethical dilemma of the liquor business for the Government,
Industry and Society.

Johnson & Johnson's public relations
campaign after the Tylenol crisis in 1982.
Danduwam Mudalali

What happened ?
Ethics ...


A set of Rules that help
to tell us the difference
between right and
wrong and encourages
us to do the right thing.
Help people decide best
actions to take in a
situation.
Ethical Behaviour
What are the factors
that influence ethical
behaviour ?
What Shapes Ethical Behavior
at Work?





Individual factors
Organizational factors
The boss’s influence
Ethics policies and codes
The organization’s culture
Based on….








Good character
Trustworthiness
Respect
Responsibility
Caring for others
Good citizenship
Moral rules
values
Do what’s
best for
me…
Do what’s
right!!
Relationship between ethics and the law ...
Most people believe
law-abiding
behavior = ethical
behavior
Ethics
… the domain of ethical
behavior extends beyond
what’s legal; some
issues may be covered
by “codes of conduct” or
other polices
but ...
Law
… and some laws may
seem counter to your
ethical standards
Bad Ethics Increases Transaction
Costs
Security
Party
A
Regulators
Lawyers Delays
Trade
Testing
Interest
Etc, etc!
Duplication
Party
B
Factors affecting ethical decisions

Normative judgments


Judging something as good or bad, right or
wrong, better or worse.
Moral standards (Morality)

Society’s accepted standards for behaviors
that have serious consequences to its wellbeing.


Behaviors that cannot be established or
changed by decisions of authoritative bodies.
Behaviors that override self-interest.

Ethics and the law




An behavior
An behavior
An behavior
An behavior
unethical.
may
may
may
may
be
be
be
be
legal but unethical.
illegal but ethical.
both legal and ethical.
both illegal and
Levels of Constraints on Behavior
Ethical Behavior Tied to Set
of Values
Professional Standards
Legal Requirements
Situation #1




Your Friend asks you to add a
few extra hours to a work
time sheet for him, but you
know that he did not put in
the time.
What would you do?
Who wins and who loses if
you agree to put down the
time?
How do you feel about it?
Situation #2




A salesperson in an
electronics store offers to
sell you an iPod after
hours at a discounted
price.
What would you do?
Who wins and who loses
if you agree to buy it?
How do you feel about it?
Ethics in Business


Business ethics are
tied to both society’s
ethics and the ethics
of individuals.
Employees,
customers, suppliers
shareholders etc.
Business Situation #1





You work for a company
that makes cyanide gas.
You know this is harmful
to people.
Is it unethical for you to make the
gas, knowing it is used to poison
people?
What about helping the company
make a profit?
What if workers health is at risk?
Shouldn’t you follow employers
instructions?
How can Businesses Solve
Ethnical Dilemmas?


Dilemmas- situation
with difficult choice
or 2 or more options
Positive and
Negative points for
every option.
Key Questions:
1.Who will be helped by
what you do?
2. Who will be hurt?
3.What are benefits and
problems of each decision?
4. Will the decision survive
the test of time?
A Code of Ethics

Business create a
document that
explains how
employees and
management should
respond in different
situations.
Principal Causes of Ethical Compromises
Note: 1 is high, 9 is low.
Sources: O.C. Ferrell and John Fraedrich, Business Ethics, 3rd ed. (New York: Houghton Mifflin, 1997), p. 28;
adapted from Rebecca Goodell, Ethics in American Business: Policies, Programs, and Perceptions (1994), p. 54.
Permission provided courtesy of the Ethics Resource Center, 1120 6th Street NW, Washington, DC: 20005.
Table 14–1
Employees and Ethical
Dilemmas

Questions employees should ask when
faced with ethical dilemmas:







Is the action legal?
Is it right?
Who will be affected?
Does it fit the company’s values?
How will it “feel” afterwards?
How will it look in the newspaper?
Will it reflect poorly on the company?
Ethical Issues Relating to
Business







Honesty—communication and behavior
consistent with facts
Disclosure of information
Promises/commitments
Representation of others like shareholders (applies to
board members)
Unfair competition
Avoid quid pro quo transaction
Comply with “anti-trust” laws (these relate to pricing,
monopolistic practices)

Just compensation



Respect intellectual property (product piracy)
Treat employees fairly
Respecting rights of others



Treat others with fairness and respect regardless of age,
religion, ethnic group, sex, economic status, etc., especially
children, women, and subordinates
Respect the community you operate in by paying fair
share of economic costs you create
Respect others and future generations by treating the
environment well
Why Ethical Behavior Adds Value

Better information







Trust from investors
Lower costs for audits, controls, investigations
Better allocation of resources
Customers will be more loyal (RC Willey example)
Lower costs from suppliers (automotive company
example)
Attracting and retaining better employees
Fair competition



Lowers cost of business in economy
Leads to better decision-making (do what’s best
for firm, not one individual)
Improves competitive nature of a country’s
economy
Why Ethical Behavior Adds Value

Just compensation



Rights of others




Creates a more vibrant, entrepreneurial economy
Attracts and retains better employees
Draws upon talents of wider set of individuals
Develops long-term respect from the community
Maintains the environment for long-term value to
all
It’s the right thing to do!
Is There Evidence that Ethical
Behavior Yields Increased Value?
Study of 2,100 firms with very strong,
well-governed boards of directors
outperformed overall market 15% vs.
12.5% in 2005
2. Firms with high level of “democracy”
outperformed “dictatorial” firms by 8%
per year in the decade of the 1990’s.
3. Philanthropy: Firms that contribute a
higher portion of their assets to the
communities in which they reside fare
better in an economic downturn.
1.
How Important is Integrity in
a Leader?

In a survey of 54,000 people Integrity
was by far the number one attribute
desired in a leader
(Quoted in Stephen R. Covey’s preface to Business with Integrity, p. xx)
These are from SriLanka
What is it
Madam?
Look OK but we need to know
Something?
How are they treating the workers
who make these?
Taught in All Cultures
Judaism: What you hate, do not do to anyone.
Islam: No one of you is a believer until he loves for his brother what
he loves for himself.
Hinduism: Do nothing to thy neighbor which thou wouldst not have
him do to thee.
Sikhism: Treat others as you would be treated yourself.
Buddhism: Hurt not others with that which pains thyself.
Confucius: What you do not want done to yourself, do not do to
others.
Aristotle: We should behave to our friends as we wish our friends to
behave to us.
Plato: May I do to others as I would that they should do unto me.
TREAT PEOPLE THE WAY
YOU WANT THEM TO TREAT YOU
Some guidelines

To increase productivity , provide safe and healthy working
conditions

To inspire trust ,make your performance transparent

Your loyal decent can lead your institution in the right direction



Downsizing labor force is only beneficial when you respect
each stakeholder.
To establish your brand name,act as a fair player
Reduce the gap between the rich and poor by developing a
new social security system





If you act against discrimination , you will increase your
productivity and profitability
If you protect intellectual property,all stakeholders will receive
their due share
Ongoing changes in information technology require new forms
of loyalty
Your public relations strategy will only secure your reputation if
it witnesses your drive for quality and excellence.
Your economic achievements will only stand on firm ground if
you diminish corruption



Long-term success urgently calls you to constantly care for the
environment.
To become a refined player,sharpen your discernment and
cultivate good manners
Care for your business by caring for society.