ETHICS AND

BUSINESS

CHAPTER ONE

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WHAT DOES ETHICS MEAN TO YOU?

The meaning of “ethics” is hard to pin down, and the

views many people have about ethics is shaky.

• Many people tend to equate ethics with their feelings. But being ethical is clearly not a matter of following one’s feelings. In fact, feelings frequently deviate from what is ethical.

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Continued……..

• Nor should one identify ethics with religion. Yet if ethics were confined to religion, then ethics would apply only to religious people. But ethics applies as much to the behavior of the atheist as to that of the saint. Ethics, however cannot be confined to religion nor is it the same as religion.

• Being ethical is also not the same as following the law. Laws, like ethics, can deviate from what is ethical.

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Continued……..

• Being ethical is also not the same as doing “whatever society accepts.” Standards of behavior in society can deviate from what is ethical. An entire society can become ethically corrupt (e.g. Nazi Germany). If being ethical were doing whatever society accepts, one would have to find an agreement on issues which does not, in fact, exist.

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WHAT, THEN, IS ETHICS ?

If ethics does not mean all these things then what

is ETHICS ?

ETHICS:

• Ethics comes from the Greek word ‘Ethos’ – moral character or custom.

• The word ‘ethics’ refers to principles of behavior that distinguish between good & bad; right & wrong. It is a person’s own attitude & beliefs concerning good behavior. Ethics reside within individuals & as such are defined separately by each individual in his own way.

• It means character, norms, morals, ideas prevailing in a group.

• Ethics are principles of personal & professional conduct.

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Continued…..• Ethics refers to code of moral principles & values that

govern the behavior of a person or group with respect to what is right or wrong.

• Ethics is the discipline that examines one's moral standards or the moral standards of a society. It asks how these standards apply to our lives and whether these standards are reasonable or unreasonable—that is, whether they are supported by good reasons or poor ones.

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Continued…..

• Ethics is the study of moral standards—the process of examining the moral standards of a person or society

• The ultimate aim of ethics is to develop a body of moral standards that we feel are reasonable to hold—standards that we have thought about carefully and have decided are justified standards for us to accept and apply to the choices that fill our lives

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ETHICS IS BASICALLY TWO THINGS:

• First, ethics refers to well based standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics refers to those standards that impose reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well founded reasons.

Continued……..

• Secondly, ethics refers to the study and development of one’s ethical standards. As, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to constantly examine one’s standards to ensure that they are reasonable and well-founded. Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly based.

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VALUES MORALS

ETHICS

DIFFERENCES BETWEEN VALUES, MORALS AND ETHICS:

VALUES are the rules by which we make decisions about right andwrong, should and shouldn’t, good and bad.They also tell us which are more or less important, which is useful when we have to trade off meeting one value or another. Valuesare beliefs of a person orsocial group in which they have an emotional investment.

MORALS have a greater social element to values and tend to have a very good acceptance. Morals are far more about goodand bad than other values.We thus judge othersmore strongly on morals than values. A person canbe described as immoral,yet there is no word forthem not following values. Morals are motivation based on ideasof right and wrong.

ETHICS: you can have professional ethics, but you seldom hear about professional morals. Ethics tend to be codified into a formal system or set of rules which are explicitly adopted by agroup of people. Ethics are thus internally defined and adopted, whilst morals tend to be externally imposed on other people.

MORALITY Morality: The standards thatan individual or a group hasabout what is right and and wrong or good and evil.

Moral Standards: Thenorms about the kinds ofactions believed to bemorally right and wrong aswell as the values placed onthe kinds of objects believedto be morally good and morally bad.

Nonmoral standards: Thestandards by which we judge what is good or badand right or wrong in a nonmoral way.

Where do these standards come from?-Family-Friends-Various societal influences (church, school, magazines, TV, music, and associations)-Experience, Learning, Intellectual development may lead the maturing person to revise these standards-Through the maturing process the person may develop standards that are more intellectually adequate and so more suited for dealing with the moral dilemmas of adult life.

We do not always do what we believe is morally right nor do we always pursue what we believe ismorally good.

MORALITY AND ETHICS

• Ethics and Morality have something to do with the concepts of good and bad.

• The meanings of the terms “ethics” and “morality” can be differentiated based on their origins in ancient Greek and Latin, respectively

• Greeks – philosophers, Romans – builders• Greeks often have meanings that are primarily philosophical

study, while the Latin derived words imply “doing the thing.”

• Ethics comes from the Greek word Ethos – moral character or custom. Morality comes from the Latin word Moralis – custom or manner.

Continued……• Both words deal with the customs or the manner in which

people do things.• Their modern meanings relate to the way people

act – either good or bad• Morality, strictly speaking, is used to refer to what we

would call moral conduct or standards.• Morality is looking at how good or bad our conduct is, and

our standards about conduct. Ethics is used to refer to the formal study of those standards or conduct.

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Ethics is “the study of morality.”Morality is the subject matter that ethics investigates

Continued……

• One refers to the study of conduct as moral philosophy,

but that is less common than just saying “ethics”. Hence

in most colleges, there is an ethics class, rather than one

named “morality.”

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One might say that morality is ethics in action, but the two terms can be used interchangeably.

TYPES OF STUDY OF ETHICS:

The study of ethics or moral philosophy can be

divided into three broad areas:

• Descriptive Study

• Normative Study

• Analytical Study (or Metaethics)

Although ethics is a normative study of ethics, the socialsciences engage in a descriptive study of ethics.

Descriptive Study

• Descriptive ethics is simply describing how people behave.

• Descriptive ethics lets us see if we “walk the walk.”

• A descriptive study is one that does not try to reach any conclusions about what things are truly good or bad or right or wrong. Instead, a descriptive study attempts to describe or explain the world without reaching any conclusions about whether the world is as it should be.

Normative Study

• Normative ethics tries to establish norms or typical

appropriate behaviors people should perform. One should be honest, in the language of ethics, this is called “veracity.” Fairness or Justice is another norm

• A normative study is an investigation that attempts to reach normative conclusions—that is, conclusions about what things are good or bad or about what actions are right or wrong. In short, a normative study aims to discover what should be.

Analytical Study (or Metaethics)

• Metaethics often looks at how people determine for themselves what norms to follow.

• There are many sources or determinants of people’s personal ethical beliefs:

- Parents - Teachers - Religion (e.g. The Ten Commandments) - Peers - Culture - Media - Moral Self Reflection

ROLE OF GUILT AND FEAR IN ETHICS• Some maintain their conduct within accepted ethical norms

because of the fear of getting caught. These people often do whatever they think that they can “get away with.” if they know they are not being watched and are unlikely to get caught, they will violate almost any ethical norm.

• Guilt, on the other hand, is the motivator of honest people. Their decision to comply with ethical norms is NOT based on whether they will get caught, but because they will know that they did something they think is wrong. Sociopaths do not feel guilt because they do not believe their actions are wrong.

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WHAT, THEN, IS BUSINESS ETHICS ?

If ethics is all these things, then what is BUSINESS ETHICS ?

BUSINESS ETHICS

• Application of moral principles to business

problems. • According to Carter Macnamara, “Business ethics is

generally coming to know what is right or wrong at the work place & doing what is right. This is in regard to products, services & in relationships with stakeholders. It is sensitizing the managers at the work place about how they should act so that they hold some kind of moral compass, which always tells you the direction in terms of where to go.

• Business ethics is a specialized study of right and wrong applied to business policies, institutions, and behaviors.

Continued……• Business Ethics is a specialized study of moral right

and wrong that concentrates on moral standards as they apply to business institutions, organizations, and behavior.

• It is a study of moral standards and how these apply to the social systems and organizations through which modern societies produce and distribute goods and services and to the behaviors of the people who work within these organizations.

Business Ethics in other words, is a form of Applied Ethics

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Importance of Ethics in Business:Ethical considerations in business are important to managersas individual’s personal life & business life cannot be neatly separatedwith respect to moral judgments. Importance of ethics can be explained in the following explanations, namely• For the individual, job is the centre of life & its values must be in

harmony with the rest of life, if he is to be a whole & healthy personality.

• This is an industrial society & its values tend to become those of the entire culture.

• If an organization does not behave in accordance with the social system’s expectations, it might not merely lose its market share of face another piece of legislated control but might lose its very right to exist.

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OBJECTIVES OF BUSINESS ETHICS

Two folds objective of business ethics:

1) It evaluates the human practices by calling upon moral standards.

2) To give prescriptive advice on how to act morally in specific situations.

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BENEFITS OF BEING ETHICAL IN BUSINESS

According to Carter Macnamara the benefits of

managing ethics in an organization are:

• It improves the society.

• It helps to maintain moral standards in turbulent times i.e. when you are in a dilemma, often called as “Ethical Dilemma.”

Ethical Dilemma is a situation that arises when all alternativechoices or behaviors have been deemed undesirable because of Potentially negative consequences making it difficult todistinguish right from wrong.

Continued……

• It also cultivates strong team work in the organization• It aligns employee behavior with the ethical values• It helps to support employee growth• It also serves as an insurance policy (person is insured

against going the wrong way.)• It helps to avoid criminal omissions & commissions • It helps to improve the public image of the organization• Unethical companies have a tough time in hiring and

retaining talent• Employees want to work in an ethical and socially

responsible organization.

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3 C’s OF BUSINESS ETHICS

• It is related with Compliance

• It is related with Contribution

• It is related with Consequences

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MYTHS ABOUT BUSINESS ETHICS

• Myth: Business Ethics is more a matter of religion than management. Truth: Business Ethics is more a matter of management• Myth: Employees are ethical so we don’t need to pay

attention to Business Ethics. Truth: Most managers face complex ethical dilemma at

workplace.• Myth: Ethics is a personal or individual matter and not a

public matter. Truth: Ethics is a publicly debatable matter, a public affair

and not an individual or a personal affair.

Continued…..

• Myth: Business and Ethics do not mix.

Truth: Business and Ethics go hand in hand.• Myth: Ethics in business is relative. (Ethical Relativism)

Truth: There are absolute things that exist in ethics.• Myth: Good Business means good Ethics

Truth: It is not necessary that a business doing good is ethical as well.

• Myth: Information and Computing are amoral

Truth: Information should not be misleading and accuracy has to be maintained in the technology being used.

THREE ISSUES IN BUSINESS ETHICS

Though business ethics cover a variety of topics,

there are three basic types of issues:

Systemic Issues Individual IssuesCorporate Issues

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Systemic Issues

Questions raised about the economic, political,

legal, or other social systems within which

businesses operate. These include questions

about the morality of capitalism or of the laws,

regulations, industrial structures, and social

practices within which businesses

operate.

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Corporate Issues

Questions raised about a particular company.

These include questions about the morality of

the activities, policies, practices, or

organizational structure of an individual

company taken as a whole.

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Individual Issues

Questions about a particular individual within

an organization and their behaviors and

decisions. These include questions about the

morality of the decisions, actions, or character

of an individual.

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Continued……….

• Some theorists maintain that moral notions apply only to individuals, not to corporations themselves

• Others counter that corporations do act like individuals, having objectives and actions, which can be moral or immoral just as an individual's action might be.

• Perhaps neither extreme view is correct. Corporate actions do depend on human individuals who should be held accountable for their actions. However, they also have policies and culture that direct individuals, and should therefore be held accountable for the effects of these corporate artifacts.

• Nonetheless, it makes perfectly good sense to say that a corporate organization has moral duties and that it is morally responsible for its acts.

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ETHICAL RELATIVISM

When faced with the fact that different cultures havedifferent moral standards, the managers of somemultinationals have adopted the theory of EthicalRelativism.• Ethical relativism is the theory that, because different societies have

different ethical beliefs, there is no rational way of determining whether an action is morally right or wrong other than by asking whether the people of this or that society believe it to be right or wrong . In fact, the multiplicity of moral codes demonstrates that there is no one "right" answer to ethical questions. The best a company can do is follow the old adage, "When in Rome, do as the Romans do." In other words, there are no absolute moral standards.

Criticisms of Ethical RelativismTheory:

• Critics of ethical relativism point out that it is illogical to assume that because there is more than one answer to an ethical question that both answers are equally correct─ or even that either answer is correct.

• The late Philosopher James Rachels put the matter quite succinctly: The fact that different societies have different moral codes proves

nothing. He concluded that in some cultures people are better informed than in

others. Similarly, disagreement in ethics might signal nothing more than that some people are less enlightened than others.

At the very least, the fact of disagreement does not, by itself, entail that truth does not exist.

Criticisms continued………

• However, the most telling criticisms of the theory point out that it has incoherent consequences. For example, it becomes impossible to criticize a practice of another society as long as members of that society conform to their own standards. How could we maintain that Nazi Germany or pre-Civil War Virginia were wrong if we were consistent relativists? There must be criteria other than the society's own moral standards by which we can judge actions in any particular society.

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MORAL DEVELOPMENTS

As people mature, they change their values in very

deep and profound ways. Just as people's physical,

emotional, and cognitive abilities develop as they age,

so also their ability to deal with moral issues develops

as they move through their lives.

Lawrence Kohlberg has identified six stages in the process

of moral development (in three levels)

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LEVEL ONE: Pre – Conventional Stages1. Punishment and Obedience Orientation2. Instrument and Relativity Orientation

LEVEL TWO: Conventional Stages1. Interpersonal Concordance Orientation2. Law and Order Orientation

LEVEL THREE: Post – Conventional, Autonomous or Principled Stages1. Social Contract Orientation2. Universal Ethical Principles Orientation

Level One: Pre – Conventional Stages1. Punishment and Obedience Orientation - At this stage, the

physical consequences of an act wholly determine the goodness or badness of that act. The child's reasons for doing the right thing are to avoid punishment or defer to the superior physical power of authorities. There is little awareness that others have needs similar to one’s own.

2. Instrument and Relativity Orientation- At this stage, right actions become those that can serve as instruments for satisfying the child’s own needs or the needs of those for whom the child cares.

At these first two stages, the child is able to respond to rulesand social expectations and can apply the labels good, bad,

right, and wrong.

Level Two: Conventional Stages1. Interpersonal Concordance Orientation - Good behavior at

this early conventional stage is living to the expectations of those for whom one feels loyalty, affection, and trust, such as family and friends. Right action is conformity to what is generally expected in one's role as a good son, daughter, brother, friend, and so on.

2. Law and Order Orientation - Right and wrong at this more mature conventional stage now come to be determined by loyalty to one's own larger nation or surrounding society. Laws are to be upheld except where they conflict with other fixed social duties.

Maintaining the expectations of one's own family, peer group, or nation is now seen as valuable in its own right, regardless of the

consequences.

Level Three: Post - Conventional Stages

1. Social Contract Orientation - At this first post-conventional stage, the person becomes aware that people hold a variety of conflicting personal views and opinions and emphasizes fair ways of reaching consensus by agreement, contract, and due process.

2. Universal Ethical Principles Orientation - At this final stage, right action comes to be defined in terms of moral principles chosen because of their logical comprehensiveness, universality, and consistency.

At these stages, the person no longer simply accepts the values and norms of the groups to which he or she belongs. Instead, the person now tries to see situations from a point of view that impartially takes

everyone's interests into account.

Criticisms of Kohlberg’s Theory:• Kohlberg's own research found that many people remain

stuck at an early stage of moral development. His structure implies that later stages are better than the earlier ones. Kohlberg has been criticized for this implication, and for not offering any argument to back it up.

• Carol Gilligan, a feminist psychologist, has also criticized Kohlberg's theory on the grounds that it describes male and not female patterns of moral development. Gilligan claims that there is a "female" approach to moral issues that Kohlberg ignores.

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Criticisms Continued……...• Both Gilligan and Kohlberg agree that there are stages of

growth in moral development, moving from a focus on the self through conventional stages and onto a mature stage where we critically and reflectively examine the adequacy of our moral standards. Therefore, one of the central aims of ethics is the stimulation of this moral development by discussing, analyzing, and criticizing the moral reasoning that we and others do, finding one set of principles "better" when it has been examined and found to have better and stronger reasons supporting it.

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MORAL REASONING

Moral reasoning refers to the reasoning process by which human behaviors, institutions, or policies are judged to be in accordance with or in violation of moral standards.

Moral reasoning always involves two essential components:

(a) an understanding of what reasonable moral standards require, prohibit, value, or condemn; and

(b) evidence or information that shows that a particular person, policy, institution, or behavior has the kinds of features that these moral standards require, prohibit, value, or condemn.

Continued…….

To evaluate the adequacy of moral reasoning,

ethicists employ three main criteria:

1. Moral reasoning must be logical.

2. Factual evidence must be accurate, relevant, and complete.

3. Moral standards must be consistent.

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MORAL RESPONSIBILITY AND BLAME

• Moral responsibility can refer to two different but related things:• First, a person has moral responsibility for a situation if that person

has an obligation to ensure that something happens.• Second, a person has moral responsibility for a situation when it

would be correct to morally praise or blame that person for the situation.

• People who have moral responsibility for an action are usually called moral agents. Agents are creatures that are capable of reflecting on their situation, forming intentions about how they will act, and then carrying out that action.

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Continued………

• Moral responsibility is directed not only at judgments concerning right or wrong. Sometimes, they are directed at determining whether a person or organization is morally responsible for having done something wrong. People are not always responsible for their wrongful or injurious acts: moral responsibility is incurred only when a person knowingly and freely acts in an immoral way or fails to act in a moral way.

• Ignorance and inability to do otherwise are two conditions, called excusing condition, that completely eliminate a person's moral responsibility for causing wrongful injury. Ignorance and inability do not always excuse a person, however. When one deliberately keeps oneself ignorant to escape responsibility, that ignorance does not excuse the wrongful injury.

Continued………

A person is morally responsible for an injury or a wrong if:

1. The person caused or helped cause it, or failed to prevent it when he could and should have;

2. The person did so knowing what he or she was doing;

3. The person did so of his own free will.

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Continued………

Ignorance may concern the relevant facts or the relevant moral

standards. Generally, ignorance of the facts eliminates moral

responsibility. This is because moral responsibility requires

freedom, which is impossible in the case of ignorance of the

relevant facts. Inability eliminates responsibility because a

person cannot have a moral obligation to do something over

which he or she has no control.

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Continued………

A person is NOT morally responsible for an injury

or a wrong if

1. The person did not cause and could not prevent the injury or wrong;

2. The person did not know he was inflicting the injury or the wrong;

3. The person did not inflict the injury or the wrong of his own free will

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ARGUMENTS FOR AND AGAINST BUSINESS ETHICS

Business Ethics is a process of rationally evaluating our moralstandards and applying them to business situations. However,many people have raised objections to the very idea ofapplying moral standards to business activities.People object to the entire notion that ethical standardsshould be brought into business organizations.

Continued…….They make three general objections:• First, they argue that the pursuit of profit in perfectly

competitive free markets will, by itself, ensure that the members of a society are served in the most socially beneficial ways.

• Second, they claim that employees, as "loyal agents," are obligated to serve their employers single-mindedly, in whatever ways will advance the employer's self-interest.

• Third, they say that obeying the law is sufficient for businesses and that business ethics is, essentially, nothing more than obeying the law.

Continued…….Arguments for bringing ethics into business:• One argument points out that since ethics should govern all

human activity, there is no reason to exempt business activity from ethical scrutiny. Business is a cooperative activity whose very existence requires ethical behavior.

• Another more developed argument points out that no activity, business included, could be carried out in an ethical vacuum.

• Another argument claims that ethical companies are more profitable than other companies

Thank you for your patience!!

Discussion!!!

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