BUSINESS ETHICS

IEthics

I. Introduction

Human beings are rational and social and therefore there is ethics or morality among them.1 From there it follows that animals cannot have morality even though they live in groups. Living in groups alone does not make them social because to be social one need to become aware of the presence of another who is similar and dissimilar and towards whom one takes a decision. Awareness is the existence of reason. However, if there were to be just one rational being in the entire world there would not have been any morality because morality arises only when two rational beings come into each other’s presence. Thus it is evident that multiple rationality or multiple rational beings is the precondition for morality or ethics. Precisely because there are indeed multiple rationalities one hears the word ethics or morality often. But what do they mean when these terms are used?

2. Definition

What is ethics? The word ethics comes from the Greek word ethos which means customs. The Latin equivalent is moralia which in English means morals.2 The Malayalam equivalent is Mariyada. One sees here the common root of some languages. The word ethos which means customs, usages and practices appears first in the Nichomachean Ethics of Aristotle.3 Although ethos is translated as customs, it does not denote any kind of customs. It means moral customs, i.e. those customs the breaking of which will fill man with remorse or guilt feeling. For example Rajive Gandhi's seven rounding of the funeral pyre of his mother is a custom but not a moral one. If he had not done it nobody could blame him for having failed morally. Thus ethics means moral customs. The word custom could evoke the idea that morality is something that changes as customs of eating and dress, etc change. It is a misunderstanding. Moral customs are lasting and valid for

1    ? Ethics and morality are used synonymously.2    ? Cf. Higgins, Man as Man, p. 7; Bittle, Man and Morals, p. 3.3    ? Cf. Aristotle, Nichomachische Ethik, p. 43.

all men.4 However, we have not yet defined ethics. We have just used another adjective. May be by clarifying the meaning of the adjective or its noun we come to the definition of ethics. What is morality? We are using ethics and morality synonymously and therefore we can say either ethics or morality. According to Bittle, ethics is the philosophical science that studies human conduct from the angle of good or bad, right or wrong.5 Ethics studies the criterion of good and evil. Thus the scope of ethics is to examine the ground of oughtness, the ground of the rules of right and wrong.6

Thomas J. Higgins defines ethics as the science that studies the relationship of human acts to man's ultimate good or end. Human acts are good if they conform to the ultimate good, and they are bad if they do not conform.7 The ultimate end of man is fellowship with the ultimate ground of his being, namely, God. According to Higgins the central problems of ethics are: How can one distinguish between good and evil? Why should man do good and avoid evil? What is the good in which human activity should terminate?8

The common aspect in the definitions is that ethics is a study of human acts from the point of view of right and wrong, good and bad. The central questions are: What is the criterion for distinguishing between good and bad? What is the ground of oughtness?

3. Ethics is a philosophical science

It was mentioned that ethics is philosophical science. Both the terms need an explanation. A science is a systematic, critical and exhaustive body of knowledge concerning a subject. Ethics is a systematic body of knowledge about a particular subject, namely, human acts from the point of view of good or bad. Thus it can claim to be a science. Ethics is a philosophical science in so far as it intends to give the ultimate reason for being moral. It is part of the explanation for the very meaning of human life itself.

4    ? Cf. Higgins, Man as Man, p. 8.5    ? Cf. Bittle, Man and Morals, pp. 4,5,6. Robert Wood, Principles, p. 4, comes to a similar definition of morality.6    ? Ibid., pp. 6-8.7    ? Cf. Higgins, Man as Man, p. 8.

8 Cf. Higgins, Man as Man, p. 11.

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4. Human acts

Ethics deals with human acts. Human acts need to be distinguished from acts of man like kneezing or yawning. A human act is one in which both the knowledge and will of man are involved. That which is known or perceived as a value is presented to the will and the will urges the person to act so that that which has been presented as valuable is realized or attained. An act of man will not be a human act if either of the element, the will or knowledge, is lacking.

5. Source of ethics

What is the source of ethics? Thomas Higgins is of the view that all men know implicitly or intuitively what good and bad actions are, and that good deserve praise and bad punishment. Ethics just systematizes this lived experience.9 Bittle, on the other hand, says that the fundamental principles of reason are self-evident, and they say what is good and bad. Besides these one's own experiences and the moral experience of the past generations form the source of ethics.10

6. Ethics is a normative science

Unlike the positive sciences like physics, chemistry, psychology, sociology, history, etc., ethics is a normative science. It deals with what ought to be.11 The positive sciences just describe the factual. There is no question of one having to obey a certain principle or not.

7. Methodology of ethics

What is the method used by ethics in coming to its norms? It is intuition understood as immediate perception of truth.12 For example, the famous insight of Socrates: It is better to suffer pain rather than inflict pain. Or just the norm: Truth must be told. Or again the dictum: good deserves praise and bad blame. In judging particular situations, ethics uses also deduction. For example: cheating is wrong. Is

9    ? Cf. Higgins, Man as Man, p. 10.10    ? Cf. Bittle, Man and Morals, pp. 13-15.11    ? Cf. Higgins, Man as Man, p. 9; Bittle, Man and Morals, p. 6.12    ? Cf. Cronin, The Science, p. 15.

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the case at hand cheating, i.e. does it have the characteristics of cheating? If yes, it is wrong.

8. Historical norms of ethics

It was said that ethics studies human conduct from the point of view of good or bad. In order to judge an act either as good or bad, one needs a standard or norm. What is the norm for judging a human act? Why is this act good and not bad? The history of ethics shows that man has proposed different criteria for judging an act good or bad.

The hedonists held that the criterion of good is pleasure. An act is good provided it gives pleasure to the actor. And among the acts those that give the maximum pleasure and cause the least pain rank the highest.13

The Stoics (336-205), on the other hand, valued wisdom as the criterion of the ethical good. Wisdom was understood as conformity with the will of God. Everything in this world takes place according to the will of God, and the wise man does not rebel against it but accepts it. Thus the ethically good act is one where man manifests his acceptance of God’s will in this world.14

For Thomas Hobbes, the English philosopher, (1588-1679), satisfaction of self-interest was the criterion of good and bad. That is to say an act was good if it served one's self-interest, and it was bad if it did not serve.15 Hobbes is the author of the famous saying: "Homo homini lupus est". Man is a wolf to his neighbour. With such a philosophy of life, it is not surprising that he said that satisfaction of self-interest is the criterion of good and bad.

Immanuel Kant (1724-1804), a German philosopher, was an idealist. He beleved in the basic goodness of man. For him man was the measure of good and bad in the sense that a good act was one in which man became or remained truly the master. Man remained the master as long as he was free, not determined by anything from

13    ? Cf. Higgins, Man as Man, p. 17.14    ? Ibid., p. 4.15    ? Ibid., p. 17.

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outside himself, and man obeyed an ought purely because it was an ought, i.e. freed from any selfish motive.16

Friedrich Nietzsche (1844-1900), another German philosopher, went the way of Hobbes. He also did not preach a philosophy of brotherhood, rather of domination of the others by some. He saw in man a basic determination/will to dominate, to be master of the other. It would be more correct to say that he saw some as destined to dominate and the others to be dominated. Thus those acts were good which enabled one to dominate the other or to have power over him.17

The christian vision also has a criterion to judge good and bad. It is not satisfied with any of the above criteria. Its criterion is the ultimate end of man, and the ultimate end of man is the beatific vision, i.e. life in the presence of God. Earthly life is only a preparation for the life with God. Consequently those actions are good which are either in conformity with man's last end or do not contradict it.18 All the modern christian ethicians will not agree to the above affirmation in the sense that they do not feel at home to speak in terms of ultimate and proximate ends.

16    ? Ibid., p. 18.17    ? Ibid., p. 1918    ? Ibid., pp. 12-26.

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II

1. The Notion of Importance/Value

We defined ethics as the study of human conduct from the point of view of good

or bad, right or wrong. To judge a human act either as good or bad, one needs a

norm/criterion. We saw a few norms/criteria: Pleasure, knowledge/wisdom,

satisfaction of self-interest, duty for its own sake, etc. Now we inquire into the

very goodness of the norms or criteria themselves. We intend to study the nature

of good or importance.

Why do we say/qualify something as good? And what do we mean when we say

that something is good? Do we mean that it is good in view of something else, as

serving an end, i.e. as means? Or do we mean that something is good in itself? If

we mean the latter, what do we intend to communicate with that?

To understand what we mean by good, let us turn our attention to the other word

importance. What is importance? It is the trait or characteristic of an object

either to motivate us or to create an affective response in us.19 For example to

learn to play the piano or to be a Pele (football super-star) could motivate us.

Seeing Mr. Veerappan, the bandit, going to Mother Theresa ought to create an

affective response in us.

Bonum and malum can have have importance. Good is the object with a positive

importance and bad is one with a negative importance.20 Giving alms has positive

importance and robbing things has negative importance.

Traditionally it was said that good is that which everyone desires.21 But desire

can refer to things that can be possessed. E. G. food, cloths, music discs, etc.

Good may also include things that cannot be possessed, for example, the

19 Cf. Dietrich Von Hldebrand, Christian Ethics, Thames and Hudson, London, 1953, p. 24.20 Cf. Ibid., p. 26.21 Cf. Ibid., p. 28.

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conversion of a sinner, the deaddiction of an alcoholic.22 Thus good cannot

automatically be identified with that which every man desires.

One could understand desire either in the narrow or broad sense. The narrow

sense includes only thaings that can be possessed and in the broad sense also

things that cannot be possessed. If one understands desire in these two senses,

then it can be identical with good23 and good in turn identical with importance.

2. Categories of Importance

To be able to judge if one is ethical/moral or not a man needs criteria. One needs

ethical criteria and not hedonistic or other criteria. Therefore a few classes on the

difference between the subjectively satisfying and the objectively important are in

place.

What is a value? It is the intrinsic importance of an object or an act 24

A. Theagreeable or the subjectively satisfying. B. The value or the objceitively

important. The difference between the two:

1. The subjectively satisfying is always for some one or for me. E.G., A

compliment. The value is important for all. For example, forgiveness,

beauty, a heroic action.25

2. The importance of the subjectively satisfying depends upon or is derived from

the effect it produces in man. The importance of the objectively

important/value is independent of man. It (importance) is from within itself.26

3. Concerntration on the subjectively satisfying leads to boredom. Ex. Aristipus

(435-366).27 (He is considered the father of hedonism.) Concentration on

22 Cf. Ibid., p. 30.23 Cf. Ibid., pp. 30-31.24 Cf. Ibid., p. 35.25 Cf. Ibid., p. 35.26 Cf. Ibid., p. 36.27 Cf. Ibid.

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value or the objectively important elevates us to the realm of the noble.28 Ex.

Socrates, Plato, Gandhi.

4. In the case of the subjectively satisfying, man is the principium, that is, the

pleasure man gets is the principium and the importance of the object due to

which pleasure is given to man is the principiatum.29 The importance of the

object is the principiatum. In the case of the objectively important, the value

is the principium and the happiness it creates in man is the principiatum.30

5. We need not respond to the appeal of the subjectively satisfying. We have to

respond to the objectively important. We ought to respond in case it is a

moral value.31

6. The subjectively satisfying seduces us. It is obtrusive. It thrusts itself on un.

The value appeals to our freedom. We are free to respond or not.32

7. Our response to the subjectively satisfying is not abandonment but

concentration on self in the sense of trying to get the maximum pleasure from

the object. In the case of value it is abandonment. We give ourselves totally

to the call/sublimity of value. The realm of value appears higher than us. So

we abandon ourselves to it.33

Between the subjectively satisfying and the objective good there is no common

factor. They belong to two different realms.34 Two kinds of sports like tennis and

football belong to the same realm. But a sportsman and an academician do not

belong to the same realm. Among the subbjectively satisfying there is a gradation

of importance. So also among the objectively important in itself.35 Eating a fruit

is less satisfying or less of a pleasure than watching a game of football. Moral

values rank higher than esthetic values. Choosing between the subjectively

satisfying and the objectively important is not like choosing between

28 Cf. Ibid., pp. 36-37.29 Cf. Ibid., p. 38.30 Cf. Ibid., p. 37.31 Cf. Ibid., p. 38.32 Cf. Ibid.33 Cf. Ibid., p. 41.34 Cf. Ibid., pp. 40-41.35 Cf. Ibid., pp. 41-42.

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objects/things of higher or lower intensity or importance. They belong to two

different classes.36

3. Legitimate Interest in the Subjectively Satisfying

It is alright to enjoy the subjectively satisfying. They make life more pleasant and

full. The only thing to be remembered in enjoying them is this: They belong to

the group of secondary importance. They do have an importance in so far as they

can motivate man’s will or create an affective response in him. But they must

remain subordinate to moral values.37

4. The Useful

Usefulness or aptitude is not a special or fourth category of importance. The

useful object is always seen in relation to another end. Without that end the

“useful” object will be useless. For example a pen and writing. Without the end

of writing a pen is useless. Pen derives its importance from the importance of the

object. If the object is worthless, then pen is also worthless.

There can be a gradation in usefulness. One pen is more useful than the other in

the sense that one writes better than the other. A thing can be useful for many

ends. For example water. Water for washing, drinking and irrigation. So also

money. Money for buying things, people and for acquiring prestige.38

We listed three categories of importance: the subjectively satisfying, the

objectively important and the objectively good for the person. The useful could

serve any of the three categories of importance. For example a car for pleasure

ride, T.T.C. for academic excellence, training in arts for esthetic expression,

training to be charming and yoga for self-discipline.

36 Cf. Ibid., pp. 44-45.37 Cf. Ibid., pp. 427-430.38 Cf. Ibid., pp. 64-66.

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5. Morality and Factual Reasonability

Man is bound to conform to conform to some kind of norm when he acts. Two

kinds of norms limit man’s arbitrary actions:

1. Factual limitations due to the immanent logic of things. Ex. If man wants to

construct a machine, he must obey the laws of mechanics.39

2. Moral limitations. Thou shall not. It comes like a command, a challenge, a

call.

If one disobeys the first, one is a fool. If one disobeys the second, he is

responsible, guilty and blameworthy. The first is hypothetical or conditional.

That is, if you want to build a bridge for the passage of heavy vehicles, then you

must use reinforced concrete…The second is non-hypothetical. Thou shall or

thou shall not.40

We often hear the phrase “according to human nature” (secundum naturam).

Nature is ambiguous here. It can mean either the physical or spiritual nature. No

amount of analysis of the physical, observable, measurable nature of man will

reveal that he should speak the truth.41 (Give the example of the nail going

through the brain of a railway engineer.)

6. Due Response

39 Cf. Ibid., pp. 182-183.40 Cf. Ibid., pp. 183-184.41 Cf. Ibid., pp. 185-190.

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It is the response a person gives to a value. A value because it is a value calls for

an appropriate response from the part of man. The response which is adquate to

the value is called the due response. It is the due of the value.

7. The Hierarchy of Values

There are different values and they belong to different value families, like esthetic

values, intellectual values and moral values. There is a gradation of importance

within the family of values. For example, within the family of moral values,

generosity ranks higher than detachment or vegetarianism (respect for life).

Within the family of intellectual values, acuteness or sharpness of intellect is

more valuable than methodicity or neatness. And within the esthetic family,

expression is more valuable than technical perfection.

Intelligence is more important than vitality.42

Just as there is a gradation of importance within a family of importance, so too

there is a gradation of importance among the families of importance. The family

of moral values ranks highest among the three.

8. Fundamental Nature of Moral Values

1. Moral values always presupposes a person.43 We include even angels in the

family of persons because they are capable of purity, reverence, charity, etc.44

A functional definition of person may be in place. A person is a unique

individual capable of relationship to both God and man. A person always

presupposes both intelligence and freedom.

2. Man is held responsible for his moral/immoral actions. We blame a person if

he fails morally in a situation, and we praise him if he acts morally.45

Responsibility naturally presupposes freedom.42 Cf. Ibid., p. 129.43 Cf. Ibid., pp. 169-170.44 Cf. Ibid., p. 170.45 Cf. Ibid., p. 171.

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3. Moral values are bound to or arise from a free act or attitude whereas

intellectual and some esthetic values are gifts of God. Moral values are fruit

of a decision.46

4. Moral values are more important than intellectual values like intelligence or a

personal value like great vitality.47

5. Failure with regard to moral values disturbs the conscience. Nothing can

pacify it.48

6. Moral values are indispensable (the ought character). We do not blame a

person for being unintelligent or short of stature but we will blame a person

for being immoral.49

7. A person must possess all the moral values/qualities. That is not the case with

personal values like talents. One cannot specialize in justice and leave out

truthfulness.50

8. Moral values belong to the unum necessarium, the one thing necessary in life.

They pertain to the end or destiny of man.51

9. Failure regarding moral values calls for punishment, repentance and

atonement.52 It is different from revenge. Revenge belongs to the

subjectively satisfying. It is the stream of evil passion.

10. Being moral calls for reward. Reward must not be understood to mean

that man acts morally in order to be rewarded by God. In that case a

concentration on the self will arise instead doing the morally right for its own

sake. Doing the morally right is in itself worthwhile. The moral action has

the perfection or completion of being rewarded by God. That ought not to be

the main concern of man. The reward of moral actions is different from the

reward a general receives for winning a war or the reward given to a writer

(Sahitya Academy Award). Only God can truly reward moral goodness.

46 Cf. Ibid., p. 172.47 Cf. Ibid.48 Cf. Ibid., pp. 172-173.49 Cf. Ibid., p. 173.50 Cf. Ibid.51 Cf. Ibid. p. 174.52 Cf. Ibid.

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Immanuel Kant thought that this world cannot adequately reward moral

goodness. So he thought of an eternal being.53

11. It is a greater good for man to be endowed with moral values than with

other objective good for the person like wealth, fame, intelligence, etc. Moral

values rank higher than intelligence or vitality.54

12. Moral goodness points to a transcendent world, eternity. Socrates became

aware of it by meditating on the natural moral values. That natural moral

values speak of the transcendent world is evident from the pointers of reward.

Only God can truly reward and punish moral goodness and wickedness. It is

he alone who can punish or dissolve the disharmony caused by a moral evil.55

13. The moral sphere is always related to the religious. People of all religion

have pointed to it. (M. K. Gandhi said: The essence of all religion is morality.)

A moral offence violates God, and a morally good act constitutes a harmony

with the divine.56

14. The moral sphere enables us to see the difference between nature and

super nature, i.e., in christian life, in baptized life, nature comes to its

fulfillment. The process of beatification also shows the relation of the natural

to the supernatural. Any failure in the sphere of natural morality is enough to

declare a to be beatified as unworthy.57 All the natural moral values play a

role in our salvation.58 If there is no natural perfection, there is no

supernatural perfection either.

15. Moral perfection makes a man a similitudo Dei. Only God can realise

moral goodness in its entirety. Man is called to realise it only analogously.

One cannot understand the mysterious character of the moral if one restricts

oneself only to the human. The moral sphere is mysteriously linked to the

divine.59

53 Cf. Ibid., p. 175.54 Cf. Ibid.55 Cf. Ibid., p. 176.56 Cf. Ibid., p. 177.57 Cf. Ibid., pp. 177-178.58 Cf. Ibid., p. 178.59 Cf. Ibid., p. 179.

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9. Freedom

What is freedom? Freedom is the capacity to bring about an act which is not the

result of another cause. Or freedom is the power to be the cause of an act.60

Freedom is the capacity to start a chain of causality.61 The second and third

definitions are defective because an act or a chain of act could be the result of

another cause.

Freedom as the capacity to bring about an act which is not the result of another

cause two elements: a) The capacity to desire something, to give one’s consent.

B) The capacity to activate the organs of the body so as to realize the willed end.

For example walking to the church to attend mass. A) attending Mass. B)

walking to the church.62 Regarding a) the object must have some power to

motivate us. It must have some importance (the capacity to motivate or create an

affective response). Otherwise it will not be willed.

Freedom is a mystery.63 It is not caused by anybody or anything outside man. It

is engendered by the person’s centre.64 Human freedom is different from animal

voluntariness. Animal voluntariness is guided by instinct.65

Freedom need not always mean a choice between a value and its opposite. By

constantly opting for the good one always chooses or decides automatically for

the good without even thinking of its opposite.66

10. Co-operative or Passive Freedom

It is the faculty by which one gives consent to the affective responses in oneself.

Using active freedom man can give rise to an act. Using passive or co-operative

60 Cf. Ibid., p. 287.61 Cf. Ibid., p. 292.62 Cf. Ibid., pp. 284-294.63 Cf. Ibid., p. 292.64 Cf. Ibid., p. 296.65 Cf. Ibid., pp. 295-301.66 Cf. Ibid., p. 310.

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freedom one can either sanction or disavow an affective response in oneself. For

example a man can feel joy at the conversion of another. This is the affective

response on the part of another human being to the object of a sinner’s

conversion. The morally sensitive person will allow it to persist in him, to run its

full course.67 A man’ enemy becomes sick or is defeated. A morally insensitive

man will rejoice over it. But a morally sensitive person will not give his consent

to that feeling. He will try to disavow it. In sanctioning or not sanctioning one

uses one’s co-operative freedom.68

The affective responses are not willed or chosen. They are bestowed upon or

happen to man. What he does after they arise is important. Sign of maturity is

that man sanctions the positive affective responses and disavows the negative

responses.69

Man has a duty to prepare his body in such a way that good responses originate in

his body. This is preparing the body to have virtues (superactual value-response

or attitude towards life, man and God). Freedom has a role to play in forming

one’s character.70

11. Four Factors that Form and Condition the Character of a Man

1. What man brings with his birth: His talents, temperaments, etc. Here freedom

has no role to play. 2. His family, the milieu, the school he attended, the

teachers he had, the books he read. There is some role for freedom here. 3.

Decisive experiences: Bitter experiences will have the consequence of

mistrust of others. Joyful experiences on the contrary will give rise to

generosity. Freedom has some role to play here too. That things happen to us

67 Cf. Ibid., pp. 316-337.68 Cf. Ibid.69 Cf. Ibid.70 Cf. Ibid., pp. 338-341.

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is beyond our control but we do with them is within our freedom. 4. What is

one’s attitude to all these?71

12. Relativism

It is possible that some spiritual people will say that morality or spirituality is

something personal and relative. There are no objective norms in spirituality or

morality. It is not possible to have objective criteria about them. Therefore a few

remarks are in place regarding relativism.

13. Skepticism

Skepticism states that there is no absolute or it is not possible to come to any

absolute truth. Transferred to the field of ethics, it will mean that it is not possible

to come to know any importance in itself or value.72 Absolute skepticism is a

contradiction in terms. If it is true that it is not possible to know anything with

certainty, then that which the skeptics say is also not certain. Thus they contradict

or disprove themselves.73

14. Definition of Relativism

Relativism is a part of skepticism. Relativism is a philosophy of knowledge

which states that knowledge is always determined by the knower, i.e. his needs or

desires. So what is knowledge for one may not be/ is not knowledge for another.

What is value for one is determined by his make-up. So there is no universal, for

all valid/applicable knowledge.74

71 Cf. Ibid., pp. 339-340.72 Cf. Ibid., pp. 106-109.73 It is desirable to read Edmund Husserl’s Critische Untersuchungen I (“Critique of specific relativism”, Pt. I, Ch. 7, Halle: M. Niemeyer, 1900).74 Cf. Ibid.

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What is stated above is a contradiction in terms because what is said is presumed

to be valid and true for all. And the starting point is that there is no valid and true

for all statements.

Absolute skepticism is a contradiction in terms, and no serious thinking person

will be unaware of it. There are other forms of relativism which are prevalent and

some of them need to be addressed.

1. There is a difference of opinion on practically every moral issue and therefore

there is no objective, valid for all norm.

Difference of opinion on a moral issue presupposes the possibility to see the

moral truth.75 For example euthanasia. There is bound to be difference of opinion

regarding a whether a certain death is euthanasia or whether euthanasia is morally

wrong in every situation. So difference of opinion does not annihilate the

possibility to see universal truth/objective truth.

Certainly the influence of family and surrounding do have an effect on one’s

moral perception: they either facilitate or make it difficult.76 However, one can

rise to moral perception in spite of such adverse circumstances or cultural

blindness.77 For example Gandhi: religious tolerance; Budha: antibrahmin

domination.

Often difference of opinion in the field of morality is not about a value but about a

particular object.78 E. G. Killing cows is a sacrilege for the Hindus whereas it is

not for the Christians and Muslims. Stamping on the consecrated host is a

sacrilege for the Christians. Thus we see that the disvalue of sacrilege is common

to both, and they think that it is possible to see that truth.

75 Cf. Von Hildebrand, Christian Ethics, p. 109.76 Cf. Ibid., pp. 110-111.77 Cf. Ibid., p. 111.78 Cf. Ibid.

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2. The French sociological school says that moral norms are just illusions or

magic or just social conventions. Illusions like believing that certain animals

are holy (totemism).79

The colours red and green are two separate entities. It is stupid to say that both

are green. In the same way moral values have a quiddity (essence) of their own,

and they cannot be reduced to illusions.80

The French sociological school became indignant at Hitler’s racism. Under what

criterion did they become indignant?81 Where is the norm for judging something

as bad? If they hold on to their theory that moral values are just illusions, then

they have no norm at all to criticize Hitler.

These moral relativists attack others for their dogmatism. In other words, the

relativists are pleading for freedom. That implies that freedom is a value. And

freedom is both an ontological as well as a moral value. Thus they are affirming

that which they are denying, i.e. moral value is an illusion.82

If moral value is just a social convention, why should they obey it? They might

as well create their own conventions. Why did conventions originate and why are

people punished for breaking them? Not to break a convention (convenire, to

come together, to come together in mind on something = to agree) is obviously a

value.

Why are the relativists writing books? Obviously they want to convince others

that there is a value like being free from illusions, etc. Even here they affirm what

they deny, namely, that there are moral values.83

79 Cf. Ibid., pp. 112-113, 113-114.80 Cf. Ibid., p. 115.81 Cf. Ibid., p. 116.82 Cf. Ibid.83 Cf. Ibid., p. 117. Even to speak about illusions one must presuppose the existence of truth and non-truth, the existence of illusion and reality. Illusion alone cannot exist. One can that there is illusion only because one believes that there is something which is not an illusion.

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A criminal or an egoist will deny moral values because his life depends on

denying them. But a sincere cannot avoid presupposing values.84

To say that moral values are just social conventions is to say that a square is a

triangle. Moral values are objective realities. Undeniable. If one is open to

reality, he can see them.85

3. Another form of moral relativism. Values are just feelings of man. There is

no objective reality like the beauty of a melody or the nobility of an act of

forgiveness. The words “beauty” and “nobility” are meaningless, i.e. there is

no objective reality corresponding to them. If one says that there is an

objective reality like “beauty” and “nobility”, then he is under an illusion. All

that one can say or does say with the words “beauty” and “nobility” is this: I

have a certain feeling confronted with these objects: a melody or an act of

forgiveness. Moral values are objectifications of feelings.86

This is an unfortunate misunderstanding of both the datum of values and the

reality of feelings. The experience of beauty is not identical with a feeling of

man. Beauty is the quality/predication of an object which is independent of man.

In the same way, the recognition of the nobility of the act of forgiveness is a

discovery of the character of an act. These two will be beautiful and noble even if

one does not recognize them as such.

Feelings are equivocal, i.e. they mean different things. Sometimes they mean the

state of the body: fatigue, depression, irritation and anxiety; sometimes they mean

experiences of bodily pain or pleasure, and some other times they mean

meaningful affective responses like joy, sorrow, fear and enthusiasm.87

84 Cf. Ibid., p. 117.85 Cf. Ibid., p. 118.86 Cf. Ibid., pp. 118-120.87 Cf. Ibid., p. 121.

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Feelings are limited in space and time. One can locate them in the body and

verify their duration. To speak of the duration of the nobility of forgiveness is to

speak non sense.88

4. A. J. Ayer, an English linguistic philosopher, says that moral judgements are

either the expression of a feeling or are commands that are neither true nor

false.89

First all, the word “expression” is equivocal, i.e. can mean many things. “In its

most authentic meaning the term refers to the intuitively given transparence of

psychical entities in a person’s face or in his voice or movements. In this way we

say that a face expresses joy, a voice expresses fear, a way walking expresses an

affected or sophisticated attitude.”90

Moral statements are not just expressions of a feeling or emotion. It is as absurd

as to say that the statement 2+2 = 4 is the expression of a feeling. One will have a

feeling of admiration faced with a great work of art. But that feeling is not

identical with the beauty or value of that piece of art. The value creates the

response of admiration in us. Both are different.

In the same way statements regarding the nobility of forgiveness are not the

expressions of a feeling. One feels great joy at witnessing an act of forgiveness.

But the joy is not the act or its nobility. The act of forgiving will be noble even if

one or another does not feel joyful about the act. Precisely because the act is

noble, we are filled with joy.

When one says that the act of forgiving is noble, one voices the perception of an

act or of something as noble. Something in front of the perceiver is seen as noble.

In expressing a feeling there is no question of a perception.

88 Cf. Ibid., pp. 120-122.89 Cf. Ibid., pp. 122-123.90 Ibid. p. 123.

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5. Ayer’s second thesis is that value-judgments are commands that are neither

true nor false.

First of all, value-judgments are not commands. To say that being truthful is a

value or truth is a precious thing or this vase is beautiful is no command. There

are commands and prohibitions in morality. But perception of a moral value is

not a command. The perception leads automatically to a command or prohibition

like: Killing is evil and therefore do not kill.

Perception as such is not a command, nor the expression of that perception in

words. However, every moral command or prohibition has a moral perception

behind it. If not, it is not a right or justified command. So also every positive law

has a moral perception behind it.91 Thus do not kill arises out of the perception

that human life is precious.

15. Teleologism and Deontologism

A morally good act is one that embodies an ethical or moral value, and a morally

bad act is one that a moral or ethical disvalue. For example paying just or unjust

wages.

There are principally two ways of qualifying a human act either as good or bad.

A human act can be qualified as moral if it embodies a moral value, and it can be

qualified as immoral if it embodies a moral disvalue. This qualification of a

human act can be done either by looking at the end or goal or result of the act or

by looking at the very content of the act. For example, telling a lie to a terrorist so

as to save the life of an innocent person or unnecessarily destroying an innocent

life (direct, non-therapeutic abortion). To qualify a human act as moral or

immoral by looking at its end (i.e. if it contains a value or disvalue) is to use

teleologism.

91 Cf. Ibid., pp. 126-128.

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Thus teleologism is a kind of or way of qualifying a human act by looking at its

result or end or goal.92 Deontologism, on the other hand, qualifies a human act by

looking at its (act’s) content. For example telling lies.93

Teleologism insists on looking at the consequence of the act because it sees that

often values are in conflict. Both values cannot be realized at the same time. One

has to make a choice for the higher value. For example, bribing to get permission

to import a life-saving machine. If the importing is delayed, many will die (E.G.

Ruwanda, cholera). Or being truthful and thus endangering some one’s life.94

The teleologists are not against universal norms. They argue that universal norms

must not be applied without reference to the situational elements which call for

attention to other values as well.95 Capital punishment was thought necessary at

one time. Now it is seen that may not be the right means to preserve law and

order.96 (Here Böckle is mixing up a value and a means to preserve it. Law and

order is the value. Capital punishment is the means to preserve it. Has there been

a change regarding the value? Did anybody say that law and order is not a value?

Think further on this point before making it public.)

Teleologism is criticised saying that if it is allowed, values will become relative in

the sense that they (values) will be considered valid only under certain conditions.

This anxiety or criticism is a possibility. However, it is only a possibility. A

relativised general norm or value which takes into account motivations and

situations does not invalidate the general validity. For example the value of

human life was always recognized. At the same time capital punishment and just

war were defended. Thereby the value of human life did not become null and

void.97 In fact what the people who defended capital punishment were saying is

this: Human life is inalienable depending on certain conditions.92 Cf. Franz Böckle, Fundamentalmoral, 4. Auflage, Kösel, München, 1985, p. 306.93 Cf. Ibid., p. 315.94 Cf. Ibid., p. 306.95 Cf. Ibid., p. 307.96 Cf. Ibid.97 Cf. Ibid., p. 310.

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Teleology criticizes a false absolutising of norms or values.98 To argue that if

teleologism is allowed it will lead to relativism, is itself a teleological way of

arguing, i.e. judging something by looking at its consequence.

Teleologism is not an argument for justifying any means with the nobility of the

end. The end does not justify the means. In no case should one do evil to bring

about a good result.99 All that teleologism says is this: In case of value conflict,

choose the higher value or intend the higher value knowing that it may have an

unintended bad effect.100

Criticism of teleologism

It is not always possible to find out all the consequences of an act so as to be able

to judge it either as good or bad.

It is not easy to compare values so as to be able to say which is higher or lower.

However, we do make teleological evaluations in life.101

Teleological evaluations are right with regard to material objects but it may not be

right with regard to evaluations concerning human beings.102

16. Deontologism

The deontologists argue that there are acts that are moral or immoral by their very

nature. One need not look at the consequence to see if they are evil or not. For

98 Cf. Ibid.99 Cf. Ibid., p. 309. Cf. Also Bruno Schüller, Die begründung sittlicher Urteile : Typen ethischer Argumentation in der Moraltheologie, Patmos, Düsseldorf, 1973, p. 174.100 The teleologists are also deontologists in the sense that they consider certain ends as values (deon, duty) to be realized. And without certain deons or values or duties how can the teleologists judge an end as good, as morally good. There should be a certain criterion. And the criterion is the deon (K.J.).101 Cf. Eberhard Schockenhoff, “Normative Ethik : eine Problemskizze” in: Studia Moralia 35 (1997), 445-473.102 This is the view of Eberhard Schockenhoff, Naturrecht und Menschenwuerde : unversale Ethik in einer geschictlichen Welt, Mainz, Mathias Gruenerwald Verlag, 1996.

23

example telling lies103 or the direct destruction of innocent lives, torture of the

innocent or rape. The deontologists base themselves on natural law to show that

some acts are intrinsically evil. For example it is against nature to tell a lie to

another person.104 Here nature is understood in the spiritual sense.It may be

difficult to see a universal natural law.105

17. The ultimate telos or deon (duty)

Franz Furger says that humaneness (Meshschlichkeit) ought to be the last telos or

aim of human moral conduct. Only when human actions correspond to or are

done in the light of Mesnschlichkeit, are they to be qualified as moral.106 What

Furger proposes as telos, can be seen as deon (duty or value). And telos and deon

can be the same. And ultimately the only criterion that stands in all situations is

that man should be humane (menschlich). If one is inhuman in following a norm,

he can be asked in the name of morality understood as humaneness that he does

not follow that norm. The request comes close to what Our Lord said: The

Sabbath was made for and not vice versa.107

According to Furger teleology is related to deontology in the sense that the last

telos is to be a value (wert, deon) which itself is not valid in view of another telos.

The last telos is a value, an absolute value.108 The last telos can be humaneness in

the humanistic or philosophical ethics and love of neighbour in christian ethics.109

Furger is of the view that the last telos (wert) which is not in view of another telos

is not a thing that can either be conclusively demonstrated by reason as in the case 103 Cf. Bruno Schüller, Begründung, p. 315.104 Cf. Ibid., pp. 317-318. Eberhard Schockenhoff in his book Naturrecht und Menschenwuerde : universale Ethik in einer geschictlichen Welt, Meinz, Mathias Gruenerwald Verlag, 1996,strongly pleads for natural law and the existence of intrinsically evil acts.105 Cf. Ibid., pp. 318-319.106 Cf. Franz Furger, Was Ethik begründet ? : Deontologie oder Teleologie - Hintergrund und Tragweite einer moraltheologishen Auseinandersetzung, Zürich, Einsiedeln, Köln, 1984, pp. 42, 45,54. On page 32 of the same Furger gives a definition of teleology. Consult when needed.107 Personal (K.J.).108 Cf. Furger, Was Ethik, p. 49.109 Cf. Ibid., pp. 41-42, 49.

24

of positive science or in the case of philosophical insight.110 He says that it is a

“Setzung”111 , an option112 , an act of belief (Glaubensakt).113

It is possible to doubt Furger’s affirmation that the last telos is an act of faith, an

option, i.e. an option to be fraternal to man and not to oppress or exploit him. To

be fraternal or being kind to man is a value, and a value is self-evident. It reveals

itself as compelling, demanding an obedience.114 It is an option to obey the call of

value. But the existence and call of value are objective realities.

III

1. What is business ethics?

Ethics concerns the rightness or wrongness of human actions or conduct. There is

a common understanding among the people of the world about rightness and

wrongness. It is that common awareness which gave birth to the UN declaration

110 Cf. Ibid., p. 49.111 Cf. Ibid., pp. 49, 53.112 Cf. Ibid. p. 34.113 Cf. Ibid., p. 49.114 Cf. Personal (K.J.).

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on universal human rights.115 Ethics does not exclude any field of human activity.

It asks the businessman also: is it right or wrong?116

Business ethics is ethics applied to the field of business. The subjects of business

ethics are the producer and consumer. Producers include the management,

employees and suppliers. The key players are the top-level management.

2. The need for ethics in business

A French proverb has it: He who looks deepest into the past, looks farthest into

the future. The Indian businessman has to look deep into the moral/cultural

heritage of India. One ought to learn from Krishna’s idea of

disinterested/detached performance of duty, from the Manuan idea of sons having

to clear the debts of their fathers, from the Maurian idea of keeping proper

accounts and from the revenue collection practice of Akbar.117

Ethics or fair play is the basis for interdependence. We either stand or fall

together.118 Ultimately there is to be a value for which a man must be ready to

make any sacrifice. That value does not change with time, threat or allurement.119

Some questions addressed to business:

115 Cf. T. A. Mathias, “Profit or People”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 79-80. International Declaration of Human Rights, December, 1948.116 Cf. T. A. Mathias, “Corporate Ethical and Social Responsibility in Action”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 24. Cf. also P. S. Bajaj and Raj Agrawal, Business Ethics : An Indian Perspective, New Delhi, Biztantra, 2004, p. 179. They are of the view that business should never be exempted from ethics.117 Cf. P. L. Tandon, “The Propertyless Manager: Culture and Ethics in India”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 3-5. In fact what Lord Krishna and Manu are saying is this (“The Propertyless Manager, pp. 4-5): It is a value to perform one’s duty without thinking of the reward. And according to Manu it is an obligation to return borrowed money. The obligation remains upto the third generation.118 Cf. C. K. Sinor, “Responsible Corporate Citizenship : Three Aspects”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 66.119 Cf. S. K. Gupta, “Ethics and Industry”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 124. One can ask Mr. Gupta if in satisfying the basic needs of man there is no place for ethics or not.

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Are govt. officials more ethical than officials of industry that is governed solely

by profit motive?

Are there absolute values?

Do values evolve or change?

Do business ethics differ in different parts of the world?

Does not the employment contract impose the organization’s value on the

worker?120

Business is done for profit. But what kind of means is used?

What kind of competition is to be faced and how is it to be faced?

What are the personal values of the chief executive?121

There is no need for ethics in business.

There is a myth about business. It is that business and ethics do not go together.

It is believed that in business there is no ethics. Henry Taylor, a British politician,

once said: Falsehood ceases to be falsehood, when it is understood on all sides

that truth is not expected to be spoken.” Deceit is taken to be part of business.122

A businessman is not expected to be ethical in his corporation. He needs to be

ethical only as a private individual.123 Since the managers have a private morality

that has no bearing on their business, they are not expected to follow the norms of

honesty, courage, sympathy and integrity. These values are strange to business.124

Some dilemmas of the chief executive are:120 Cf. S. K. Gupta, “Ethics and Industry”, p. 124.121 Cf. R. Narasimhan, “A Practical View of Business Ethics”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 128.122 Cf. R. Narasimhan, “A Practical View”, p. 130.123 Cf. T. A. Mathias, “Corporate Ethical”, p. 24. This is not openly said in India because the moralistic climate does not allow it to be said openly but it is practiced (ibid.).124 Cf. T. A. Mathias, “Profit or People”, p. 81. Joseph R. Desjardins, “Is Morality Relevant to Business”, in” Contemporary Issues in Business Ethics by Joseph R. Desjardins and John J. McCal, Belmont, California, Wadsworth Publishing Company, 1985, pp. 2-19, thoroughly deals with the question if business is ethically neutral or not. He is of the view that it is impossible to keep business out of the reach of ethics, if one believes in the fundamental values of honesty and fairness. In the course of his article Josehp R. also clearly demonstrates the impossibility of being relativistic in ethics and applying relativism to the field of business.

27

The need to make compromises but not too many

Disclosing truth only partly so as to avoid revealing the full truth

Making decisions on incomplete facts

Accepting responsibility for the mistakes of the subordinates but not allowing

them to make too many mistakes.125

The CEO may have personal ethics and ethics different from it in the company

which follows the norm: do what your boss wants you to do. This will

eventually lead to ethics not being different from quest for one’s own survival and

advantage.126

Milton Friedman, a Nobel laureate, is of the view that the manager’s sole

responsibility is to maximize profit at increased efficiency. His sole responsibility

is towards shareholders. He should not divert profit to social work.127

125 Cf. R. Narasimhan, “A Practical”, p. 129.126 Cf. Donahue, “Disagreement”, p.p. 42-43.127 Cf. T. A. Mathias, “Profit or People”, pp. 80-81. The view of Milton Friedman is thoroughly analyzed and criticized by Joseph R. Desjardins, Contemporary Issues, pp. 20-46. Accroding to Friedman, the CEO of a company is solely responsible to the shareholders, i. e. he must maximize the profit for them. He has no social responsibility, and to engage in social responsibility will be to divert the money of the shareholders to a field in which the CEO is no expert and he has no right nor responsibility to do it. The govt.’s function is to see that in business there is neither force nor fraud. Desjardins proves that there is a social responsibility for the CEO and that the govt. has to safeguard more than just seeing to it that there is neither force nor fraud. Govt. has to see to it that it protects other values like the intrinsic value of a person, the right to freedom and the right to a fair share of the goods and services of society. Allowing laissez faire is only one of the values, and it is not the fundamental value of life. D. Amarchand, Government and Business, 2nd ed. New Delhi, Tata McGraw-Hill Publishing Co. 1991, pp. 261-266, agrees to the social responsibility of business corporates. They are obliged, for example, to protect the environment, to give decent wages and to help to uplift the locality in which the business is located. There is an excellent article (“The Social Obligation of Organized Sector”, in: Busianess Ethics : An Indian Perspective by P. S. Bajaj and Raj Agraval, New Delhi, Bizantara Publications, 2004, pp. 120-130) which describes in detail the social obligations of corporates. The position or point of view of Milton Friedman seems to be differently understood by different authors. According to Harvery S. James Jr. and Farhad Rassekh, “Smith and Friedman on the Pursuit of Self-Interest and Profit”, in Laura P. Hartman, Perspectives, pp. 252-256, Friedman follows the Smithian model. He wants the corporation to follow self-interest and not be selfish. Friedman wants the company to be legal and ethical. It should not cheat in any way or withhold information from the public so as to increase the sales of its product. Nor should it influence the Govt. to prevent the entry of other competitors. But does Friedman has anything against giving low wages so as to increase the profit of the company or does he support the idea of giving jobs to the illiterate so that their children will be enabled to be literate, as the Tatas did in Jamshedpur years ago? The last questions are mine. KJ.

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According to the classical view the responsibility of the manager is to maximize

profit. The neo-classical view differs from it. It looks at business as a venture

which looks after the interests of the stakeholders. And the stakeholders are:

producers, consumers, environment, employees and suppliers. Business does not

look after the interests of the shareholders alone. 80-85% of the managers of

today believe in the neo-classical view.128 There is the tension between self-

interest and social welfare or common good in business. Some will emphasize the

former and the others the latter. But no nation can survive long without concern

for the common good or concern for others.129

A possible definition of social responsibility: “By ‘social responsibility’ we mean

the intelligent and objective concern for the welfare of society that restrains

individual and corporate behaviour from ultimately destructive activities, no

matter how immediately profitable, and leads in the direction of positive

contributions to human betterment, variously as the latter may be defined”

(Kenneth R. Andrews).130

“Look at a well-run company and you will see the needs of its stockholders, its

employees, and the community at large being served simultaneously” (Arnold

Hiatt, Former CEO, Stride Rite Corp.).131

Corporations do have social responsibility. The market will destroy the

inefficient corporations. The slow anger of man against immoral corporations

will destroy/penalize them in the long run. That anger will, in the long run,

destroy capitalism and, possibly, freedom itself.132

128 Cf. Thomas Donaldson, “Ethics in Business : A New Look”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 17. Jagadish N. Sheth, an Emory University (USA) Professer, “This is the best time for India to unlock its potential. The entire world is ready to help”, India Today, Oct. 6, 2008, is firmly convinced that the CEO is not only responsible to the shareholders but principally to the stake holders as explained above.129 Cf. Donahue, “Disagreement”, p. 38.130 Laura P. Hartman, Perspectives in Business Ethics, 2nd ed. New Delhi, Tata McGraw-Hill Publishing Company, 2003, p. 221.131 Ibid., p. 224.132 Cf. Laura Hartman, Perspectives, pp. 221-222.

29

Corporations do have social responsibility. They should avoid social injury, like

for example, environmental damage.133

Man is most authentic when he is obedient to the innate desire to know truth and

do good. If one is faithful to that innate desire, then he will be attentive,

understanding, reasonable and responsible.134 In society there are people called

whistle blowers. They are sensitive persons and they hope that others will listen

to them, i. e. there are others who are sensitive to the call of truth and goodness

(the innate drive). If others do listen, then they become attentive, understanding,

reasonable and responsible. They thus prevent society from disintegration.135 It is

possible to raise critical questions and listen to the questions of others if there is

willingness.136

A survey of 100 companies shows that ethics and profits can indeed go

together.137

In the last 20-30 years ethics has become a major topic in management courses.

Why?

Ethics is needed for an efficient and smooth economy.

Govts. and laws cannot solve some key issues.

Ethics is valuable in itself. It is not a fad. It enhances the quality of our life.138

133 Cf. N. Craig Smith, “Arguments for and against Corporate Social Responsibility”, in: Laura P. Hartman, Perspectives in Business Ethics, New Delhi, Tata McGraw Hill Publishing Company, 2003, pp. 236, 235.134 Cf. Eugene L. Donahue, “Disagreement as an Ethical Resource for Economic Growth and Social Responsibility”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 41.135 Cf. Donahue, “Disagreement”, p. 43. Whistle blowing is extremely difficult especially in a society that accepts corruption as normal. The whistle blower can be ostracized, penalized and even dismissed from service. Only the very brave and principled dare to blow the whistle. God is their ultimate strength. One way to surmount the difficulties faced by whistle blowers is to approach the trade unions of each branch of industry. Another is to approach reliable media (Cf. Sucheta Dalal, “Whistle Blowing – Can it Work?” , in: P.S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Biztantra Publications, 2004, 292-297).136 Cf. Donahue, “Disagreement”, pp. 38-43.137 Cf. T. A. Mathias, “Corporate Ethical”, p. 28.138 Cf. Donaldson, “Ethics in”, pp. 9-12, 15, 21. P.S. Bajaj, and Raj Agrawal, Business Ethics : An Indian Perspective, New Delhi, Biztantra, 2004, pp. 178-179, are of the view there should be a code of ethics in business, the managers are the most influential people in the company, i.e. their

30

In the long run, it pays to be ethical.139 Ethical companies do make profit and

people are willing to pay higher prices for their products. For example Johnson

and Johnson and the Tatas. J and J withdrew its drugs (Tylenon) that others had

tampered with and made unsafe. J and J withdrew the entire quantity of drugs

from the market and reintroduced tamper-free drugs. The company incurred huge

financial loss but it gained in reputation and credibility and eventually also in

money.140

Both ethical and economic principles are to be considered in business while

decision making. Ethics help better decision making. Business is not a social

work organization. Business must be run on economic principles. Otherwise it

will not make profit. But lay offs, closing of units and toxic waste management

are some issues that need both ethical and economic considerations. Ethics will

force the management to take all aspects into consideration. In the process

decision making may be slow but fair to all concerned. In the long run, it is ethics

that will ensure the existence of the company.141

Values make the management credible to the employees. It is not fringe-benefits

that create credibility but perceived moral and social uprightness. Employees feel

it as their company and not of the shareholders. Even retrenchment will be taken

as honest way of dealing with bad times.

Ethics helps business run smoothly. The Tatas sincerely consulted at all levels:

managers, workers, etc. Gave medical and education help to the employees. On

ethical behaviour influences that of the subordinates and creates the type of ethical climate in the company.139 One must observe here that the statement: in the long run it pays to be ethical” can give rise to utilitarianism in business ethics. But utilitarianism is not what is intended. It is intended that it is good to be ethical, and its positive result may take a long time to show up (K.J.).140 Cf. Mathias, “Profit”, pp. 83-84.141 Cf. Mathias, “Corporate Ethical”, p. 32. Most managers agree that profit should not be the only criterion while making decisions. But they also complain that it is difficult to be ethical in a sea of corruption/unethical atmosphere (Cf. P. S. Bajaj and Raj Argraval, Business Ethics : An Indian Perspective, New Delhi, Biztantra Publications, 2004, p. 178.).

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account of these for the last 58 years or so there was no strike against the

management in Tisco.142

Values in a company creates credibility in the public. For example, Larson and

Toubro and Tatas. Their shares and products will be bought enthusiastically.

Govt. laws are meant to curtail the self-interest of the company. But they are

often ineffective and do not create the type of atmosphere which ethical values

create in a company.143

A company is not ethical because of expediency or it wants to avoid court cases.

It is ethical because the top management feels that their decisions affect thousands

of people and their concern should not be ignored. More importantly people want

to be part of an organization which they can respect and be proud of because its

purpose and activity are beneficial to society.144

O. A. Ohmann writes in Harward Business Review, 1970:

People like a boss who has ethical principles.

Bread alone does not satisfy most people.

The God of production has feet of clay.

We need an ethical way of doing business.

Raising the price of prostitution does not make it a work of love.145

Law cannot protect society in every case. But ethics can. There are many things

for which man is responsible but he cannot be made legally responsible. Law just

does the minimum. There are international ethical issues but there are no laws to

deal with them effectively.146

JRD Tata is of the view that immense damage has been done to private enterprise

due to the lack of ethical principles in many businessman. It is not true that

142 Cf. Mathias, “Corporate Ethical”, pp. 31-32. Cf. also Donaldson, “Ethics”, pp. 12-14.143 Cf. Mathias, “Corporate Ethical”, p. 31.144 Cf. Mathias, “Corporate Ethical”, p. 30.145 Cf. R. Narasimhan, “A Practical”, p. 131.146 Cf. Donaldson, “Ethics”, pp. 14-15.

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ignoring ethical principles will lead to quicker profits. Our own experience is

different. Corporations that make ethical and socially responsible decisions do

better in the long run. For a short period they may make losses.147

The Americans neglected ethics for a long time and glorified greed and

selfishness. But then came the shock of 1973. Competition (in automobile

industry) forced them out of business. In the long run it is ethical values that will

ensure the survival of the company.148

Surveys in Europe and US have shown the absolute need of ethics in business. It

is the top manager/leader who is the most influential man. His ethical attitudes

will determine those of his subordinates.149

It is objected that ethics is possible only in large concerns/companies. That is,

only they are able to care for the workers, consumers and the environment. And

also when there is no competition. This is just not true. IBM, AT &T, Johnson

and Johnson and Tatas held up high moral values even when they were small in

size. It is in fact ethics that made them big.150

Alfred Marshal, the famous economist, said in 1925: A score of Tatas might well

do more for India than any govt., British or indigenous.151

There is cultural difference in the world. So also in ethics. The Japanese seem to

emphasize more personal relationships than level playing field. East and West

differ in ethics. So have to make compromise.152

Capitalism’s essential need for ethics

147 Cf. Mathias, “Corporate Ethical”, pp. 28-29.148 Cf. Mathias, “Corporate Ethical”, pp. 27-28.149 Cf. Donaldson, “Ethics”, p. 22.150 Cf. Mathias, “Corporate Ethical”, pp. 25-26.151 Cf. Donaldson, “Ethics”, p. 12.152 Cf. Donaldson, “Ethics”, p. 16. I disagree on compromise. Ethics is ethics anywhere in the world.

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Capitalism is an economic process/activity which harnesses the inevitable, even

though regrettable, self-interests of man and directs it to the common good.153

Capitalism is not immune to the shortcoming of its participants, men. Even Adam

Smith was aware that capitalism does not work well unless it is joined to the

ethics of its participants.154 He was further aware that, unless curbed, greed and

selfishness can destroy capitalism itself.

For Adam Smith self-interest is not selfishness. In selfishness one does harm to

his neighbour. In self-interest one does not. In self-interest one looks after one’s

interest without harming the interest of his neighbour. Self-interested behaviour

does no injury to his neighbour nor does it take away that which belongs to

another. Self-interest sins when it either injures his neighbour or takes away that

which belongs to his neighbour. In other words, self-interest is tempered by

justice, understood as neither taking away another’s property nor injuring him in

any way.155

Adam Smith was also aware that the sentiment of benevolence perfects the human

race and that is mankind’s grace. “…that to feel much for others and little for

ourselves, that to restrain our selfish, and to indulge our benevolent affections,

constitutes the perfection of human nature; and can alone produce among

mankind that harmony of sentiments and passions in which consists their whole

grace and propriety” (The Theory of Moral Sentiments, p. 25)156

Ivan Boesky, a Wallstreet economist, said, at the convocation ceremony of the

University of California, Berkeley, 1985: “Be proud to be greedy and selfish

when you enter the world of business; because these are the virtues that motivate

153 Cf. Donaldson, "Ethics", p. 12.154 Cf. Donaldson, "Ethics", p. 12.155 Cf. Harvey S. James Jr. and Farhad Rassekh, “Smith and Friedman on the Pursuit of Self-Interest and Profit”, in” Laura P. Hartman, Perspectives, pp. 249-250.156 As quoted by Harvey S. James Jr. and Farhad Rassekh, in: Laura P. Hartman, Perspectives, pp. 250-251.

34

you higher and higher.”157 Even Centesimus Annus158concedes that capitalism is

best suited for the production of goods and services but it has to be directed to

care for the poor and environment.159 This care is absent in the capitalistic system

as such.

Capitalism allocates resources efficiently. Whenever man bribes a govt. to get a

product passed, man prevents the creation of true wealth through the capitalistic

mechanism. That is, man prevents the market from bringing out the best product

on the basis of price and quality.160

In its initial stage capitalism did neglect ethical issues. It employed child labour

and brought out even putrid products, products not fit for consumption. Govts.

intervened and corrected the anomaly. Now we have reached a second stage in

the capitalistic system. This is a far more difficult stage. In the second stage

ethical attitude within a corporation is far more important than govt. legislations

because legislations lag behind.161

Brute capitalism was challenged by socialism. But socialism ended in

inefficiency and no progress. Now it is realized that no business can survive in

the competitive world without being fair to consumers and environment.162

3. The ethical climate in a company

The ethical climate in a company depends on two factors: a) the clear and shared

ethical values of the company b) the number of times the company complies with

157 Cf. Mathias, "Corporate", p. 25.158 John Paul II, Centesimus Annus, Bombay, Paulist Press, 1991.159 Cf. Mathias, "Corporate", p. 25.160 Cf. Donaldson, "Ethics", p. 13.161 Cf. Donaldson, "Ethics", p. 21.162 Cf. S. K. Gupta, “Ethics”, p. 125.

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these values.163 Breach of ethics leads to lack of trust required to maintain

individual and organizational moral climate.164

In order to foster an ethical climate in a company165, it is necessary to have an

ethical code of conduct.

The code must be formulated after having discussions/consultation at all levels

and not just managerial level only. Norton did this in 1970, and TISCO right

from the start.

It should be implemented. Otherwise cynicism will be the result.

Make the code known through printed copies.

Train the employees in it, especially the new recruits.166

Implement the code by making it known to the employees that unethical

behaviour will be punished, no matter what the cost. Serious offences are to be

dealt with immediately and punished. It will have a salutary effect.

People can be held responsible for their mistakes (Union Carbide, Bhopal) only if

they knew what they were doing, i.e. in what process they were involved. Have a

structure in which people are aware and responsible.167

There should be an ethics committee to advise the board on grey areas. The ethics

committee will explain to the employees reasons for a particular decision. The

committee will suggest changes to the code according to changed times and

values (for example: dress code).168

163 Cf. Jeswant Nair, “Ethics in Marketing: Advertising, Pricing and Product Quality”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 243.164 Cf. Patricia A Sullivan and Timothy Brown, “Common Sense Ethics in Administrative Decision Making: Preparatory Steps”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 111.165 Cf. Donaldson, "Ethics", pp. 18-19.166 Cf. Mathias, "Corporate", pp. 33-34.167 Cf. Donaldson, "Ethics", p. 18.168 Cf. Mathias, "Corporate", pp. 34-35.

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Ethical committees can be of two types: a committee of outsiders and a committee

of insiders. Outsiders are those who do not belong to the board of directors. They

have no executive power. But the company must listen to their advice otherwise

the company will loose credibility. The committee of insiders is constituted with

members from the board and with the CEO as chairman.169

It is highly important to have a committee of utterly honest and competent men to

evaluate the ethical practices of the company. The Tatas had two such

evaluations, in 1980 and in 1992.170

By drawing up a code of ethics, explaining it to the employees through special

training and implementing the code through a committee of the board of directors

the company institutionalizes ethics in the company.171

A code of ethics could have the following as part of its content: The interests of

the organization ranks above that of the individual. The interest of society ranks

above that of the individual and the organization. Truth must be told in all

cases.172

The following will also contribute to creating an ethical climate in the company:

The top manager must be a moral role-model.

Associate and consult with morally sensitive and competent persons.

Follow one’s conscience and take responsibility for one’s actions.

Stress standards and spirit of the law.

Be committed.

169 Cf. Mathias, "Corporate", p. 35.170 Cf. Mathias, "Corporate", p. 36.171 Cf. Mathias, "Corporate", p.33.172 Cf. R. Narashimhan, “A Practical”, p. 129. Is truth-telling always possible? One can ask: is the interest of the organization always to be preferred to that of the individual? Is it not so that justice must prevail, irrespective of whose, i.e. of the individual or of the organization?

37

There should not be a discrepancy between the personal ethics of the manager and

that of the organization. So too there should not be a disparity between the ethics

of the worker and that of the organization.173

Even if it does not lead to smooth running of business, ethics is still good or

important.174

Norms for managerial decisions

The top manager has to take decisions that will affect thousands of people. And

what should guide him when he does take a decision? In 400 BC Hipporates

formulated a negative norm for taking a right moral decision: primum non nocere,

i.e. do no harm to anybody. The Indian physician Charaka went even a step

further when he said: I shall never harm the patient even in my thought (Ency.

Brit. Vol. 5, 1987).175

Laura L Nash has proposed four criteria for managerial decisions:

What is your intention in making this decision? (Presupposed is that the intention

must be good).

Whom could you harm with this decision?

Will your decision be valid for tomorrow too?

Are you ready to disclose and defend this decision before anybody?176

The four way test of Rotary International

173 Cf. Patricia A Sullivan and Timothy Brown, “Common Sense”, pp. 110-114.174 Cf. Donaldson, "Ethics", p. 15.175 Cf. Mvd Bogaert, "Economic Development", pp. 52-53. The real value presupposed in the norm of Hippocrates is: it is a moral disvalue to hurt a human being. Positively, a human being a valuable being and so should always be nurtured.176 Cf. Mvd Bogaert, "Economic Development", p. 258.

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Is it the truth? This can refer to what a company tells the public or what it has

heard or discovered or feels to have discovered in a research on the basis of which

a decision is taken.

Is it fair to all concerned? (Presupposes that it is a value to be fair or just to all).

Will it build good will or better friendship?

Will it be beneficial to all concerned?177

Kenneth B Vincent and Norman Peal have proposed yet another set of norms that

could help managerial decision-making.

Is it legal? Will it be violating either civil or company law?

Is it balanced? Is it fair to all concerned in the short and long term? Does it

promote a win-win relationship?

How will it make me feel about myself? Will it make me proud? Would I feel

good if my decision were to be published in the newspapers? Would I feel good

if my family members knew about it?178

M. K. Gandhiji had an astonishing but inspiring norm to be adhered to:

How will my decision affect the poorest of the poor? One could add to it the

concerns of today also: How will it affect the ecology and the future of the

coming generations?179

Business ethics in India

177 Cf. Mvd Bogaert, "Managerial Decisions in a Developing Economy: In Search of an Anchoring Point", : in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 53. Some of these questions are controversial in the sense one could plead for a decision for the sake of good will or better relationship among the participants but, in fact, may be morally wrong.178 Cf. Mvd Bogaert, "Managerial", p. 53.179 Cf. Mvd Bogaert, "Managerial", pp. 56-63. Gandhiji’s norm has been criticized as being impractical. In fact, it is not a norm in the strict sense but it is a call to have the care of the poor in one’s conscience.

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India is at the nadir of business ethics. “Our problem is: How does one begin the

essential process of reform?”180 There is much corruption in business in India.

But in the end, people like to work for an ethical company and for a boss who has

moral values and whom they can trust.181

Creating an Ethical Atmosphere in Indian Companies

There is a feeling among the businessmen of the world that Indian businessmen

are not entirely trustworthy. They fail in delivery on schedule and are not

thorough.

This impression has to be changed, especially because India has entered the stage

of liberalization and globalization. It can be done only by manifesting to the

world that the top management of companies believe in moral values and act

accordingly.

It can be done only when the guilty are duly punished.

It can be done only when there is no discrepancy between the personal values of

the manager and those of the corporation he heads.

It can be done only when companies do not employ ‘agents’ to do dishonest

deeds.

It is lamented that there are role models in business. This is, in fact, an alibi for

being dishonest. The great majority are without values. But there are

businessmen of character: Tatas, Infosys.

180 Cf. R. Narasimhan, “A Practical”, p. 128.181 Cf. R. Narasimhan, “A Practical”, p. 128.

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By being faithful to values a corporation may suffer in business in the short run.

But in the long run it will gain financially, the good will of the consumer, and

international acceptance and respect.182

Bribing in Business

Petty sums may be given to petty officials for performing their duties. Otherwise

unnecessary delays and harassments may follow, like slowing down delivery, etc.

But bribing to secure a contract against another company that may win it on

quality is wrong. In this kind of bribery quality suffers and in the long run

consumers or society.183

4.Social responsibility of business

Business has certain social responsibilities.184 Social responsibility of Corporates

is the application of the ethics of the corporate house to the concerns of society.

For example women’s welfare in the corporate and care of the environment. And

concern of society will change from time to time.185

Wealth is meant for all. It is not just for the rich nations, the bourgeoisie, or the

shareholders. Robert Wood Johnson who wrote the code of ethics for Johnson

and Johnson said: Wealth is essentially social.186

182 Cf. Maya Reddy, “Creating an Ethical Organization: Role of Management”, in: Corporate Ethics, ed. T. A. Mathias, Bomhay-Calcutta, Allied Publishers, 1994, pp. 277-282.183 Cf. Mathias, "Corporate", pp. 29-30. Cummins, a truck making company in the USA was asked to practice racial discrimination in recruiting. They refused and lost a lucrative contract which other unethical companies grabbed. But Cummins did not regret the decision (cf. ibid.).184 Cf. Donaldson, "Ethics", p. 18.185 Cf. T. A. Mathias, “Profits”, p. 80.186 Cf. T. A. Mathias, “Profits”, p. 87.

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Private property is allowed because it produces goods and services more

efficiently more often. However, insensitive companies must be made socially

responsible through laws.187

Corporates have social responsibility because they exist and flourish on account

of the social wealth of nature and other resources: maintenance of law and order,

mass media, transport and communication facilities.188

Corporates are not solely responsible to the shareholders and directors. They are

to be responsible to the govt., public and consumers. There should be

transparency in finance, employment and research. No law can fully regulate

them. Ethical behaviour can.189

According to Berle and Means, the surplus of a company belongs not only to

shareholders but to workers in the form of bonus, to consumers as low prices, fair

deal to suppliers, donations to charitable organizations and higher taxes to the

govt. Friedman, Galbraith and Rowstow believe that surplus belongs only to the

shareholders.190

There is more acceptance in the world of today for the views of Berle and Means

than for that of Friedman and company. It is the view of the public that large

corporations must contribute to education, culture, eradication of poverty and to

check pollution. The large corporations must fulfill the above obligations because

they have the means, and wealth is essentially social in nature.191

There has been a marked increase in corporate responsibility in the last decade.

Tisco and Cummins Engines of Columbus, Indiana, USA are some examples that

187 Cf. T. A. Mathias, “Profits”, pp. 87-88.188 Cf. T. A. Mathias, “Profits”, pp. 88-89.189 Cf. T. A. Mathias, "Profits", p. 90.190 Cf. T. A. Mathias, "Profits", p. 85.191 Cf. T. A. Mathias, "Profits", pp. 86-87.

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have ethics review committees in their administration. In the long run they make

more profit and people love to work for them.192

Friedman and company will agree to making profit through efficiency, i. e.

production of quality goods at low price without cheating and exploiting,

respecting competition and obeying laws. This is the enlightened approach.193

A company must make profit by being efficient. It should not be a drag on

society like some public sector companies. A company management must be

responsible to directors, shareholders, employees and society as a whole. It

should have an annual evaluation of all these.194

Large business houses have enormous power and influence in using up resources,

employing people and producing goods of many kinds, from detergents to

sophisticated instruments. They ought to have ethical responsibility. Otherwise a

situation of exploitation, anarchy and revolution will follow.195

“The point, …, is that social responsibility is a corporation’s duty, whether it wins

kudos for it or not. It could be said that every company must include social

responsibility as one of its objectives and draw up a detailed plan for its

implementation just as we do for any other project.”196

There is widespread corruption in our country. Still corporations must obey the

law in its spirit. They must not cheat the govt. by using the loopholes of the

law.197

192 Cf. T. A. Mathias, "Profits", pp. 91-92.193 Cf. T. A. Mathias, "Profits", p. 82. Friedman is willing to obey govt. laws. What would be his difficulty if the govt. passes a legislation that part of the profit must be given for charitable purpose?194 Cf. G. K. Sundaram, “Aspects”, pp. 127-128.195 Cf. T. A. Mathias, "Profits", p. 89.196 G. K. Sundaram, “Aspects”, p. 127.197 Cf. G. K. Sundaram, “Aspects of Business Ethics”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 126.

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The social obligation to pay taxes

Individuals and corporations must pay taxes. But taxes must be reasonable. In

India one pays 55-60% tax on super wealth. In other countries it is only 35%.

Taxes must be reasonable and the system should be easy to understand.

Otherwise it will lead to corruption. Taxes are to be used for productive

investments.198

It is obvious that every citizen has to pay taxes. The corporates have a special

responsibility to pay taxes because their financial strength is enormous. In India

there is much tax evasion and tax avoidance. Tax evasion is not paying the

declared tax, and tax avoidance is finding loopholes in the existing tax laws and

thus escaping from the ambit of the tax law. Both are bad.

To avoid tax avoidance the govt. passes new laws and thus adds to the maze of

numerous tax regulations which becomes unwieldy for the taxpayer and the

official who enforces compliance. This leads to corruption.

Tax evasion is mainly due to the fact there is a very high rate of taxation in India.

It is almost expropriatory. That forces people to avoid paying taxes.

It is imperative that the govt. simplifies the tax laws and reduces the rate of

taxation.199

5. Care of employees

198 Cf. P. K. Sinor, “Responsible Corporate Citizenship: Three Aspects”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 73-78.199 Cf. R. Narasimhan, “Ethics and Corporate Tx Responsibility”, in: Corporate Ethics, ed. T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 252-257.

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Ethics demands that adequate salary be paid, good working conditions are

provided and partnership with the trade unions and fellowship among workers is

fostered.

Workers/employees must be seen as persons and not as mere tools of production.

Employees must be well informed or educated so that they are not misled by the

unions.

In a competitive economy, it may not be possible to guarantee absolute job

security. Instead use the talents of workers in different fields.200

Here a word about the nature of the Indian worker is in place. It that he will work

well for himself, work well during the probation period. But once he is made

permanent, he will not work well. Job security leads to laziness. This leads again

to irresponsibility and loss of production.201

In the West decent wages, good working conditions and a humane treatment

satisfy the worker. It is not enough in India. In India, the worker expects welfare

measures like schools, housing, hospitals, etc. But all these add up to the cost.

Besides, is it not the duty of the govt. to provide the worker with these welfare

measures?202

The American policy of “hire and fire” is not suited to India. Even in the States,

it is being abandoned in favour of longer duration of employment. The Japanese

model of life-long employment, not necessarily in the same department, is better

suited to India, and that will ensure more loyalty and production.203

200 Cf. K. S. Swaminathan, “Concern for Employees, Consumers and the Public”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 225. Cf. also Donaldson, "Ethics", p. 15.201 Cf. K. S. Swaminathan, "Concern for", p. 225. In other words, there is no firm commitment to ethical value of rendering a just service for the pay one draws. It is a pity.202 Cf. K. S. Swaminathan, "Concern for", p. 220.203 Cf. K. S. Swaminathan, "Concern for", p. 225.

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A company must care for its workers. However, labour must not hold the

company to ransom as in telecommunications and airlines in India.204

How to deal with resistance in the labour force?

Employees cheat, work less and at times destroy company property out of

frustration with the organization. Either their values conflict with those of the

organization or the organization is inconsistent in its values. In any case, the

company must try to identify the cause of frustration and rectify the anomaly.205

Do not try to outsmart the workers. Deal with the resistance of the workers

creatively. Production will increase.206

The company leadership should have a consistent ethical policy. Explain the

goals of the company to the workers, reward honesty and punish dishonesty

consistently.207

6. Profit and ethics

It is ingrained in many men to work for profit. If profit were to be prohibited, it

will certainly lead to economic stagnation.208 In itself it is not wrong to make

profit. Profit is the difference between revenue and cost. Profit must be shared

by the govt., shareholders, employees and the local people.209 A company must

make reasonable profit. It is its social responsibility. Reasonable profit is the

204 Cf. G. K. Sundaram, “Aspects”, p. 127.205 Cf. Frank J Navran, “Rthical Conflicts in Ethical Companies: Lying, Cheating, Stealing in the Workplace – How to find it? How to fix it?”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 95-109.206 Cf. Frank J Navran, “Ethical”, pp. 108-109.207 Cf. Frank J Navran, “Ethical”, pp. 102-109.208 Cf. T. A. Mathias and B. G. Raghavendra, “Economic Growth and Profit as a Social Objective”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 212.209 Cf. T. A. Mathias and B. G. Raghvendra, “Economic Growth”, pp. 210-212.

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result of efficiency. But unreasonable profit due to monopoly or market vagaries

or artificial scarcity is not just. When that happens, the govt. must intervene.210

The two main concerns of business in India as well as in the world are:

Maximize profit

Rational behaviour, i.e. a business corporate acts solely out of self-interest. No

ethics is expected to be taught or to be necessary in business. This is very much

the situation in India.211

People discard ethics for short-term profits: they exploit workers, pollute rivers

with untreated effluents (Zuari Agro Chemicals, Goa), they bribe govt. officials

and cheat on paying taxes to the govt. All these are ways to maximize profit.

That they obey some laws is no deterrent against their selfishness. And laws are

often inadequate.212

In unadulterated capitalism crass selfishness prevails, as it did in the West and

USA in the nineteenth century. Short term profits by any means were gained:

exploitation of workers and offering substandard goods to the consumer. The

same prevailed in India till recently. Through lack of competition product of any

quality was good enough for the consumer. Rampant corruption as cheating the

govt. and bribing officials was the norm of the day.213

Contrary to the popular make-belief, there is a clear co-relation between ethical

principles and profit. The TATAS have unambiguously shown that it does not

hurt to be ethical. Companies known to be ethical are those whose shares are

most enthusiastically bought.214

210 Cf. T. A. Mathias and B. G. Raghvendra, “Economic Growth”, p. 210; G. K. Sundaram, “Aspects of Business Ethics”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 126. P. K. Sinor, “A Tradition of Social Concern: Ethics at ACC”, in: in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 161.211 Cf. Mathias, "Corporate", p. 23.212 Cf. T. A. Mathias, “Profits”, p. 84.213 Cf .T. A. Mathias, “Profits”, pp. 81-82.214 Cf. Donaldson, "Ethics", p. 17.

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It is unethical to keep all or major part of the profit for the shareholders. There

are many others who are stake-holders, namely, the workers, the environment and

society. The TATAS make good steel and good profit. From that they run

schools, hospitals, and even build good roads for the local community.215

Profit need not be the only criterion for doing business. For example The

Nagaland Paper and Pulp Corporation. Due to the enormous distance and other

costs, paper produced there is very expensive. But the factory is a great blessing

for the hill tribes. Precisely because of it, the govt. set up the factory there.

Private firms, unless subsidized, cannot do this.216

7.Advertising

Advertising is a hotly debated topic. It is both approved as well as disapproved.

We are concerned here about the ethics of advertising, i.e. the ethical and non-

ethical aspects of advertising.

Is there anything in itself evil in the act or phenomenon of advertising? There is

nothing in itself evil in advertising. Advertising is a way of making known the

existence or the coming into the market of a new product. However, advertising

is not so immaculate or innocent as it appears to be at first sight.

For example it is quite common among companies to use USP (Unique Selling

Proposition). In USP companies or manufacturers of a product emphasize an

ingredient in the product so as to attract the customer. For example: Chandrika

soap removes every bacteria. In fact all soaps remove bacteria and so it is not a

great specialty of Chandrika. Is this cheating the customer/consumer?217 One

opinion is that it is not cheating but using the creativity of the advertiser or the 215 Cf. T. A. Mathias and B. G. Raghavendra, “Economic Growth”, pp. 209-210.216 Cf. T. A. Mathias, “profits”, p. 86.217 Cf. Jeswant Nair, “Ethics in Marketing: Advertising, Pricing and Product Quality”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 245.

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company.218 One cannot deny that there is creativity in this. But there is also an

element of cheating. The consumer is made to think that only Chandrika removes

bacteria, and other soaps not. In fact it is not true. That misleading is not ethical.

The product is sold by misleading the customer.

Another question that is asked is: does advertising promote unhealthy materialism

or create artificial needs? It does to some extent. For example the introduction of

microwaves, fancy sanitary wares, brown bread, cakes, etc. Industry always tries

to go beyond the need satisfaction. Indian eating habit does not really require

microwaves but it is presented to the consumer as needed and as raising the

quality of life. The consumer decides to buy them even when it is not in their

financial interest because the force of the advertisement is such.219

Here is a question of relativity. In a poor country like India Microwave will look

like a luxury at the moment but eventually it will not, just like self-contained

rooms were once thought to be for the elite but now it is so common.

Advertising makes known the various choices and material welfare need not

necessarily lead to materialism. Material welfare should not be a dirty word.220

Marketers also bring up the argument that there are different income groups and

so they have to be served with different products, thus cake for the affluent and

rice for the poor.221 There is something in this argument but glaring disparity of

income and consumption is an offence against human fellowship.

Advertisers or marketers pass on the cost of advertising to the consumer.

Advertising goes on even in a seller’s market. Is this ethically justified? This is

not justified when the product is well-known and it still enjoys the benefit of a

seller’s market.222

218 Cf. Jeswant Nair, “Ethics”, p. 249.219 Cf. Jeswant Nair, “Ethics”, p. 246.220 Cf. Jeswant Nair, “Ethics”, p. 249.221 Cf. Jeswant Nair, “Ethics”, p. 249.222 Cf. Jeswant Nair, “Ethics”, pp. 243, 247.

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Another controversial point in advertising is the using of women. There is

certainly an element of instrumentalising a human being, and that is bad. But the

marketers argument is that it is just catching the attention of consumer.223 In any

case it is not a grave evil.

Is advertising of liquor ethical? If liquor is not evil in itself, advertising it may

not be an evil either. But in an illiterate and uninformed country like India

advertising of liquor may not be ethical. If explicit advertising is prohibited by

law, then implicit advertising is to be also prohibited.224

Advertising in itself is not evil. It gives choice and voice to the people/consumer

in the sense they ought to be able to voice their likes and dislikes to the

marketers.225

Any advertising that does harm to the consumer, like concealing the presence of

harmful elements in a product, must be banned. Harm should not be understood

only in the physical sense. It may be understood in the psychological sense of

driving up people’s desires beyond reason.226

Companies indulge in false advertising. False advertising consists of telling lies

about the company’s product, i.e. claiming more qualities for the product than it

actually possesses, and in disparaging the product of a rival company. This is

totally unethical.227

Laws alone cannot prevent unhealthy or unethical advertising. It is the ethical

sense of the company that will ultimately do away with unhealthy advertising.228

223 Cf. Jeswant Nair, “Ethics”, p. 247.224 Cf. Jeswant Nair, “Ethics”, pp. 244, 247.225 Cf. Jeswant Nair, “Ethics”, p. 251.226 Cf. Jeswant Nair, “Ethics”, pp. 250-1.227 Cf. P. S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Biztantra Publications, 2004, p. 182.228 Cf. Jeswant Nair, “Ethica”, p. 250.

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8. Pricing

Price must consist of product cost and a reasonable profit.229 It is unethical to

charge exorbitant prices in a shortage situation.230 So also to raise the price

according to the urgency of the consumer’s need is not justifiable. For example a

person in desperate need of life saving drugs may be willing to pay any price but

it is immoral to take advantage of that situation.231 However, it is disputable with

regard to luxury and fancy articles.232

9. Quality

Quality refers primarily to the product and not to the packing. Quality is, in fact,

the aptitude of the product to serve well the end for which it was produced. It is

unethical to market even a successful product once it is known that the product

contains some harmful element. Only the management may know about the

harmful element.233 So also it is unethical to change the ingredients of the product

marginally so as to increase the profit margin of the company.234

“Product quality must be a sacred obligation in the production and sale of

goods”.235 Quality is something which the consumer expects. It is his due. By

increasing the quality the company gains more by reducing repairs and

229 Cf. Jeswant Nair, “Ethics”, p. 244.230 Adam Smith has an explanation of his own for price rice in a shortage situation. According to him price rice is the natural mechanism to subdue consumption of the item in shortage. But who is asked to consume less? The poor, of course.231 Cf. Jeswant Nair, “Ethics”, pp. 244, 248.232 Cf. Jeswant Nair, “Ethics”, p. 248.233 Cf. Jeswant Nair, “Ethics”, p. 244.234 Cf. Jeswant Nair, “Ethics”, pp. 244, 248, 248.235 P. K. Sinor, “”Responsible Corporate”, p. 71.

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replacements.236 Here a word of caution is in place. One can make the safest car

but it will cost much? Can it be marketed?237

Quality of products is not ensured by govt. laws although laws are required.

Quality is ensured through competition, and to restrict competition is to be unfair

to the consumer.238

Consumer and his right

It is not his right to get the utmost quality. But it is his right to get the value for

his money.

It is his right to have a large choice.

It is his right to truth in advertising.

It is his right to have good after-sale service.

It is his right to be free from artificial scarcity and high prices thereof.

It is his right to have goods at reasonable price.

It is his right to be free of monopoly created by business by eliminating

competition by unfair means.

It is his right that business produces the goods and services that the consumer

requires.239

Product safety

It does not concern only finished products. The transportation of hazardous

material also calls for safety. Industry must train consumers in the use of

hazardous products. The NGOs could see to it that only safe products come to the

market.240

236 Cf. K. S. Swaminathan, "Concern for", p. 222.237 Cf. K. S. Swaminathan, "Concern for", p. 221.238 Cf. K. S. Swaminathan, "Concern for", p. 224.239 Cf. K. S. Swaminathan, "Concern for", p. 224; P. K. Sinor, “Responsible Corporate”, p. 71.240 Cf. K. S. Swaminathan, "Concern for", p. 224.

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10. Intellectual Property Rights

The ethical basis of intellectual property right is that it is fair or it is the due of

man that he keeps for himself the fruit of his labour.

Intellectual property is the physical result of intellectual work that has commercial

value.241 Intellectual property right is based on art. 27 of the Universal

Declaration of Human Rights. It states: Every man has the right to participate in

the cultural wealth of the community.

Every one has the right to protect the property which is the fruit of his intellectual

work.242 It is the right of the person to enjoy the fruit of his intellectual labour if

properly legally protected. These rights are covered by titles: Trade Mark Acts,

Patent Laws, Specific Property Rights and Copy Right Laws.243

The question of intellectual property rights is surcharged with emotion because

the protagonists are rich and poor nations whose needs are different from those of

the rich ones. But a return on the huge investment made in the discovery is the

right of the researcher nations. But consideration has to be shown to poor

countries while sharing the fruit of research.244

When the patent laws were formulated by the rich nations, the poor countries had

no say in it. Is it fair to ask for compliance without having given any

representation while the laws were formulated? The poor countries do not have

the resources to conduct expensive researches. But their needs are more urgent

than those of the rich. Is it fair to expect them to pay for the rich patents by way

of exorbitant prices?245

The investor needs to get a return. Incentives to creativity, i.e. new inventions

have to be protected. The interests of the poor are also to be protected. A 241 Cf. P. K. Ghosh and T. A. Mathias, Intellectual Property Rights”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 226.242 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 227.243 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 226.244 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 230.245 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 227.

53

possible solution may be to differentiate between products for the rich (luxuries)

and products for the poor (essential articles). Products for the poor could have

shorter period of protection (royalty period) and products for the rich could have a

longer period of protection.246

The scientists from the developed nations have created a reservoir of natural

genes. Natural genes are the ones that can be modified to create high yielding and

pest-resistant varieties of crops. It is not possible to do the same with hybrid

varieties. These natural genes have been collected, especially, from tropical

countries. Using these genes, the scientists can develop high yielding crops and

the poor countries have to pay for the high yielding variety. Do they have to?

Should not the rich countries pay for collecting the natural genes from the forests

of poor countries?247

Formerly, living being could not be patented. Thus cross-bred animals were not

patented. So also for a time cross-bred (high yielding) wheat could not be

patented. But that changed with the Supreme Court of the US ruling that both can

be patented, i.e. cross bred bacteria and genetically manipulated crops.248

Product patent and process patent

India recognizes only process patent. This is advantageous for India. Making a

small change in the process of making a product, India made sophisticated drugs

available for the poor of India. This would have been impossible if India had to

adhere to product patent.249

Product patent demands that products be imported and not be produced under

license. This is prohibitively expensive for poor countries. Which should have

246 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 230.247 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", pp. 229-230.248 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 229.249 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 228.

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precedence: profit of drug companies or the health of the poor in poor

countries?250

India gives protection to new inventions only for 7 years whereas internationally

they are protected for 20 years. Using the 7 years period, Indian companies made

drugs available to millions of poor in India, which a 20 years period would not

have allowed.251

Brazil and China capitulated before international pressure. India did not. It says

that it will accept product patent practice provided poor countries are allowed to

produce under license the expensive drugs of the rich nations. Price may still be

high but bearable than drugs being imported from abroad.252

The Americans say that process patent is sheer robbery of the intellectual work of

others. It just makes a slight change in the process and calls it a new invention.253

If product patent is not protected, incentive for research will dry up. So also the

impulse of creativity. In India, especially, the craze for imitation will kill

creativity.254

Some govt. of India Regulations with Regard to Intellectual Property Rights

IPR is like rights in immovable property.

Protection of it is the concern of the author.

Govt’s role is in enforcing it and preventing societal crimes related to it.

Specific role of the govt.:250 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 229.251 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 228.252 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 229.253 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 228.254 Cf. P. K. Ghosh and T. A. Mathias, "Intellectual Property", p. 231. On 15 April, 2007, the govt. of India passed a New Patent Act. According to this act, the govt. does recognize product patent but those product patents issued in India. They are valid for 20 years. There is a long list of application waiting to register foreign patents and their complaints against alleged Indian piracies. It will take a long time to settle those cases. That is the breathing time during which India hopes to strengthen the Indian companies to come up with their own inventions in the field of drugs and such other things (source: internet).

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Define clearly the rights and their infringement.

Prescribe deterrent civil and criminal remedies including fines and imprisonment.

Ensure fair, speedy, transparent and simple enforcement procedures.

Set up judicial system with power to issue injunctions, order search and seize and

sanction payments outside the normal channels of trade and commerce.

Set up border outfits to prevent entry and exit of infringing goods.

Various Acts Regarding IPR

The Copyright Act, 1957

The Patents Act, 1970

The Trademarks Act, 1999

The Geographical Indication of Goods (Registration and Protection) Act, 1999

The Design Act, 200

The Semiconductor Integrated Circuit Layout-Design Act, 2000

The Protection of Plants Varieties and Farmers’ Rights Act, 2001.

The Biological Diversity Act, 2002.

Institutional Mechanism to protect IPR

Industry and its Initiative

FICCI: National Initiative against Piracy and Counterfeiting

a) Drafting of an Optical Disk Law to tackle optical disk piracy

b) Programmes to familiarize the judiciary about IPR

CII: National Committee on Trademark Counterfeit Products

Awareness Generation Programmes

Organization of Seminars and Workshops by MHRD, FICCI, CII, NASCOM,

IITS, IIMS and Universities.

Planning for the future

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Training for Police, Customs Officers and Civil Servants.

More Chairs of Study and Faculties in universities and other institutions for IPR

Introduction of IPR in the school curriculum

Enlightening the judiciary about IPR

An enlightened public is the best guarantor of intellectual property rights.

11. Business and Environmental Protection

Environmental protection is an issue of recent origin. It is roughly twenty five

years old. Those who spoke first about environmental protection were considered

spinners, i. e. day dreamers or idle talkers. In Europe they were called the

“greens” and they had a tough time in gaining an audience for them. But now

they have been recognized as prophets.

There is a presupposition in the idea of environmental protection. And that is:

Man is not the owner of the planet earth but its steward. He has to take care of it

in such a way that he and other living beings can continue to exist and flourish on

this earth. If he fails to do it, his as well the existence of others will come to

nothing.255

Formerly, one spoke of the rights of human beings. Now one speaks also of the

right of animals as well as plants. This is a bit of an exaggeration. But one may

see sense in it as the duty of man to care for both animals and environment.

Prudent use of the environment is an eminently ethical issue. It is also part of

what man bequeaths to the future generations. It will be a pity if the present

generation leaves to the next a world depleted of its non renewable resources.256

255 Cf. M V d Bogaert, “Economic Development, Use of Resources and Environmental Protection”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta-ahmedabad, Allied Publishers, 1994, p. 259.256 Cf. Mvd Bogaert, "Economic Development", pp. 259, 260, 262.

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Some pertinent questions regarding business ethics and environment have been

posed by famous environmentalist like Maurice Strong at the UNCED conference

of world leaders in Brazil:

Should or should not economic progress be linked to ecological duties? How

much responsibility has the industrial world shown till now in fulfilling such

obligations? What should be its share in clearing up the polluted environment and

replenishing depleted resources in the world and in India?257

How does the Western consumerist ideology influence present-day industrial

engineering and business practices in India?

What are industry’s responsibilities towards people who are displaced and

deprived of their livelihood due to industrialization?

Who should decide how and when to use scarce resources?

Who should decide on the import of technology?

Who should prevent the dumping from abroad of obsolete and environmentally

hazardous technologies in this country?

What are the respective roles of industry and the state in making an ecological

audit and in environmental scanning?

How can Indian industry establish an internal, but efficient and honest system for

ecological accounting, project appraisals and ‘greenchecks”?

What are the respective roles of business and the government in creating

environmental awareness in the public?

What should industry’s attitude be towards environmental activists and voluntary

ecology movements in the country?

257 Cf. Mvd Bogaert, "Economic Development", pp. 259-60.

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Should social costs be subtracted from the net profit of a polluting industry or

added to the product price?

In assessing a project’s viability, how far should environmental costs be

incorporated into the total project cost and what should be the criteria for

environmental cost accounting?

What policies should be adopted regarding dumping or processing and recycling

of toxic hazardous wastes?258

Some facts about environmental depletion:

Atmospheric levels of CO2 are twenty per cent higher than fifty years ago.

The earth’s surface is warming up much faster than expected and this may cause a

melting of the polar ice-caps which in turn may inundate the low-lying areas of

the world, like ports and costal towns.

Forests are disappearing at the rate of 17 million hectares per year while 92

million people are added yearly to the world population, especially in the

developing countries.259

Environmental degradation and its sanation is not a problem of the West. The

West has contributed the maximum to the degradation of environment. But others

are not entirely free of blame, and a solution to the problem can be found only

internationally.260

In the past man thought there is an inexhaustible source of natural resources and

he could use it as he pleased. Tragically, it has led to ‘ecocide’ and

environmental breakdown.261 We have to intervene in nature so as to produce

food and other necessities for the sustenance of human life. But we have to strike

a balance between man’s need and that of nature to sustain itself.262

258 Cf. Mvd Bogaert, "Economic Development", pp. 260-61.259 Cf. Mvd Bogaert, "Economic Development", p. 263.260 Cf. Mvd Bogaert, "Economic Development", p. 263.261 Cf. Mvd Bogaert, "Economic Development", p. 263.262 Cf. Mvd Bogaert, "Economic Development", pp. 261, 263.

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Indian industry has been plundering nature. The time has come for the industry to

view nature as ‘majority share-holder’.263

It is not enough to legislate about the need to protect the environment. Enough

laws have been passed and even a control board established. There is even a

separate ministry to protect the environment. But in the absence of a commitment

to follow the laws, the laws remain ineffective.264

COPRA (Consumer Protection Act of 1986) does not mention a safe environment

as part of the right of a consumer.265

What is the level of environmental awareness in the organizations? The

production manager must concentrate on energy efficiency, the research

department should check the environmental compatibility of existing technologies

and try to develop alternate environment friendly technologies and all the

employees should be educated in environmental awareness.266

India has no choice but to produce enough for its huge population which grows at

17 million per year. But India has to opt for a production technology that does

not deplete its resources irredeemably. India must produce taking care of nature

at the same time.267 For that India needs a management philosophy which will

observe the following points:

Stress should be laid on using renewable resources, such as wind, sun, sea power

(wave-energy) and biomass. Little has been done in India in this regard. Suitable

technology will be used to produce the largest volume of goods with the

minimum use of non-renewable resources.

263 Cf. Mvd Bogaert, "Economic Development", p. 264.264 Cf. Mvd Bogaert, "Economic Development", p. 264.265 Cf. Mvd Bogaert, "Economic Development", p. 264.266 Cf. Mvd Bogaert, "Economic Development", p. 264.267 Cf. Mvd Bogaert, "Economic Development", p. 265.

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Whenever possible, resources used will be replaced, e. g. fresh trees will be

planted for every tree cut down; mines will be filled up and restored to their

original state when worked out; effluents will be treated and pumped back into

rivers.

The cost of building the environment will be built into the cost of production, and

planning will be done accordingly.268

Environmental pollution is not only a rural problem. It is equally an urban

phenomenon. The noise-pollution of the cities due to traffic and fire crackers, etc.

is appalling. So also there is space pollution, i.e. over-crowding of living space

due to the growth of slums, which is in fact due to the influx of the rural

population in search of livelihood.269

It is important to create new attitudes in people through schools and colleges in

order to fight against or resist environmental degradation. It is important to

realize that:

One need not be a slave of consumerism.

Godless capitalism need not be worshiped.

One has to make choices in life: Not everything is desirable in life. India could

possibly become an oil exporter if the forests of Assam are destroyed and land is

explored for oil.270

Environmental protection is the job of all. En. Pollution is a world phenomenon

and it can be checked only globally. Export of toxic wastes from developed

countries to third world countries should be resisted by all means. The argument

that third world countries are not polluted and so they could bear the little

pollution of treating toxic wastes and thereby earn money does not hold good.271

268 Cf. Mvd Bogaert, "Economic Development", p. 266.269 Cf. Mvd Bogaert, "Economic Development", p. 266.270 Cf. Mvd Bogaert, "Economic Development", pp. 266-267.271 Cf. Mvd Bogaert, "Economic Development", pp. 267-68.

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The market generally does not look at what could happen to future generations.

But it should look at it.272

A company must try to improve the locality where it is situated by building roads,

schools, colleges, hospitals, etc. For example the Lakshmi Mills of Coimbatore is

an excellent example of this.273

The environment has to be protected. But who should bear the cost? Should the

entire cost be borne by the consumer by paying high prices or should the share-

holders also pay by having lesser dividends?274

It is not ethical to expect a company to devise means of controlling pollution in a

short time when it has been functioning in a particular way since many years

when pollution level was low. Time must be given to the company to develop the

technology to control pollution.275

Here is a chart suggested by Mr. Bogaert to help managers to decide in favour of

the environment:

Good for the environment

+

Bad for poor----------------------------------------------good for poor

_ +

_272 Cf. Donaldson, "Ethics", p. 20.273 Cf. G. K. Sundaram, “Aspects”, p. 127.274 Cf. K. S. Swaminathan, "Concern for", p. 221.275 Cf. K. S. Swaminathan, "Concern for", p. 223.

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bad for environment

In this quadrangle there is only one decision that is positive and positive. That is

a decision that is good both for the poor as well as the environment. All other

decisions are either positive and negative or negative and negative.276

One should go for the technology that is beneficial to the largest number, uses less

of non-renewable resources and is suited to the local situation.277

12. Public and Private Sector

A public sector company is one completely owned by the govt.: its starting and

continued existence is due to the govt. It is operated like a public limited

company. It is financed with tax money and paper money which contributes to

inflation.278

Public sector companies have a bad name. The real problem of the public sector

companies is that they lack autonomy. The public sector manager is subjected to

very many controls. He does not have the freedom to take the appropriate

decisions.279

There are good private companies, like the Tatas. There are also good public

sector companies. They are few and their good performance or image is marred

by that of the bad ones.280

There should be a right balance between public and private sector companies.

Govt. must encourage private sector but must control it from extracting high

276 Cf. Bogaert, “Managerial Decisions”, p. 60.277 Cf. P. K. Sinor, “Responsible Corporate”, pp. 65-73.278 Cf. S. K. Gupta, “Public Sector and Privatization: The New Economic Policy – Some Economic and Ethical Issues”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 214.279 Cf. S. K. Gupta, "Public Sector", pp. 214-216.280 Cf. S. K. Gupta, "Public Sector", p. 214.

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prices, offering shoddy quality products, using obsolete technology and unsafe

designs and from degrading the environment.281

Competition is to be encouraged both in public and private sectors so as to

maximize profit, and profit is to be shared by all stake-holders: managers,

workers, shareholders, suppliers and society at large. Industry must have a clear

cut value system. Leaders of public sector companies must be men of conviction

and not mere “yes men”.282

It is the role of the govt. to facilitate conditions for business, to ensure justice and

fair-play, reasonable distribution of profits and to decide on priorities.283

It is important that a country like India must make great economic progress so as

to make possible welfare for its people. But what must happen first: redistribution

or growth of economy? Both must take place.284

The new management philosophy is: maximize profit and share it with all stake

holders: shareholders, workers, etc.285

Public sector companies make losses. And often there is call from the public to

close them down. One can close them down. But, what about the livelihood of

thousands of people who are dependent on the company? In the West there is a

developed social security system but not in India. So we must devise means to

protect the unemployed, like keeping their compensation fund and giving the

worker only the interest thereof.286

The media calls for disinvestment of govt. shares in the public sector companies.

What does really happen when 20-25% of the shares are disinvested? These

281 Cf. S. K. Gupta, "Public Sector", p. 217.282 Cf. S. K. Gutpta, “Ethics and Industry”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 125-126.283 Cf. T. A. Mathias and B. G. Raghavendra, “Economic Growth”, p. 212.284 Cf. T. A. Mathias and B. G. Raghavendra, “Economic Growth”, pp. 208-212.285 Cf. S. K. Gupta, "Public Sector", p. 218.286 Cf. S. K. Gupta, "Public Sector", p. 217.

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shares are bought by govt. financial institutions. How can that improve the

situation?, asks S. K. Gupta. Disinvestment cannot answer the real problem of

lack of autonomy for the govt. manager of the public sector company.287

Only 5% of the work force is in the organized sector. They have total job

security. And they hold both the govt. and public to ransom. This is an anomaly

and must change.288

In the name of socialism, protecting the small-scale industry, saving energy and

giving employment to many people, govt. introduced many laws. Result: loss of

money, no quality product and labour militancy. Should the people’s interests be

sacrificed for some ism?289

The founding fathers of our nation wanted the public sector to be dominant in the

economic life of the country. And in fact, it meant the state running the business.

The motive behind having a very large public sector was:

To create economic welfare for the largest number.

To give employment to the largest number.

To prevent monopoly of private companies.

To keep away the multinational companies.

To promote self reliance.

It is good to have the ideal of creating welfare for the largest number. But due to

the lack of efficient production, much was not created to be distributed among the

masses. Only govt. control flourished.

In itself it is good to create employment for the largest number in a country like

India with a huge population. But due to laziness, inefficiency and absolute job

287 Cf. S. K. Gupta, "Public Sector", p. 216.288 Cf. S. K. Gupta, "Public Sector", p. 218.289 Cf. S. C. Varshnei, “Impact on the People”, in “Government Policies and Laws: Their Impact on Business”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 121-122.

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guarantee, the already employed became a burden on the nation. Sick companies

were kept going with tax payers money. They did not create more jobs. A study

shows that 58% of all govt. companies are making losses.

It is good to prevent monopolies. But in effect it became stifling the will and

capacity of private enterprises to expand in areas of their competence. They had

to beg for loans from the govt. financial institutions. So also there was limit

placed on the number of units produced (for example, cars) in a company.

Debarring the multinationals was a mistake. It is true that in the past some

multinationals behaved like wolves in India. But that was not reason enough to

keep out all of them. They have the finance, managerial wealth and technology.

And India needs them.

Self reliance is good. But trying to invent the wheel is foolish.290

13. Information Technology and Ethics

Computers, fax machines and video conferencing etc. belong to the information

technology. It does enhance production of goods and services. Life has become

immensely more comfortable with the advent of information technology.

However, as everything has two sides, information technology has also its

negative side.

It is possible to store an immense amount of data in super-computers. This can be

accessed by many. There is the danger of invasion of the privacy of individuals.

It is not easy to correct false data if it has been disseminated across the world.

Invasion of privacy can be of three types: companies snooping on employees,

employees poking into company secrets and making use of them, and employees

290 Cf. T. A. Mathias, “Freedom versus State Control of Business”, in: Corporate Ethics, ed. T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 267-276.

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poking into colleagues’ correspondence when it is not sufficiently secured with

pass words, etc.291

There is the risk of theft and fraud (e. g. by manipulating the data electronically,

one can amass great wealth).

There is the risk of hardware or software failure causing loss of vital data. This

can be indeed catastrophic.

Computers or information technology, in fact, eliminates more jobs than it

creates.292 Man fears that computers will dominate him by being faster and

possibly more intelligent.293

One sees that it is important to protect data in computers. There should be a code

of ethics of respecting the privacy of others. Above all the guilty must be

punished immediately and adequately.294

14. Women in Employment and Ethics

Women are more caring towards their fellow workers than men. They tend to

place more emphasis on relationships than on rules and regulations.295

It is obvious that there should not be any gender bias in industry towards women.

So also there should be equal pay for both men and women for the same type of

work.

Women must be treated with extra care because they are more vulnerable to the

stresses of life. It is desirable to think of ways to create suitable conditions for

employment of women in industry.

291 Cf. P. S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Bizantara Publications, 2004, p. 207.292 Cf. James Gips, “Information Technology: Trends and Ethical Issues”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 46-51. Cf. also P. S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Bizantara Publications, 2004, p. 210. However, this fear is not fully justified (cf. ibid.).293 Cf. P. S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Bizantara Publications, 2004, p. 210.294 Cf. P. S. Bajaj and Raj Agraval, Business Ethics : An Indian Perspective, New Delhi, Bizantara Publications, 2004, pp. 208-209.295 Cf. Donaldson, "Ethics", p. 19.

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15. Examples of ethically run companies

SAIL: Social Responsibility vs. Profit.

There is a view among economists that the goal of any business is to make profits

and only after making profits begins its social responsibility. Another view is that

both are important. It is not that till the entity makes profit, it has no social

responsibility.

Sail is a public sector undertaking. Right from the beginning it had a marked

social orientation. Thus the units were started in the least developed states and

people of the locality, mostly illiterate, were given encouragement and

employment to bring them up socially. Sail built schools, hospitals, recreation

centres, roads, bridges, etc as fulfilling its social obligation. It has 220 schools in

which two lakhs students are studying. It also finances higher education in

colleges.

Sail spends huge amount in social welfare and so it did not have much money left

for modernization and expansion. But that is changing. Due to efficient

production and discipline it making profit and the process of modernization is

progressing.

There is a conscious effort to create an ethical atmosphere in the factories as well

as in the sail cities.296

Sysco Corporation

CEO Joseph M. Sciortino

296 Cf. Arvind Pande, “Social Responsibility vs. Profit: A Case Study from Sail”, in:Corporate Ethics, ed. T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 191-197.

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Ethics deals with good and bad conduct. When it is applied to business, it

becomes business ethics or business ethics deals with the good and bad conduct of

business.297

Mr. Sciortino’ Background:

His father was a grocer. Sciortino helped him in the shop. Father insisted that

goods must be properly weighed and in case there is a mistake, it should be in

favour of the customer. Sciortino used to play for the college team and while

staying in hotels used to keep back the hotel towels. His mother scolded him for

it and wanted the towel not to be in the house.

Sciortino started his business career in 1957 as a salesman. He was with another

company for nineteen years before quitting on ethical policy and joining Sysco.298

After joining one of the first things Sciortino did was to stop thieving by the

company’s own employees at all levels. He also stopped other companies from

poaching the best employees of Sysco with better pay, etc by drawing up proper

employment contracts.299

A vision statement and code of ethics were formulated. The content of the code

of ethics: “fundamental honesty, adherence to law, product safety and quality,

health and safety in the work place and conflicts of interests.” Also fairness in

pricing and marketing is included.300

In the book In Search of Excellence Peters and Waterman writes: After having

studied many successful companies we find that there is no excellence in business

without ethics.301

297 Cf. Joseph M. Sciortino, “Establishing and Maintaining an Ethical Business Climate: The Sysco Foods Experience”, in:Corporate Ethics, ed. T.A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, p. 138.298 Cf. Joseph M. Sciortino, "Establishing and Maintaining", pp. 137-8.299 Cf. Joseph M. Sciortino, "Establishing and Maintaining", pp. 139-140.300 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 142.301 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 142.

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It is not enough to formulate a code of ethics. There should be a commitment to it

by all.

Nor is it enough to publish the code of ethics. All must adhere to it.

Ethical behaviour is not the result of a command but of a free commitment.

Argument belongs to intellect, but commitment belongs to free choice. So a code

of ethics must be both reasonable and desirable.

Creating an ethical climate by rewarding ethical behaviour, even if it would cost

the company financially. This is the finding of the Woodstock Seminar on

business ethics held at Georgetown University in Washington, DC.302

People are the greatest asset of a company. Treat them well. Create a family

spirit. And the workers will serve the customers well.303

Role of CEO:

Use his charisma as a moral guide.

One can make money honestly.

The CEO’s job ought to be the place where faith and work combine.304

According to Thomas Peters and Robert Waterman, In Search of Excellence :

Lessons from America’s Best Run Companies, most successful companies are

spiritual and holistic. They are concerned about the whole: employees, suppliers,

customers and shareholders. People ought to work not only for a paycheck.

Work is expression of oneself. Work must harmonize with one’s priorities:

family, health and spirituality.305

CEO is a servant leader. He is a steward who looks after the interests of the

stakeholders : employees, shareholders and community, customers, suppliers and

even of the competitors.302 Cf. Joseph M. Sciortino, "Establishing and Maintaining", pp. 144-5.303 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 147.304 Cf. Joseph M. Sciortino, "Establishing and Maintaining", pp. 147-8.305 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 148.

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Looks after the employees: good pay, benefits and even making them

shareholders in the company.

Customers: quality product at reasonable price.

Stockholders: good return for their money.

Environment: biodegradable packing.306

A good company believes that it must give back to the community some of its

talents, time and money as charity.307

As we pass on a legacy of honesty to our children, so too must companies pass on

its ethical tradition to its successive managements. The Tata group is an

example.308

Another example of an ethically run company

The ACC

The world will always be governed

By self-interest. We should not

Try to stop this; we should

Try to make the self-interest

Or cads a little more

Coincident with that of

Decent people (Samuel Buttler).

Whether thy work be fine or corse,

Planting corn or writing epics,

So only it be honest work,

Done to thine own approbation

It shall earn a reward

306 Cf. Joseph M. Sciortino, "Establishing and Maintaining", pp. 148-9.307 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 151.308 Cf. Joseph M. Sciortino, "Establishing and Maintaining", p. 154.

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To the senses as well as to the thoughts (Emerson).

This above all: to thine own self be true,

And it must follow, as the night the day

Thou can’st not then be false to any man (Shakespeare, Hamlet).309

J. N. Tata wanted ethical principles to be the bed the bedrock on which

corporation and their operations are based. Ethical principles shape the attitude of

the corporation towards employees, provident fund and other welfare schemes.

They were practiced several decades before they became govt. laws.310

Social responsibility of the corporation

Social responsibility was considered so important that it became part of the article

of association of the company. It goes as follows:

“The company shall continue to have among its objectives the promotion and

growth of the national economy through increased productivity, efficient

utilization of material and manpower resources and continued application of

modern scientific and managerial techniques, in keeping with the national

aspirations; and the company shall continue to be its social and moral

responsibilities to consumers, employees, shareholders, society and the local

community.”311

The company is absolutely convinced of the need for ethics in business. Ethics

ought to be the basis of any enterprise. And it is the experience of the Tatas that

ethics lead to good profit, to the satisfaction that something worthwhile has been

accomplished and that again motivating the company to greater achievements.312

Fundamental ethical principles do not change. Most of the ills that beset India

today are due to the neglect of ethical principles. Greed of man leads to misery.

309 P. K. Sinor, “A Tradition of Social Concern : Ethics at ACC”, in: Corporate Ethics, ed. by T. A. Mathias, Bombay-Calcutta, Allied Publishers, 1994, pp. 158-59.310 Cf. ibid., p. 159.311 Ibid., pp. 159-160.312 Cf. ibid., p. 160.

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Unethical practices have led to the growth of a parallel economy of unaccounted

wealth which threatens to submerge the real economy of the country. ACC has

consistently avoided these pitfalls.313

Profits are to be earned ethically. Profit is the reward of enterprise. It leads to

further growth and expansion. One need to be proud of profits. With ethically

earned profits the national cake becomes larger and prosperity of the masses

increases.314

Human welfare is the goal of any enterprise. There is no greater satisfaction than

having lived ethically, and that will give a sense of fulfillment and mission in this

world. “There can never be a substitute for a good mind, a good heart and, above

all, a good conscience. That small voice deep down within each of us must never

be allowed to become still.”315

313 Cf. ibid., p. 161.314 Cf. ibid., p. 161.315 Ibid., pp. 161-162.

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