Unit II – Business Ethics

Moral Responsibility
 Moral derived from Latin word-mores, likewise meaning
customary behaviour.
 Moral responsibilities are the standards of good and evil, which
govern an individual’s behaviour and choices. Individual’s
morals may derive from society and government, religion, or
self. When moral values derive from society and government
they, of necessity, may change as the laws and morals of the
society change.
 In philosophy, moral responsibility is the status of morally
deserving praise, blame, reward, or punishment for an act or
omission in accordance with one's moral obligations.
Deciding what (if anything) counts as "morally obligatory" is a
principal concern of ethics
 Moral Responsibility

 The term “Moral Responsibility” refers to the duty that

individuals and groups have to act in accordance with
the moral principles that are important to their social
communities and to humanity at large.
 The concept implies that a person can be evaluated with
praise or blamed for the actions based on a moral code.
It suggests that a person is in control of his/her actions
and no other element in the decision making interferes
with the person’s control of the situation.
BASIC CONCEPTS OF MORAL RESPONSIBILITY

 Merit Based View–According to this view praise or

blame would be an appropriate action towards the
candidate if and only if he merits or deserves such
reaction. Whether a person deserves praise or blame will
depend on further conditions, like having right type of
control over choice.
 Consequentialists View–According to this view, praise
or blame would be appropriate if and only if a reaction of
this sort would likely lead to a desired change in the agent
or his behaviour.
 BALANCED CONCEPT OF FREEDOM
 It states that to be morally responsible for something, an individual
had to have some amount of freedom, at some suitable time prior to
action or outcome for which he is responsible. This sense of freedom is
“free – will.”
 This free – will is prerequisite for responsibility. It means that the
person can choose one alternative over another, one course of action
over another. It does not mean people are free to do anything. The
most basic freedom is the freedom to shift one’s attention, or change
one’s way of thinking.
 The choice can be in between choosing from among equally good and
between incommensurably good options. This is where the concept of
moral responsibility originates. Specially making choice among the
immoral and moral options, shows the moral responsibility of an
individual. If he can exercise his freedom of choice then he can act as a
morally responsible person.
 INDIVIDUAL RESPONSIBILITY
 It means being accountable for what one think, say, and do.
Personal responsibility involves working on one’s own character
and skill development rather than blaming others for situation and
circumstances. The individual himself has to choose to design a life
that honor our values and purpose.
 FORMS OF INDIVIDUAL RESPONSIBILTY
 Responsibility as Cause
 Responsibility as Accountability
 Responsibility as Ability
 Responsibility as Duty
 Responsibility as Virtue
 IMPLICATIONS RELATED TO MORDERN ISSUES
Individual remain responsible for their actions – even
while performing in a group individual has control over his
activity, thus individual always remain accountable for itself.
 Individuals always have a choice – example is seen from
the case below:
 A business example of ethical behaviour is related to an
employee working on a contract for a State agency
(“agency”).
 In this example, in agency’s representative requested that
the audit results be changed to support the agency’s
budgetary, strategic and political needs.
PUBLIC ACCOUNTABILITY

 Accountability means ‘answerability.’

4 pillars:
 Appropriate Representation
 Citizen’s Participation
 Legitimate Conduct
 Liability enforcement
PUBLIC ACCOUNTABILITY
ENTREPRENEURIAL RESPONSIBILITY

 Entrepreneur occupy central position in a market

economy. For is the entrepreneur who serve as the
sparkplug in the economy’s engine, activating and
stimulating all economic activity. It is the
entrepreneurial energy, creativity and motivation
that trigger the production and sale of new
products and services. No doubt if society has
accorded the realm of business with a power that
exceeds that of the state.
Theory of corporate moral excellence

 Culture is based on values

 Espoused values
 Values in practice
 Espoused values refer to a company’s
statements, credos and code of ethics.
 They describe the organizations
purpose and ethical perspective.
 Espoused values may differ from
values in practice, depending on
situations.
Hoffman classified corporate
culture into three types:

 Basic values attitudes and beliefs of

the organization.
 Organizational goals, policies,
structure, strategies that are shaped
by the values and beliefs prevalent
in the organization.
 Organizational procedures and
processes.
 Common format for Corporate Code
 Compliance code अनुपालन सं हिता
 corporate credos ("a statement of the beliefs or aims which guide someone's
actions." )
 Management philosophy statements
 Special documents
 Circulated letters
 Compliance certificate
 Purchase orders
 Johnson and Johnson credo says, "We believe our primary
responsibility is to the doctors, nurses and patients, mothers and
all others who use our products and services“
 Tata credo says 'give back to the people what you have earned
from them'.
 Wal-Mart, established the “Three Basic Beliefs” as the company's
credo:
- Respect for the Individual
- Service to our Customers
- Strive for Excellence
Discussion on case related to
unethical Practices in Industry
Nirav Modi is an Indian Businessman who was involved in the
business of diamonds. Nirav Modi has been charged by the
Government of India and the Interpol for criminal conspiracy, fraud,
money laundering, dishonesty, and embezzlement of contract since
2018.
Punjab National Bank's name comes hand in hand whenever this scam
is being discussed. Nirav Modi is also being scrutinized in a $2 billion
fraud case against the Punjab National Bank. He has also been sued in
California for defrauding Paul Alfonso, a Los Angeles entrepreneur,
over two custom made diamond rings that actually turned out to be fake
diamonds.
Back In March 2018, Nirav Modi applied for bankruptcy protection in
New York. After three months, in June 2018, Modi was reported to be
in the United Kingdom and had applied for political protection in
Britain. In June 2019, Swiss authorities had frozen a total of 6 million
US dollars present in Nirav Modi's Swiss bank accounts along with his
assets.
 NIRAV MODI UNETHICAL PRACTICE:
 Lack of ethical grounding in corporate governance is the reason behind
scandals like the one involving diamantaire Nirav Modi in India, just
as absence of values in business practices triggered global accounting
scandals like Enron.
• Modi is a fugitive high-profile diamond merchant who is accused of
defrauding the Punjab National Bank of over Rs 11,000 crore and is
being investigated by the Central Bureau of Investigation.
• The workshop, he said, would help influence faculty in the way they
choose to conduct their courses
• ethical decision-making ensures fair and transparent mechanisms in
governance practices and can curb corrupt mindsets.
• "It is crucial to the long-term stability of any organization or
institution and benefits all stakeholders. It is essential to the well-
being of society... Individuals who create and safeguard existing
systems or structures must have some grounding in ethics to minimize
conditions that perpetuate corrupt models and mindsets," he said.
 Ethical learning, he said, should permeate all forms of learning and
should not be limited to a single course or subject.
 "We live in a complex world and people need to learn relevance
and applications of ethics and value-based learnings so it does not
remain an isolated cerebral exercise," he said.
 Commenting on the six month intensive programme announced by
GIM, Priyadarshi said, that it is designed as a very hands-on
approach initiative "in the spirit of most of MIT programmes for
effective behavioral and social change".
 "We believe in longitudinal goals which requires continuous
engagement and practice of the discipline. Habits are hard to
change especially when there's is a lack of will to do so. The
programme helps deepen one's understanding of the importance
and motivation for such positive changes by working through
aspects of values, empathy, emotions, meaning and sense-making.
What was the Nirav Modi Scam Story?
The whole country was appalled when the news telecasted
that India's Punjab National Bank (PNB), the second-
biggest public sector lender had found out deceitful and
fraudulent transactions worth $1.77 billion (about Rs11,400
crore) at a single branch in Mumbai.
Despite rigid fiscal conditions at that time, the government
gave Rs 88,000 crore to agonizing PSU banks as a portion
of a broader $32 billion bank recapitalization plan. The
banking sector of India also faced higher capital
requirements by then next year to meet new global banking
rules that were known as Basel III.
The Allegation
On 29 January 2018, a PNB officer from Mumbai documented a
criminal complaint with India's federal investigative agency
against three companies and four people, which also listed
billionaire jeweller Nirav Modi and his uncle Mehul Choksi, the
managing director of Gitanjali Gems Ltd, claiming that they had
cheated the bank and had caused a loss of Rs 280 crore ($43.8
million) to the Punjab National Bank.
The bank declared that the two junior employees at the Mumbai
branch of Punjab National Bank had helped and supported the
companies and people managing them, in getting "letters of
undertaking" (LoUs) from it without even having a sanctioned
credit limit or maintaining funds "on margin".
According to Punjab National Bank, the LoUs were used by
Modi and Choksi to obtain short-term credit from overseas
branches of other Indian banks.
What is an LOU?
In the international system of banking, a Letter of Undertaking
(LOU) is a provision of a bank guarantee. Under the LOU, a bank
allows it's customers to raise funds from the branch of an Indian
bank which is established overseas, in the form of a short term
credit. In simple words, the purpose of the bank guarantee is served
by the LOU.
On the basis of the complaint, the Central Bureau of Investigation
(CBI) registered an initial case against those companies and the
people named, on 31 January 2018 and Punjab National Bank
announced that a detailed investigation was underway.
Later, the bank revealed in a regulatory filing that it had excavated
deceitful and unauthorized transactions totaling to Rs 11,400 crore
at the Mumbai branch. The related investigators said the latest
disclosure was related to the case filed earlier.