BBA

Business Ethics and CSR

Dr. Poonam Khurana

Study Material: Unit 1

Syllabus- Unit one:

Introduction: Values-Concept, types and formation of values, ethics, values and behaviour,
Values of Indian Managers, Ethics, , relevance of ethics and values in business. Ethical
Decision Making

Management of Ethics: Management process and ethics, managerial performance, ethical

issues, ethos of Vadanta in management, Hierarc ism as an organizational value.

Topic 1: Introduction of Values:

Values can be defined as those things that are important to or valued by someone. That someone
can be an individual or, collectively, an organization. One place where values are important is in
relation to vision. Dr. John Johns, in an article entitled "The Ethical Dimensions of National
Security," mentions honesty and loyalty as values that are the ingredients of integrity. When
values are shared by all members of an organization, they are extraordinarily important tools for
making judgments, assessing probable outcomes of contemplated actions, and choosing among
alternatives. Perhaps more important, they put all members "on the same sheet of music" with
regard to what all members as a body consider important. Values provide the basis for
judgments about what is important for the organization to succeed in its core business.

Defining Values: These are two famous definitions of Values:

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“Values are beliefs that guide, actions and judgments across variety of situations.”
Milton Rokeach

“Values are the constellations of likes and dislikes, viewpoints, inner inclinations, rational and
irrational judgments, prejudices and association patterns that determine a person’s view of the
world. “

Edward Springer

Features of Values:

 Values represent basic conviction that specify mode of conduct is socially preferable to
an opposite mode of conduct

 Values are manifested in thoughts, speech and actions

 Values are inherent in all cultures and societies

 Values guide people to take specific positions on societal issues

 Values are relatively stable and enduring as these are passed from one generation to
another

 Values are the most central to the core of a person

 Values provide standards of morality

Topic 2: Types of Values:

First Differentiation given by Milton Rokeach:

1. Terminal Value: is an ultimate goal or aim of a person. Terminal Values signify the
objectives of the life of a person – the ultimate things the person wants to achieve
through his or her behavior (the destination he wants to reach in life). In our personal
lives, Terminal Values are those things that we can work towards or we think are most
important and we feel are most desirable – terminal values are desirable states of

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 existence. Terminal Values include things like happiness, self respect, family security,
recognition, freedom, inner harmony, comfortable life, professional excellence, etc
2. Instrumental Values: These relate to the means for achieving the desired outcome
or end. Instrumental Values refer to preferable modes of behavior and include values
like honesty, sincerity, ambition, independence, obedience, imaginativeness,
courageousness, competitiveness, and also some negative traits too. Instrumental Values
indicate the methods an individual would like to adopt for achieving his life’s aim (the
path he would like to take to reach his destination). Examples of Terminal values and
Instrumental values are as follows:

Terminal values Instrumental values

Happiness Assertiveness

Knowledge and wisdom Being helpful or caring towards others

Peace and harmony Education and Intellectual pursuits

Pride in accomplishment Hard work and achievement

Prosperity, wealth Open mindedness

Security Self sufficiency

Salvation, finding eternal life Obedience

Second Differentiation given by G.W. Allport, P.E. Vernon & G.Lindzey:

 Theoretical: Interest in the discovery of truth through reasoning & systematic thinking

 Economic: Interest in usefulness and practicality

 Aesthetic: Interest in beauty

 Social: Interest in people and human relationships

 Political: Interest in gaining power and influencing other people

 Religious: Interest in unity and understanding the cosmos as a whole

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Third Differentiation given by Graves:

Graves has identified seven values ranging from the lowest (reactive) to the highest
(existential)

 Reactive : Unaware of oneself and others as human beings, reacts to basic physiological
need

 Tribalistic: High degree of dependence, strongly influenced by tradition and the power
exercised by authority figures: wants strong directive leadership

 Conformity: Lower tolerance for ambiguity, difficulty in accepting people with

divergent values, desires

 Manipulative: Strives to accomplish goals by manipulating things and people,

materialistic, actively seeks status and recognition

 Egocentrism: Believes in rugged individualism, aggressive and selfish, responds

primarily to power, desires individual; responsibilities, wants to work alone in an
entrepreneurial style

 Sociocentric: Desires to be liked and go along with others rather than get ahead, dislikes
materialism, manipulation and conformity, seeks primarily the social relationship which a
job provides.

 Existential: High tolerance for ambiguity and for people with divergent values,
outspoken on inflexible systems, seeks full expression of growth

Topic 3: Formation of Values:

People indoctrinate values from their parents, teachers, friends, media, television, radio,
newspaper and all those whom they admire and thus, try to follow.

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Factors Influencing formation of Values:

1. Family factors: Parents and elders

2. Social factors: school, religioun, political environment
3. Cultural factors
4. Personal factors: intelligence, ability
5. Organizational Factors: peers, boss, subordinates

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Process of Moral Development

Moral values are not born characteristics but are acquired gradually over a period of time. A
newly born child has no moral values. He learns them as he grows from his surroundings. Some
are taught to him by his family and teachers, some he acquires from reading religious literature
and some he learns by observing and feeling. This process can be broadly categorized into three
distinct categories: -

1. Pre-Conventional Level – Person follows the dictates of law and good behavior out of fear
of punishment or expectation of reward. In the early stage of childhood, he is taught by mother,
father and teachers to follow certain rules and he does that more out of fear of punishment or for
promised reward. This is pre-ethical stage or preparation stage for ethics

2. Conventional Level – Person conforms to the behavioral standards to meet the expectations
of peers and society to avoid ridicule and gain acceptance.

3. Post-Conventional (Principled) Level – Person develops a personal, internal set of standards

and values which he is not willing to compromise even in the face of threat or personal loss. He
sticks to these values for his own sake (About 20% of adults reach this stage fully or partially)

Topic 4 : Values of Indian Managers versus Western managers

The values of Indian managers can be briefly summed up as under:

• Forming a vision and planning the strategy to realize such vision.

• Cultivating the art of leadership.
• Establishing the institutional excellence and building an innovative organization.
• Developing human resources.
• Team building and teamwork.
• Delegation, motivation and communication.
• Reviewing performance and taking corrective steps whenever called for.

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The values of Western managers can be briefly summed up as under:

• Western managers are highly professional with excellent analysis power, high
professional education and specialization.
• Western managers follow a proper code of conduct and work in a structured formal
atmosphere with no place of modesty in their behavior.
• Professional efficiency and work-discipline are the conditions under which western
managers perform and they are imperialistic in their approach.
• They consider rules as sacred for them in their value system.
• They value principles above its privileges and they consider this as the best strategy to
win.

There are certain values which are important in the context of a business enterprise. The most
important is the value of the enterprise for the customer. Peter Drucker pointed that the purpose
of a business is to create a customer and retain him. The values which are important to
consumer, are ultimately the most important values for a business enterprise. The second
important set of values for an enterprise relates to finance. Profit and finance became important
values for an enterprise. The third aspect of values of business relate to the wide spread impact
of information technology. We are in the age of the Internet, ecommerce and e-business. This
goes by the name of "New Economy". In this new economy, creativity has become the highest
value.

While these values relate to stakeholders outside the business enterprises, there are other values
that relate to within the enterprise. One of the values is the value of loyalty of employees to the
enterprise. In the past, when the pace of change was slow and there was more stability, perhaps
a person stuck with the same enterprise and was loyal to the enterprise. Loyalty was common in
the past. With increasing competition, loyalty has become a vulnerable value.

Topic 5 : Relationship between Values and Behaviour:

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Topic 6 : Introduction to Ethics

Ethics is not a recent discovery. Over the centuries many philosophers in their struggle with
human behaviour have developed various approaches to ethics, each leading to different
conclusion. The word “Ethics” which is coined from the Latin word ‘Ethics’ and Greek word
‘Ethikos’ pertains to character. Ethics is thus said to be the science of conduct. As a matter of
fact it deals with certain standard of human conduct and morals.

The field of ethics involves systematizing, defending and recommending concepts of right and
wrong behaviour.

Ethics is a mass of moral principles or set of values about what is right or wrong, true or false,
fair or unfair, proper or improper, what is right is ethical and what is wrong is unethical

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Nature and Objective of Ethics:

The liberalization and globalization being sweep changes in the concept of doing business, but
the major by-product like corruption, favoritism and nepotism, deterioration of human values,
series of scam in business, govt. policies and society are also produced in the 21st century.
Business houses are becoming big with control of large resources, human, financial and technical
but their surviving purposes to society are always having the doubtful values.

Day by day innocent Indians are losing their faith in laws, courts and govt. At one side business
enterprise are coping up with intense emerged competition and on the other side they are
violating the principles of proper public conduct. In the wake of mounting scandals corporations,
all around the world are adopting ethical conduct, code of ethics. They are excellent
organizations, which have shown a spurt of activity towards evaluation of goals, concepts, values
management and conduct.

Ethical issues are more critical today than they have ever been. Similarly the increased interest
with ethics in India is also related to many issues as nexus between business, crime, politics, a
series of scams , sordid events of the past few years in the public affairs of the country which
have led many in the country to believe that the country is approaching destruction unless it
reforms ethics. In terms of practically applied the terms ethics and values became an important
concern in the U.S. in the eighties. But fortunately the application of ethics in theory and practice
in new millennium is gaining momentum rapidly. As the all India council for technical education
which regulates the management education in India has in December 1995, recommended the
inclusion of business ethics as a course in management studies curriculum

Objectives of Ethics:

The objectives of ethics are as below:

 The very basic objective is to define the goodness of man and establish a standard for the
same.
 Set/Establish moral standards/norms of behavior.
 An overall study of human behavior: what is moral or immoral should be assessed
 Apply judgment upon human behavior based on these standard and norms.

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  Suggest moral behavior, prescribes recommendations about do’s and don’ts.
 One’s opinion or attitude about human conduct is expressed in general.

Nature of Ethics:

The concept of ethics is applied to human beings only as they have freedom of choice and means
of free will. They can only decide the degree of ends they wish to pursue and the means to
achieve the ends.

• The study of ethics is nothing but a field of social science in which a set of systematic
knowledge about moral behaviour and human conduct is learned.

• Ethics deals with human conduct which is voluntary not forced by circumstances or humans.
So we can say that at the ground level ethics deals with moral judgement regarding set directed
human conduct.

• The science of ethics is a normative science. It is a search for an ideal litmus test of proper
behaviour. Normative science involves arriving at moral standards that regulate right and wrong
conduct.

Ethics and Related Terms:

Ethics and Morality: A morality is a set of rules to guide the actions of an individual human-
being. Rand says about it –“a code of value to guide man’s choice and actions.” So, ethics and
morality would seem to be synonymous but exactly it is not so.

As morality refers to the rules and guidelines which an individual or a group has about what is
right/wrong, good or evil same as ethical principles also give an idea about right or wrong, true
or false. Really speaking, to differentiate between ethics and morality is a difficult task as human
behaviour is influenced by emotions and sentiments. As many big organisations and big
businessmen have no predetermined ethics but they may evaluate the good conduct of business
on the basis of customs, expectations of society, and some beliefs. But in way ethics is not

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merely the code of conduct based on customs, conventions and the accepted courtesies of a
society but it is the code of conduct developed by proper testing to guide the human behaviour.
In short, Ethics and morality, for all purpose may be assumed to mean the same.

Ethics and Religion: Though ethics is not synonymous to religion morality is a primary force in
shaping our ethics. Thomas M. Garrett writes, “The religion derives their moral percept not
only from human experience but from divine revelation. It must rely on the unaided human
reason.” Ethics gets idea from religion and thorough experiments it approves them as “code of
conduct.” The development of ethics is dependent on the religious morality. The great historian
Arnold J. Toynbee writes, “No society could succeed without any religious aim. Mere desire for
prosperity cannot motivate a person for building up an enduring dynamic and progressive
nation.” Needless to say, about the vital role of ethics in our economic life which could be
activated on the basis of religious principle?

Ethics and law: Hosmer (1995) says – Respect for law as an ethical value– What is law? Law
is a code of conduct which the authority in power prescribes for society. It is concerned with the
minimum regulation necessary for public order which is enacted by govt. So government gives
shape to only those minimum social obligations, customs or traditions which are essential to be
complied with by the people. It basically differs from ethics in its option to use force when
necessary and in fact it is backed by power.

The most important divergence between ethics and law is that ethics concentrate on the do’s
and laws on the don’ts. Ethics is a much wider term than law. The required ethical behaviour
may not be covered by the law at all. ‘look after the aged’, ‘be considerate to your workers’,
‘Teach well to your students’, ‘Do not tell a lie’, Obey your elders’,— will fall within the circle
of ethics but not within the law.

Ethics and Values: Moral values are deep-seated ideas and feelings that manifest themselves as
behaviour or conduct. These values are not so easy to measure or express in words. There is very
thin line which distinguishes between ethics and values both drive what is right and what is
wrong in human conduct and what ‘ought to be’. But then also a relationship can be derived
between value and ethics like this Law + Knowledge = Ethics So as, we know the consequences
of our actions, we can convert values into rules of behaviour that can be derived as ethics.

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Theories of Ethics: (PPT already shared)/ Models of Moral Reasoning/ Models of Decision
Making/ Approaches of Solving ethical dilemmas

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Details and explanations of theories already shared in PPT

Topic 7: Introduction to Business Ethics:

In any organization from top executive to bottom line employees, ethics is considered as
everybody business. It is not just only achieving high level of economic performance but also to
conduct one of business’s most important social challenges, ethically at the same time. Here
what we get a combination of two familiar words—‘Ethics and Business’ in ‘Business Ethics’.

Different meaning is given to business as follows:

 Business ethics are the application of general ethical rules to business behaviour.
 Business ethics are rules of business by which propriety of business activity may be
judged.
 By Cater Mcnamara— “Business ethics is generally coming to know what is right or
wrong in the workplace and doing what is right— this is in regard to effects of products/
services and in relationship with stake holders”.
 “Attention to ethics in workplace sensitizes managers and staff to know they should act
so that they retain a strong moral compass. Consequently, business ethics can be strong
preventive medicine.” According to John Donalds on Business ethics in short can be
desired as the systematic study of ethical matters pertaining to business industry or
related activities, institutions and beliefs. Business ethics is the systematic handling of
values in business and industry.
 Business ethics concentrate on moral standard as they apply to business policies,
institutions and behavior. It is a specialized study of moral right or wrong. It is a form of
applied ethics.
 Business ethics are nothing but the application of ethics in business. It proves that
business can be and have been ethical and still make profits. Today more and more
interest is being given to the application of ethical practices in business dealings and the
ethical implications of business.

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  Business Ethics is a form of the art of applied ethics that examines ethical principles
and moral or ethical problems that can arise in business environment.

 It deals with issues regarding the moral and ethical rights, duties and corporate
governance between a company and its shareholders, employees, customers, media,
government, suppliers and dealers.

 Henry Ford said, “Business that makes noting but money is a poor kind of business”.
Ethics is related to all disciplines of management like accounting information, human
resource management, sales and marketing, production, intellectual property knowledge
and skill, international business and economic system.

The 3 Cs of Business Ethics:

Following are the 3 C’s of business ethics:

Compliance: (The need for compliance of rules including): • Laws • principles of

morality • policy of the company
The Contribution (Business can make to the society): • The core values • Quality of
products/services • Employment • Usefulness of activities to surrounding activities •
The consequences of Business activity: • Toward environment inside and outside the
organization • Social responsibility toward shareholders, bankers, customers and
employees of organization. • Good public image, sound activity good image

Features of Business Ethics:

1. Code of conduct

2. Based on Moral and Social Values

3. Commitment towards Stakeholders

4. Provides norms and standards

5. Voluntary

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 6. Requires education and guidance

7. Subjective in Nature

Need and Relevance of Business Ethics:

• Ethics is important not only in business but in all aspects of life because it is the vital part
and the foundation on which the society is build.

• A business/society that lacks ethical principles is bound to fail sooner or later.

• According to International Ethical Business Registry, “there has been a dramatic increase
in the ethical expectation of businesses and professionals over the past 10 years.

1. Ethics Facilitate strategic decision making

2. Business Ethics increase employee retention and thus minimize cost

3. An ethical business attracts investors

4. Ethical practices help in building and maintaining reputation and sustainable growth in
sales

5. An ethically oriented company is bound to avoid fines

6. Ethics in a business attract more employees

7. Business Ethics is the key to enhancing productivity.

8. Ethics create customer loyalty.

9. A business that values ethics attracts more suppliers.

10. Ethics enhancers’ partnerships.

11. Ethics reduces business risks

Three levels of Ethical Standards:

I. Macro Level

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II. Company Level
III. Individual Level

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Ethical Dimensions in Business:

1. Globalisation: The growing integration of economies and societies around the world has
been one of the most hotly debated topics in international economies over the past few
years. Many forces are driving globalization— Communication, improved infrastructure,
technology, regulation, free trade and free movement of people. Rapid growth and
poverty reduction in India, China and other countries that were poor 20 years ago, has
been positive aspect of globalization. On the other hand, globalization has also generated
significant international opposition over concerns that it has increased inequality and
environmental degradation. Ethics, morality and globalization are connected with each
other the ethical dimension of globalization is beginning to be debated world widely. At a
business level, we talk of globalization when companies decide to take part in the
emerging global economy and establish themselves in foreign markets. To meet the
objectives first they adapt their products and services to the final user’s linguistic and
cultural requirement, which is not all an easy task manager have to manage the workforce
in different languages, different cultures, and different tax procedures. The basic need in
the globalization era is to control the ethical conflicts to its minimum level though it’s not
so easy to achieve. Though some ways can be suggested like:

• Sensitive and sympathetic attitudes towards local customs

• Awareness about world pressure group

• Know and comply with local laws related to tax, employment and finance
• Manage diversity within and across the national boundaries

2. Technology: Technology is a driving force helping business organization to face the

challenges of today’s competitive business environment. It is revolutionizing the nature
and speed of communication within and between companies. All the functional areas of
organization— Marketing, finance, HR, production, etc., are being facilitated by it. The
global development of companies is very much affected by technology. Technology has
been catalyst for this development. Though there are some social and ethical issues
related to technology, they are as follows:

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 • Complexity and integrity
• Software piracy
• Monitoring
• Harassment
• Employment
• Privacy
• Accessibility
3. Intangible Assets: The most valuable assets as far as an organisation is concerned in the
new economy are called as in tangible assets. Intangible assets are non-scarce; these
increase in values when used as they are not subject to diminishing returns as the tangible
assets, but have increasing returns. As all intangibles (customer, employee, leadership,
culture, strategy, brand, innovation, knowledge, intellectual property rights) are
future oriented so they create future value. The ethical points of discussions related to
intangible assets are a lot like: • Intangibles are difficult to manage and exclusively
control • Intangibles investments are typically more risky • Intangibles cannot be directly
measured and their value.

The following steps should be taken to maintain ethics and values in the workplace :

1. Organizational objectives and policies should be clearly laid down so that every member
of the organization works towards attainment of these goals in an ethical manner.

2. The behavior of top managers is precedent for others in the organization. Ethical actions
of top managers will promote ethical behavior throughout the organization.

3. Imposing penalties and threats for non-conformance to ethical behaviour will reduce
unethical activities in the organization. Formal procedures of lodging complaints will enable
subordinates to report unethical behavior of their superiors to the concerned committees.

4. Organizations should offer courses and training in business ethics which can create
conscientious business managers.

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Topic 8 : Ethical Decision Making:

As we all know that the real identity of a manager is to make decisions regularly and correctly.
As Alvin Toffler says—“The very speed of change introduces a new element into management,
forcing managers to make more and more decisions at a faster and faster pace. Now a days
management simply has become the process of decision making. All the parts of management
pass through decision making toward goal achievement like.

A logical five steps analytical structure (Kitson and Campbell 1996) has been developed to
help out the students how they should make the decisions? Identification of the present situation
is the basic foundry and most crucial step. A manager must understand the very nature of the
problem or circumstances. Again ethical considerations are involved in alternations generated by

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decision maker. Now evaluations and selection depend upon so many factors it involves ethical
reasoning of the decision maker.

PLUS Approach of Ethical Decision Making:

• P = Policies
Is it consistent with my organization’s policies, procedures and guidelines?
• L= Legal
Is it acceptable under the applicable laws and regulations?
• U = Universal
Does it conform to the universal principles/values my organization has adopted?
• S= Self
Does it satisfy my personal definition of right, good and fair.

Problems in Ethical decision making:

If we say or assure that unethical behavior in organisation is just because of some wrong doers or
some greedy people, some bad individuals who are always behind money, then some where we
would be wrong.

Now-a-days, people who look decent, who seem to be ethical, do involve in unethical practices,
though they don’t think of doing anything illegal or immoral but they get backed into doing
something unethical by systems and practices of their own firms.

The sources of ethical problems are various and varied:

 Due to globalization, as companies deal with other countries where cross cultural
diversity issues arise. Managers working in MNC’S find it very difficult to standardize
ethical standards as they do change as society change.
 Sometimes the decision makers do not follow what they must follow as they have
conflict in individual values v/s organizational goals.

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 Individual moral standards affect whole organization decisions if they are morally
strong, ethical decisions would be the outcomes.
 If the decision makers/managers/policy makers who are greedy, look for short cut routes
to earn in earliest possible time, they have an upper hand on the moral values, therefore
ethically the decision process would be corrupt.
 Competitive pressure is also the main cause which forces decision makers to choose
such path where they have to kill their morals, values and move on unethical path just to
cope up with the competition.
 Poor decisions without deep thinking of implications.
 Ambiguous situations create problem which put the manager in dilemma as to which
decision they should make and follow.
 Pressures of budget systems

Topic 9: Ethos of Vedanta in Management:

 Vedanta is the systematic presentation of teaching of the Upanishads.

 All cultures in India have roots in Vedanta.
 Vedanta is a living philosophy of life in India which is a part of the mental structure of
our people.
 Simplicity is the key note of Vedantic ethics.
 Vedanta gurus grasped the truth that problems of secular pursuits cannot be resolved by
secular route.
 Vedantic Thoughts
 Human Existence is to aim at and strive for a pure mind. Intellect does not decide or
choose. Emotions are the first to make the secret choice.
 Subject is the cause, the object is the effect.
 Work must be done without personnel claims to egocentric results as driving force.
 Like Cause – Like effect(Karma Theory)
 Self Management – Individuals personality comprises of i) an outer active ii) an inner
silent. This awareness will lead to self management.
 Teamwork and Leadership.

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PRINCIPLES OF INDIAN ETHOS

1) Know Yourself:

Who are you? All of us are part of supreme power (GOD) & hence all of us have all the
divine qualities like integrity, patience, courage, loyalty, forgiveness, service attitude i.e.
mind so if you try to develop our self by improving our qualities we will not only make
ourselves happy but also the society be live in.

2) Holistic Approach To Life:

We should behave in same way of manner which we expect from others. Efficiency
&effectiveness in an organization will increase only when there is co-operation team spirit
&positive energy in employees.

3) Sewa Or Service Attitude:

The person should have altitude of service providing & at the same time have happy face i.e.
smile on face.eg: organization should be service oriented & not profit oriented, provide best
possible service to your entire customer.

4) Self Sacrifice: Self sacrifice refers to sacrifice of self ego. We should be ready to
sacrifice for others.

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