6 : Business Ethics 0

Concerned with 1.6 Etl

Busin
performanc
Similar to society's ba:
Concerned with examples rc
(1) J 0
stc
po
or
Conoerned with
(ii) Pa
to:
sv.
(iii) E\i
Fig. 1.2 Understanding ofBuslness Ethics wi
m;
By what method do we decide on answers to questions of moral m!
right and wrong in business? There is no special or unique process to an
do this, nothing more or less than is involved in any disciplined enquiry it
into complex problems, whether in business or anywhere else. reo
We can subject this to three different kinds of tests. th
. Test of agreement with the evidence: Does the evidence ne
support or deny the explanation we have put forward? Example. reI
we are arguing for the benefits of greater worker participation ex
in the running of companies. what is the evidence that .By doir
employees actually want such involvement? of rupees or
. Test of internal coherence: Are all the parts of the explanation One of
in agreement with each other or is itself contradictory in some ethics and
way? Does it say things which are somehow in opposition and economicall
so cannot be or are unlikely to be. equally true at the same The thl
. time?
. R1:
Example: We cannot accept the workers who are exclusively .
interested in maximising wages and argue for the importance to them Pr,
of an enhanced self esteem that would come from participation in . . Ju
decision making. and the
. Test of its compatibility (with our more general system in These c
belief): Does it fit in with what we generally take to be true in past, as our
this area or does it somehow contradict our assumptions. or crowded an(
at least test uncomfortably with them? How well. for example. questions aJ
does the claim that the workers are exclusively interested in multi -decisi,
maximising wages. fit in with what we generally accept about
human motivation? The etl1
and the de1
We attempt to solve ethical problems in much the same way as we decisions an
would solve any other complex and contentious questions. There is the questions (
same range of test available and the same kind of critical relationship agreement t
to theory.
 ,
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Introduction to Business Ethics: 7
8
1.6 Ethical Performance
Business frequently demonstrates a high level of ethical
performance toa. Ethical business performance means adhering to
society's basic rules that define right and wrong behaviour. The following
examples reyeal the same.
(1) Johnson and Johnson protected its customers by recall1ng
stocks of Tylenol capsules twice within 5 years p~riod when
poison was found in some Tylenol bottles on store shelves.
(ii) Parker Brothers voluntarily withdrew its all time best selling
toy wh~n it found that two children were choked to death by
swallowing some of its parts which they never anticipated.
(11i)Even in India, HMT Ltd,; a reputed public sector undertaki~
witl1drew all its milk separators supplied througn!ts dairy
machinery unit. Aurangabad. when it found that one of the
milk separators"lid at the customers end flew off while running
and hit the roof. No major accident took place, Owing to this.
it withdrew all the separators supplied to the customers for
re~checking and to ma}te design changes for some time, so
that the same should not be repeated, Later on, HMT replaced
e new separators to its customers. AU this was done only to
,e. regain the customers confidence in them. by incurring heavy
n expep.ses.
t ,By doing jugglery like this, the companies have to spend millions
of rupees or dollars on recalls/resupply etc.
n One of the major social challenges faced by business is to balance
Ie ethics and economics. Society wants business to be ethical and
ld economically profitable at the same time.
The three terms used to define ethics are:
. Right
. Proper
. Just
and the question is "what is right, proper and just?"
n
These are highly important terms in the future, compared to the
in
past, as our economy is more competitive. the society is becoming more
r
crowded and technology is becoming more complex. These terms and
le,
questions are important for any business executive who has to take
n multi-decisions in ways that are beyond his own control.
t
The ethics of management is coined with the above tl1ree terms
and the determination of what is 'righ(' 'proper' and 'just' in the
decisions and actions that affect other people - goes far beyond simple
questions of bribery. theft and coll'..lsion. Collusion is a secret
agreement to deceive. ,~

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 8 : Business Ethics
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1.7 Ethics In Business and reflecti,
a given situ
Allover the world. there is a growing realisation that ethics is point ofvie\
important for any business and to achieve the progress of any society. involves the
Ethics give rise to efficient economy. It is not the government or law all parties i
which will protect the society. But ethics alone can protect it. Ethics decision. or
are good in itself. Ethics and profits go together in the long run. An
ethically responsible company is one which has developed a culture of As an I
caring for people and environment, a culture which flows downwards. parties conI
insurance c
from the top managers and leaders. Ethics can be described as the
conscious appeal to norms and values to which. on reasonable grounds, excluded fre
illness of cl
we hold ourselves obliged. as reciprocally. we hold others obliged to the basic moral
same norms and values, As a reflection, ethics are the methodical and
systematic elaboration of the norms and values we appeal to in our and reJect i
first.
daily activities. Where these activities are organised under business
issues, we face ethics in the practical and reflective variety of business The mt
ethics. three possi
has been id
On innumerable occasions. people in business are facing ethical
questions in which a balance has to be found between the different and argued pos!
the case. T:
often conflicting rights and interests of the parties involved. One may
even say that the weighing of rights and interests, at stake in joint effort
influence t]
determinat~ circumstances. constitutes the common domain of
business ethics. required.
Ethical rules are guides to moral behaviour. For example: All
1.9 Ob.
societies have ethical rules forbidding, lying. stealing. deceiving and
harming others, similar to the other ethical rules that approve of . The o~
honesty. keeping promises. helping others and respecting the right of
others. These are the basic rules of behaviour which are of much use
for the preservation and continuation of organised life.
Most of the people find major source of ethical guidance and moral
meaning in religious beliefs and organisations. The family institution
is equally important as it imparts a sense of right and wrong in children
when they grow up, as schools and other similar institutions like
cultural associations and television etc. The totality of these exposures
will create in them a concept of ethics. morality and socially desirable
behaviour.
Ethical rules are present in all societies. all organisations and all
individuals. though they may vary greatly from one to another. What is
considered ethical by one society may be forbidden by another society.
One particular religious notion of morality may differ with others. Still
ethics is a universal human trait. All people wherever they are. need (i) Tt
rules to govern their conduct. rules that tell them whether their actions ar
are right or wrong. moral or immoral. approved or disapproved. et:
) wI
1.8 The Common Domain of Business Ethics.
I
.' Majority of the business practition~rs and ethicists alike show a
pI-

good and clear competence in handling more dilemmas. Experience

i
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Introduction to Business Ethics: 9
G
and reflection have taught them how to spot the ethical implications of
, a given situation and how to approach them in an orderly way. 'Moral
point of view' is to be adopted to track moral elements. adequately. This
I involves that one tries to determine the specific interests and rights of
all parties involved. Taking the moral point of view as the first moral
1 decision, one makes in a process of forming a moral judgement.
f As an example, a young girl is suffering from neuro-blastom, the
parties concerned are her parents, family doctor on one hand and the
t insurance company on the other. All insurance companies might have
excluded from their policies willingly or inadvertently. cases facing lethal
illness of clients, similar to the one of the young girl. If equity is the
I" basic moral concept, one cannot accept a moral obligation in one case,
and reject it in another that. in all re1.evant respects is similar to the
first.
The morai core issue is to be determined in addition to two or
three possible core issues in a given situation. Once the core issue
has been identified. however. it is another thing to come up with a well
argued position to give good reasons. that is for a moral preference in'
the case. The real. hard work of ethical analysis takes place ~ith the
Joint effort of the concerned (preferably) who are in a position to
influence the decision and with some support of ethical expertise if
required.

1.9 Objectives of Ethics .

The objectives of ethics are as shown in figure 1.3 below:

Study of human behaviour: Makes evalutative assessment

about that as moral or immoral (a diagnostic goal)

Establishes moral standards/norms of behaviour

Makes judgement upon human behaviour based on these

standards and norms

Prescribes moral behaviour; makes recommendations about

how to or how not to behave (therapeutic goal)

Expresses an opinion or attitude about human conduct in

general.

Fig. 1.3 Ethical Objectives

(i) The primary objective is to define the highest good of man
and set a standard for the same. Here we have to consider
ethics to deal with several interrelated and complex problems
which may be of psychological. legal. commercial.
philosophical, sociological and political in nature.
 10 : Business Ethics

(ii) The other objectives are many. These are

Study of human behaviour: making evaluative assessment
about them as moral or immoral (a diagnostic goal).
Establishing moral standards and norms of behaviour.
Making judgement
these standards/norms.
. ..
upon human behaviour based on

Prescribing moral behaviour and making recommendations

about how to behave or vice versa (therapeutic goal).
Expressing an opinion or attitude about human conduct
in general.

1.10 Nature of Ethics

. The. concept of ethics deals with human beings only. Only
human beings are endorsed with the freedom of choice.
. The study of ethics has become a set of systematic knowledge
about moral behaviour and conduct; study is a science - a
field of social science.
. The science of ethics is a normative science. Normative
sciences judge the value of the facts in terms of an idea:
concerned with judgements of 'what ought to be.' but not with
factual judgements.
. Ethics deals with human conduct which is voluntary and not
forced or coerced by persons or circumstances. Eg. Injuring or
even killing a person who has come to kill you is not
considered a moral or legal offence. but a cold blooded murder
is considered to be the highest kind of moral or legal crime.
Ethics is basically an area dealing with moral judgement
regarding voluntary human conduct.
. Business ethics is nothing. but the application of ethics in .

business.
. Business ethics can be, and has been, ethical and can still
make profits.
. More interests shown today in the application of ethical
practices in business dealings and the ethical implications.
. Profit maximisation and discharging of social responsibilities
at the maximum limit cannot be done simultaneously as they
are at opposite ends. (eg. concern for task I.e., productivity
and concern of workers).
. By introducting advanced technology to replace occupations
of ageold inhabitants is an ethical dilemma. Many managerial
decisions have ethical implications and these decisions give
rise to managerial dilemmas.
The nature of ethics is shown in fig. 1.4 which is self explanatory.
 Introduction to Business Ethics: 11
@
~nt
. Voluntary;not
forced or
. Deals with
human beings only
coerced by as they are en-
persons or dowed with freedom
circumstances. of choice and
m ,'r (example: means of tree will.
~
Ii'
Injuringor killing a person who . Human being can distinguish
:j!t has come to kill you Is not a between good and evil, right
I;.
:15 moralor legal offence; A cold
bloodedmurder is the highest
kind of moral or legal crime)
. and wrong, just and proper
Human being can distinguish
between the end he wishes to
ct pursue and the means to gain

~
. Judge the values
of thefacts In terms
ofanidealsituation.
. that end. .
Only human being does the
question of ethics, values and
. Conoernednot with moral conduct
faotualJudgements
but with judge- .
y A set of
mentsof 'what ought to be'
. EthicsIs concerned with Judgement systematic
of value or what ought to be; seeks knowledge about
e moral behaviour
to determinethe nature of the norm
a ideal or standrds and seeks to
enquire Into the fitness of human
Botlonsto this Ideal
.
and conduct
-
A science a
field of social science

] Fig. 1.4 Nature of Ethics

~
1.11 Sources of Ethics
r
Noone takes a course to learn business ethics. Ethics is a natural
t
r
market consequence of business as few ethics experts argue. Six
primary sources of ethics have been identified in the American
business area by ethics scholars George and John Stever as under:
(1)Genetic Inheritance
In recent years. socio-biologists have lots of evidence and
arguments to suggest that the evolutionary forces of natural selection
influenc« the development of traits such as cooperation and alteration
that lie at the core of our ethical systems.
(ii) Religion
The great world religions as we have seen are: .
. Judaism
. Christianity
. Islam
The business people in these religions believe that their religion
provides them with eth~cal principles/standards. which can be applied
in business. The Jewish tradition and the Christian tradition refer
the religious ethical teaching as the 'Ten Commandments' which are
believed to have been divinely revealed as the will of God.

,.-
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 12 : Business Ethics

n I. Genetic Inheritance
Steiner and Steiner identified . The qualities of goodness is
three primary categories of a product of genetic traits
codes strengthened over time "by
. Company codes the evolutinary process
. Company operating II. Religion
policies
. Codes of ethics . Religious morality Is clearly a
primary focus in shaping our
V. The legal system 41 societal ethics (through a
Law is an everchanging rule exemplified by the golden
approximatio~ of current rule and the ten
perception of right and wrong. commandments)
Laws represent a rough III. Philosophical Systems
approximation of society's
ethical standards . The quality of pleasure to be
derived from an act was the
IV.Codes of Conduct..- essential measure of its
. John Steiner refers to the goodness as per the
rules, customs and epicureans. The stoics like
standards transmitted the puritans and many
from generation to contemporary Americans
generation as guidelines advocated a discussed
for appropriate conduct. hardwoklng, thrifty life style.
Individual values are Suoh philosophies have been
shaped in large measure Instrumental In our society's
by the norms of the moral development
society.

Fig. 1.5 Six Primary Sources of Ethics

The Ten Commandments
These are one of the earliest recorded codes of conduct as found in
the Bible.
The ethical commands in this are:
. Honour your father and your lTIother, that you may have a
long life in the land which the Lord, your God, is giving you.
. You shall not kill
. You shall not commit adultery
. You shall not st.:al
. You shall not bear false witness against your neighbours
. You shall not covet your neighbour's house. You shall not covet
your neighbour's wife, nor his male or female slave, nor his
ox or ass, nor anything else that belongs to him.
Tradition in both cases - and reinforced for Christians by the
teaching of Jesus - has come to view these commandments from God
as ethical principles which forbid doing anything to destroy or harm
another 'person's life or marriage or reputation or property'.
Religion can also include beliefs about God's other actions which
have ethical implications. In the Judoeo-Christian traditit:>n: God is

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 18 : Business Ethics
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1.12 Six Primary sources of Ethics in the American
Business are
I

George and John Steiner,noted scholars have identified six

primary sources of ethics in the American business arena. These are
already explained in fig. 1.14.

Six Primary Sources of Ethics

. The LegalSystem
. Religion
. Genetic Inheritance
. Philosophical Systems
. Code of Conduct
. Cultural Experience

Fig. 1.8 stx Primary sources ofEthLcs a

Religion
The religion is as explained in page 11-19.
. Via a rule exemplified by the Golden Rule (or its variations in
many religions) and the Ten Commandments. religious
morality is clearly a primary force in shaping ~Uf' societal
ethics
. The applicability of religious ethics to the business community
is the concern
. The question is all the more relevant since the Golden Rul! C1
is not limited to western thought
. Could the Golden Rule serve as a universal, practical, helpfuJ
standard for the business persons conduct?
Philosophical Systems

. To the Epicureans, the quality of pleasure to be derived fron 1.

an act was the essential measure of its goodness. The stoics
like the puritans and many contemporary American!
-
advocated a disciplined. hardworking. thrifty life style. Thesl ma:
philosophers like other philosophers. have been instrumenta orgi
in Qur society's moral development stre

The Legal System has

.Laws represent a rough approximation of society's ethica indl.
standards. Thus. the law serves to educate about the ethica on t
Amt
 Introduction to Business Ethics: 19 @
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causes in life. The law should not be treated ~s a vehicle for

expressing all of society's ethical preferences.
Codes of Conduct
Steiner and Steiner identified three primary categories of such
codes:
.
. .
Company codes, ordinarily brief and highly generalised
express broad, expectations about its conduct.
. Company operating policies often contain an ethical
dimension. Express policies as to gifts, customer complaints,
hiring and other decisions serve as a guide to conduct and as
a shield by which the employee can protect against unethical
advances from these outside the firm.
. Affirmative ethical principles of the American Institute of
Certified Public Accountants: Many professional and Industry
Associations have developed codes of ethics as above. Codes
of conduct seem to be a growing expression of the business
community's sincere concern about ethics. However the utility
of such codes remains unsettled.
Genetic Inheritance
. As already said in page II, Socio-biologists .in the modern age
have amassed persuasive evidence and arguments suggested
the evolutionary forces of natural selection influence the
developIT1ent of traits such as cooperation and altruism that
lie in the core of our ethical systems.
. Those qualities of goodness often associated with ethical
conduct may in some measure be a ,product of genetic traits
strengthened over time by evolutionary process. Iii
II!
J!:
.,.
Cultural Experience
. Steiners refer to the rules, customs and standards transmitted
from generation to generation as guide lines for appropriate
conduct. Individual values are shaped in large measure by
the norms of the society. .1
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1.13 A Model of Ethics 11

",
A model of ethics is presented below in Fig. 1.7. Ethics consists of
mainly two relationships as indicated in the figure. A person or 'l'i
organisation is ethical. if these relationships (combined together) are h;:
strong and positive. !.;
The Time magazine article has said "large sections of the ethical roofiitg Ii';
has been sagging badly from the White house to churches, schools, tl::
I;
industries, medical centres, latL'J irms and stock brokers - pressing down
on the institutions and entLi ;)rises that make up the body and blood of Ih
1,';
America." .
~i
f
 . . Leadin\J to
20 : Business Ethics

Fig. 1.7 A Model of Ethics

Everyone makes ethical decisions
Determines

or unethical decisions everyday.

0

Example
. Too many changes in the work - you may not tell your assistant
all the changes.
. Professors may err in your favour in computing your grade.
. CEO may favour one of his assistants who is less experienced.
with only one time contact and on the impression he gets and
sends him abroad on an important assignment. neglecting
other experienced capable personnel.
Minor private decisions are unimportant. But decisions in small
matters tend to set a pattern for the more important ones you may
make as managers.
A multi-industry survey conducted at USA indicated that 40% of
the managers said that their superiors had at some time told them to
do certain things unethical. Despite the ambiguity. ethics appears to
be moving up in the corporate priority-list. Many of the companies have
introduced codes of ethics. Industry associations adopt such codes. then
recommend to members.
Refer figure 1.7. The sources of ethical guidance should lead to
our beliefs or convictions about what is right or wrong.. People have a
responsibility to avail themselves of these sources of ethical guidance.
Individuals should care about what is right and wrong and not just be
concerned with what is expedient. The strength of the relationship
should be between what is right and wrong and not just be concerned
with what is expedient. . .
The strength of the relationship between what an individual or an
organisation believes to be moral and correct and what available sources
of guidance suggest is morally correct is "Type I Ethics."
E.g.. A student copies in the examination. though every one
condemns this practice. This student is unethical. but perhaps only in
a type I sense (Here the student believes it is acceptable to copy another
student's paper in the examination).

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