Business Ethics

S.K.Palhan
 Course Content
• Introduction ,Indian ethos in management
• Self management for effectiveness
• Value of values in business
• Stakeholder analysis
 Course Content
• Corporate governance
• Ethical dilemmas
• Principle cantered leadership
• Work ethics
• Ethics in marketing & entrepreneurship
• Case studies in business ethics
 Indian Ethos in Management
• Existing management systems have not
succeeded in India
• Quality of life has gone down in terms of
– Happiness
– Material development
 Indian Ethos in Management
• Development based on local value system
has succeeded in
– Japan
– Korea
– Singapore
– Taiwan
 Indian Ethos in Management
• Modern value system has deteriorated
quality of life leading to :-
– Consumerism
– Stress
– Erosion of values and family life
 Present Status
• Expectation • Result
– Money – Money
– Fulfillment of – Comforts and
desires enjoyment
– Power – Worries
– happiness – aimlessness
 Present Status
• Growing dissatisfaction
• Selfishness
• Greed
• Exploitation of
– Society
– environment
 Indian Ethos in Management
• Survival of Indian civilization
unlike.Roman,Greek and Babylonian
• What is the secret of survival ?
• Is there excellence in India ?
– Distribution of wheat and coconuts
– Brassware , carpets, handloom
– Bania shop
– Morning newspaper vendors
– Mumbai’s Dubbawalas
 Indian Ethos in Management
• Indian ethos is not merely shlokas from the
scriptures
• It is applicable in
productivity,growth,leadership and human
resource management
 Indian Ethos
Managing Through Wisdom
knowledge
Job skills
skills
attitude

Emotional stability
Life skills
Holistic view of reality
 Distinctive Features of
Indian Ethos
• Self development (values )
• Life skills
• Holistic approach for physical.mental,social and
spiritual growth
• Balanced pursuit of multiple life objectives
– Dharma,artha, kama, moksha
• Self management through the handling of the
gunas (tendencies ),sattva,rajas & tamas
 Indian Ethos
• Divinity of all souls with infinite potential
• Holistic vision ,concept of advait
• Stress on
– Skills or
– Values
• Efficient worker or wisdom worker
 Ethics of East
• Hindu philosophy
– Dharma artha,kama ,moksha
• Islam
– Concern for poor,non interest,risk sharing
• Buddhism
– Self control,right action
• Jainism
– Non violence
 Ethics of East
• Chaarwak philosophy
• Chanakya neeti
• Single political party condoning poor ethics
 Western Ethics
• Plato and Aristotle
– Living good life
– Responsibility of the elite
• Stoics
– Austerity
– Endurance
– Tolerance
• Shaw, Russell, Malraux,Rolland
– Anti imperialism and exploitation
 Western Ethics
• Christianity
– Compassion
– Sharing and Responsibility
• Existentialism
– Personal responsibility to all mankind
• Modern western government & Business Schools
– Corporate ethics
– Good governance
 Western Ethics
• Epicureans and Hedonist
– Pleasures without responsibility
• Nietzsche and Schopenhauer
– Emphasis on power,superman,might is right
• Darwin
– Survival of the fittest by any means
 Western Ethics
• Milton and Friedman
– Business and not social responsibility
• Some MNC
– Kick backs are justified
 Deontological Ethics
(Means)
• Decisions based on rules or principles
which govern decisions
• Stress on rules rather than the consequences
by Kant, Confucius,Aristotle
 Teleological Ethics
(End Result )
• The teleological morality of a decision is
determined by measuring the probable outcome or
consequences
• Utilitarianism seeks as its end the greatest good
( or utility ) for the greatest number
• John Rawls :- (distributive justice) Ethical acts or
decisions are those which lead to an equitable
distribution of goods and services
• Hybrid theories :- Balance of Mercy and justice
 Why Values
• The business benefits through shared values
• The right thing
– Integrity
– Obey laws
– Quality life
– Satisfaction to the customers
 Why Values
• Changing attitude / aspirations
– Holistic life with values
• Changing pattern of work
– More people working with mind rather than the hands
• Positive encouragement and not negative
prohibitions
• Urgent need for value education
– Youngsters appear to have rejected or not aware of
basic code
 Business Values &Ethics
• Long term foundation of corporate governance can
be built through values and ethics
• Absence of values and ethics may inadvertently or
otherwise dilute safeguards of law, organizational
systems and rules
• Chairman & non- executive directors should
demand & approve the core values to guide major
decisions,operations &behaviour in organizations
 Corporate Ethics
• Rising levels of services to the multiple
stakeholders
• Trusteeship of resources entrusted to the care and
leadership of promoters & managers
• Fair dealings with stakeholders,business partners
• Optimum contribution through the creation of
wealth,jobs,exports and Innovation
• Good corporate citizenship through legal
compliance & social responsibility
 Values
• Value indicates the regard for
– A thing
– Situation
– Attitude
Which for some reasons is prized by the value
holder
 Values
• In Sanskrit an ethical value can be defined as
Dharma,which is a standard or norm of conduct
derived from the way in which I wish others to
view or treat me
• I want others to speak the truth to me,I do not
want others to lie to me ,truth speaking is a
dharma for me
• Ethical norms are not just arbitrary but stem from
an inherent common regard for one’s own interest
and comfort
 Value –Speak the Truth
• I want others to speak the truth
• Authorities tell me to speak the truth
(parents,society,religion )
 Ethics in Decision Making
• Ethics in organizational decision making
have a wise spectrum
– No consideration at all of ethics
– Ethics considered briefly but thought to be
irrelevant
– Problems of ethics recognized after decision is
made / implemented
– Ethics said to be important but not systematized
– Ethics built into decision making process
Integration of Ethics in Business
Corporate Vision

• Doing ( goals ) • Being ( values )

• Principles
– Finance
• Relationships
– Markets • Behaviour
– Technologies
code of conduct
– specialist policies
plans » Quality
» Environment
» Health
operations
» People’s development
» Customer care
 Principles
• Principles are guidelines for human conduct
that are proven to have enduring value
• They are fundamental and self evident
 Principles
• Consider the absurdity of living an effective
life based on the opposite of principles e.g
– Unfairness
– Deceit
– Uselessness
• Happiness-the ultimate objectiveness of life
comes only through Dharma-righteous
action
 Ethical Issues in India
• Poor productivity
• Lack of integrity, selfishness
• Non responsive system
• Stress on rights instead of duties
 Ethical Issues in India
• Jobs not suiting swardharma
• Poor wages
• Profits through loopholes in laws and
personal contacts and not world class
results
• Serving the boss and not the customers
• Not walking the talk
 Corporate Values
• Eastman Kodak company
– Honesty
– Fairness
– Trust
– Teamwork
– Diversity
– Employee’s well being
– Citizenship
– Winning attitude
 Corporate Values
• Hewlet Packard
– Growth-a measure of strength and requirement
for survival
– Products & services should be useful
– Profit : the best single measure of our
contribution to society to be pursued &
maximized but consistent with our objectives:
• Creativity,personal satisfaction and employee’s
share in success of the company
Mission Statements of Corporate
• Honesty & trust in relation to
– Customers
– Shareholders
– Suppliers
• Respecting the needs of individuals
• Becoming showpiece of productivity and
quality
• The customer matters most
Mission Statements of Corporate
• Safety and health as our highest value
• Never to take or give bribe
• No false billing etc
• 100 % testing of finished products
• Will not handle business of harmful items
like drugs, tobacco,liq
 Stakeholder Model

shareholders
lenders customers
dealers employees
BUSINESS
vendors promoters
competitors
community
regulators
government
 Stakeholder Management
• Stakeholders expectations
(Internal & external)

Corporate objectives
Long term vision & goals Resource audit
External scan
Strategy & plans
Organization & management
operations
Feedback
&learning
 Stake Holder's Action Plan
• Managerial leaders-set examples,prevent erosion
of values
• Entrepreneurs-ethical,socially relevant projects
• Regulators-create environment for ethical
behaviour,suitable awards & punishment
• Business stakeholders-support ethical business
• Social stakeholders-ethical guardians,no
unreasonable demands
• Press media-highlight positive roles
 Corporate Ethics
• Rising levels of service to the multiple
stakeholders
• Trusteeship of resource entrusted to the care
and leadership of promoters and managers
• Fair dealings with stakeholders, business
partners
 Dealings With Suppliers
• Are you honest in negotiating with your suppliers?
• Do you pay your suppliers in time as per the
agreement ?
• In dealing with smaller suppliers do you bully or
abuse your power ?
• Do you either offer or accept bribes?
• Do you behave towards your suppliers as you
would like your customers to behave?
 Ethical Issues in Marketing
• A survey of 1076 marketing managers identified
the following difficult issues
– Bribery ( gifts,payments,kickbacks)
– Fairness ( conflict of interest-manipulation )
– Honesty ( lying,misrepresentation)
– Pricing issues- predatory pricing
– Product – safety ,quality
– Personal confidentiality
– Advertising-puffing , misrepresentation
 Ethics in Banking/financing
• Personal behaviour
Resources
Opporunity Situation
Power
temptation Ups -downs
,information

Value Moral constraints

system standing

Moral Level of
Life goals integrity External
code pressure
 Ethics in Banking/financing
• Factors considered by lenders
( Chartered Institute of Bankers – 1989 )
– Character
– Ability to pay
– Margin
– Purpose
– Amount
– insurance
 Resolving Dilemmas
• SITUATION
– What are the facts,root cause,risk.
Opportunities?
– Affected stakeholders
– Perception of facts by the stakeholders
 Resolving Dilemmas
• ALTERNATIVES
– What are the options ?
– Are there no other options?-Be creative
– Impact of alternatives on stakeholders
 Resolving Dilemmas
• ANALYSIS
– Vital values involved in the decision
– Judgment based on
• Means (deontology )
• Results (teleology )
– Can you eliminate few alternatives ?
– Lateral thinking –other alternatives
– Value of values- decision criteria
 Resolving Dilemmas
• CHOICE
– Choose according to the most important criteria
– How can you minimize the negative impact
– How to communicate the choice ?
 Case Study in Dilemma
• You are the G.M.in a company exporting jeans &
negotiating a Rs. 2 crores deal in country X
• There is recession in the local market & you may
have to close one of your manufacturing plants in
India if this order is not received
• You can get the order if you pay a bribe of Rs. 20
lacs to the agent of the commerce minister of X &
the order is big enough to absorb the bribe
• What would you do ?
 Business Case Study-2
• you have to cut lending to small business & you
have to choose between accounts A & B
• A- a play group for handicapped children.It just
manages to break even. Your friend’s child also
attends it.
• B- video shop known for video nasties,it is
currently in loss but will certainly move into profit
shortly, provided it is not closed by the authorities
• What would you do ?
 Business Case Study-3
• You publish a successful teenage magazine
• Profitability depends on major advertisers
• You have bowed to the pressure of tobacco coys
& do not run anti smoking articles
• Now , however you are concerned over tobacco
co. ads targeting teens
• Tobacco coys have recently merged with food
coys who account for your bulk ad. Sales
• WHAT WOULD YOU DO ?
 Business Case Study-4
• You have been suddenly asked to stand in for your
manager ( on sick leave) at a day at the races
sponsored by an important customer.Your hosts
are highly hospitable & suggested a number of
horses to back, some of which won.your bets were
modest & you estimate your winnings at $50.At
the end of races the hostess gives you an envelope
of winnings with your manager’s name on it.You
open the envelope at home & find $5000 in it.
• What would you do ?Give your analysis.
 Principles Centered Leadership
Alternative life centers

SECURITY GUIDANCE
money

family posessions

spouce
work
church
principles

self pleasure

church friend
enemy POWER
WISDOM
 Principles Centered Leadership
• Principles as life center give
• GUIDANCE
– Sense of direction,your own interpretation
• SECURITY
– Sense of worth,identity,self esteem
• WISDOM
– Sense of balance,judgment,comprehension,oneness
• POWER
– Capacity to act,energy to make choice,to accomplish
 Principles Centered Leadership
• Alternative organizational centers may be
– Profit
– Supplier
– Employee
– Owner
– Customer
– Program
– Policy
– Image
– Competition
– technology
 Principles Centered Leadership
• Each of us has a center, though we do not
recognize it as such
 Principles Centered Leadership
• Principles are guidelines of human conduct
that are proven to have enduring permanent
value
 Principles Centered Leadership
• Principles do not react e.g.
– Fairness,
– integrity,
– honesty,
– quality
– Excellence
– Human dignity
– service
 Principles Centered Leadership
4 Levels
1. Personal trustworthiness
• Character
• Competence
2 Interpersonal trust
• emotional bank account
3 Managerial empowerment
4 Organizational alignment
 Principles Centered Leader
Characteristics
• Continually learning
• Service orientation
• Radiate positive energy
• Believe in other people
 Principles Centered Leader
Characteristics
• Lead balanced life
• See life as an adventure
• Synergistic
• Exercise for self renewal
– Physical,mental,emotional,spiritual
 Work Ethics
• Why?
• What?
• How?
• Which work –priority ?
• Work attitude
• For whom ?
 Rights &Duties
• I oriented
Product development marketing
issues
 Ethical Issues in Marketing
• A survey of 1076 marketing managers identified
the following difficult issues
– Bribery ( gifts,payments,kickbacks)
– Fairness ( conflict of interest-manipulation )
– Honesty ( lying,misrepresentation)
– Pricing issues- predatory pricing
– Product – safety ,quality
– Personal confidentiality
– Advertising-puffing , misrepresentation
 Marketing ethics
• Shall not do any harm knowingly
• Shall not knowingly promote conflict of
interest
• Is honest and fair in serving customers
 Marketing ethics
• Done in good faith to all parties concerned
• Deliver products and services which are
safe and fit for the intended use
• No deception about the product while
communicating
• Redressal system for handling complaints
• Adhering to applicable laws & regulations
 Pricing issues
• Increase price & the give discount-bogus
sale
• High prices for captive customers on
renewal of services
• Low product cost but very high service cost
 Pricing issues
• Cross subsidize products
• Promoting ordinary products as luxury
items
• Bundled price for fast moving items with
slow ones
• High prices during shortage
• Form cartels to keep the price up
 Pricing issues
– Tyres
– DRAM chips-Samsung & others
• MRP as retail price
• Predatory pricing
 Promotion issues
• Surrogate advertizing
• Using irrelevant attributes of product
• False claims
• Advertizing to children
• Use of fear appeal
– Insurance
– Fairness creams
 Ethical issues in HRM
• Discrimination
• Privacy issues
• Phone tapping
• Electronic surveillance
• Safety
• health
 Ethical issues in operations
• Safety
• Quality -compromise
• Affluent
• Health hazards
 Ethical issues in Banking
• Misappropriation and breach of trust
• Manipulation of records
• False financial documents
• Unauthorized credit facilities
• Forgery in demand draft
• Irregularity in foreign exchange guidelines
• False letter of credits