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ACHARYA INSTITUTE OF GRADUATE STUDIES SOLADEVANHALLI, BANGALORE LECTURE NOTES SUBJECT: BUSINESS ETHICS & CORPTORATE GOVERNACE CHAPTER

NUMBER-I CHAPTER NAME: - INTRODUCTION PREPARED BY: MR.SHAIKH JUNED SAOUD


In brief: Meaning of Ethics: Ethics is derived from the latin word ETHICUS and in greek it is called ETHICOS meaning character or manners. In other words ethics is said to be source of morals, moral principles and recognized rules of conduct. Definition of Ethics: According to R. Wayne Mondy, ethics is the discipline dealing with what is good and bad, or right or wrong or with moral duty and obligations. Meaning of Business Ethics: Business Ethics are rules of business conduct, by which the proprietary of business activities may be judged. It also relates to the behavior of managers. Definition of Business Ethics: According to John Donaldson, Business Ethics in short can be described as the systematic study of moral (ethical) matters pertaining to business, industry or related activities, institutions or practices & beliefs. Objectives of Ethics: 1. 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. 2. To study of human behavior, making evaluative assessment about them as moral or immoral 3. To establish morals standards and norms of behavior. 4. To make judgment upon human behavior based on ethical standards and norms. 5. To make ethics give suggestions regarding moral behavior and how to behave in organizations.

A Model of Ethics: -

ETHICAL GUIDANCE SOURCES

Leading to

OUR BELIEF WHAT IS RIGHT OR WRONG

Determines

OUR ACTION S

TYPE I ERROR

TYPE II ERROR

1. Ethical Guidance Sources: - The sources of ethical guidance should lead to our beliefs or conventions about what is right or wrong. People have a responsibility to avail themselves of these sources of ethical guidance.( Sources: Genetic Inheritance, Religion, codes of conduct, the legal system and cultural experience) 2. Type I Error: - The strength of the relationship between what an individual or an organization believes to be moral and correct and what available sources of guidance suggest is morally correct. 3. Our belief what is right or wrong: - Just by having strong beliefs about what is right or wrong and basing them on the proper sources may have little relationship to what one does. 4. Type II Error: - The strength of the relationship between what one believes and how one behaves. Everyone would agree that to do what one considers wrong is unethical. Ethical Performance In Business:In any business organization you will see a strong culture of integrity underpinned by principles, values & policies. All organizations sets out clear and practical guidance for ethical conduct throughout their organization. The Code of Ethics ensures that all employees understand how the organization core principles and values relate to a range of issues. With clear language and easy-to-understand examples, the document aims to provide employees with support in judgments related to ethical business at the individual, team and company-wide level. In short, it is a guide to help employees understand what is expected of them and how to make good decisions.

Ethical Performance in managerial values & Attitudes

Individual/Organizational Model of Ethical Behavior


Individual Influences
Value systems Locus of control Machiavellianism Cognitive moral development

Organizational Influences
Codes of conduct Norms Modeling Rewards and punishments

Ethical Behavior

Ethical Congruence Ethical congruence refers to a situation where one's decision is consistent with, aligns with, the applicable set(s) of values. Under these circumstances, a choice to take some action will harmonize with the decision-maker's values. The organizational state where values, behaviors and perceptions are aligned. Managerial Philosophy:It is a major factor affecting how socially responsive an enterprise will be in the long term. Managers ethical standards in the enterprise determine the type of response it will make as it reacts to the tension between the forces for change and stability. Proactive responses are likely to be more ethical since they will go beyond minimum legal requirements. They are more consistent with high social expectations. Reactive responses on the contrary either conform only to the minimum legal requirements or even attempt to avoid legal requirements through long court cases, lobbying efforts to avoid responsibility.

Types of ethics: There are three types of ethics namely:1. Transactional Ethics: - This is based on the principle of equality. The common interest needs to be specified because of different types of common interest can be distinguished . It implies that every agent should allow every other same amount of freedom. 2. Participatory Ethics: - It is privileged part of business ethics. It is within the category of other including actions, guided by common interest we find other type of ethics. There are three features of participatory ethics: a. Good is done through participation b. Participation should be voluntary and cannot be forced. c. Though participation is profitable none have to participate for survival 3. Recognitional Ethics: - This recognitional ethics is mainly concerned with self development and is guided by the principle of fidelity to one self. The rights of the party affected have great importance or more weight that freedom to act or acting party.

Code of Ethics: Code of ethics is referred to as statements of values and principles which define the purpose of the company. The codes seek to clarify the ethics of the corporation and to define its responsibly to different groups of stake holders as well as defining the responsibilities of employees. How to develop code of ethics: Cynics always claims that codes are for impressing outsiders. They are not affecting the behavior of the company or its employees codes. The code of ethics should be having: 1. Explicit (towards goals) 2. Sufficiently detailed 3. Internalized by those to whom and by whom they will be applied. 4. Worthy of name to embodied in the behavior and the practices of the relevant group of people. Recipients of code of ethics: 1. Customers 2. Employees 3. Shareholders 4. Society or environment.

Business issues and situations covered by the Code include:


Avoiding conflicts of interest Fair dealing with customers, vendors and others Handling sensitive information and safeguarding confidentiality Honest, ethical and open dealings with government officials Workplace conduct

Importance of business ethics: The general public expects the business to exhibit high levels of performance & social responsibility. This is referred to as doing business ethically right. Some of the reasons for which the problem in business ethics occurs: 1. Personal Gain/ Dubious character 2. Individual values widely differ with organizational goals. 3. Manager value & attitudes. 4. Competitive pressure 5. Cross Cultural ontrdictions