Ethics and morality

Definition
Ethics as a moral and normative science refers to principles that define human behavior as right, good and proper. Morality, according to philosophers, refers to human conduct and values.

Law and Morality

There is a clear-cut difference between law and morality. In a particular situation, an act that is legal may not be morally right. For example, it will be legal for an organization running in loss to lay off a few employees so as to sustain itself. But it is not morally right to do so, because the employees will find it difficult to find a living.

On the other hand, an action performed can be illegal but morally right. For example, it was illegal to help Jewish families to hide from the Nazis, but it would have been a morally admirable act.

Law Vs Morality in Organizations

In the organization too, we will find such situations where an act will be morally right and legally wrong to perform. The strong ethical base of the individual as well as that of the organization helps an employee overcome such a situation. The law cannot cover the wide variety of possible individual and group conduct. The law prohibits actions that are against the moral standards of society.

Morality, Etiquette and Professional Codes

Morality is the moral code of an individual or of a society Etiquette is a set of rules of well mannered behaviors Etiquette is a unwritten code or rules of social and professional behavior

Ethical Theories in Business

Ethical theories in business include: Consequentialist normative theory:egoism, utilitarianism, Non-consequentialist normative theory:duties, moral rights, and prima facie principles; Kantian ethics.

Classification of Normative Theories

Normative Theories

Consequentialist

Non-consequentialist

Egoism

Utilitarianism

Kantian ethics

Normative Themes
Egoism

contends that an act is morally right if and only if it best promotes an agents long-term interests
makes use of self-interest as the measuring rod for actions performed is equated with an individuals personal interest but it is equally identified with the interest of an organization or society intends to provide positive consequences to the partys interest without considering the consequence to the other parties

Normative Themes: Egoism (Contd.)

Philosophers distinguish between two kinds of egoism: personal and impersonal.

Personal egoism: One should pursue his/her long-term interest and not dictated what others should do. Impersonal egoism: Everyone should follow their best long-term interest.

Utilitarianism
The proponents were: Jeremy Benthan (17481832) John Stuart Mill (18061873)

Utilitarian principle: An action is ethically right only if the sum total of utilities produced by that act is greater than the sum total of utilities produced by any other act that could have been performed in its place.

Kantian Ethics
Proponent: Immanuel Kant (17241804) This theory introduces an important humanistic dimension to business decisions, which is to behave in the same way that one would wish to be treated under the same circumstances and to always treat other people with dignity and respect.

Kants Philosophy

Stressed that action must be undertaken for duty's sake and not for some other reason. Opined that the imperatives of morality are not hypothetical but categorical. The core idea of this categorical imperative is that an action is right if and only if it will become a universal law of conduct.

Normative Theories of Business Ethics: Classification

Normative Theories

Stockholder Theory

Stakeholder Theory

Social Contract Theory

Normative Theories of Business Ethics

Stockholder Theory: expresses business relationship between stock owners and their managers running the day-to-day business of the company. As per the theory, managers should pursue profit only by all legal, non-deceptive means.

Normative Theories of Business Ethics

Stakeholder Theory: This theory argues that a corporates success in the marketplace can best be assured by catering to the interests of all its stakeholders (shareholders, customers, employees, suppliers, management and the local community). This objective is achieved when corporations adopt policies that ensure an optimal balance among all stakeholders.
Eg: Parachute oil

Normative Theories of Business Ethics

Social Contract Theory: This is based on the principles of social contract, wherein it is assumed that there is an implicit agreement between the society and any created entity such as a business unit, in which the society recognizes the existence of a condition that it will serve the interest of the society in certain specified ways.

Ethics and Religion

The worlds great religionsChristianity, Hinduism and Islamhave all left their indelible marks on morality and the conduct of people in every aspect of human endeavour, including business. Every religion has provided its followers its own set of catechisms, moral instructions, beliefs, values and virtues, traditions and commitments.

Teachings of the Church

The Church always supports and promotes the welfare of the poor. People often think how we can relate business and ethical teachings of the Church. But now the trend has changed and organizations and institutions relate business to religion and ethics. This transition is due to the increased importance of ethics in business.

Rerum Novarum

Since the late 19th century, there developed a strong tradition of reflective thought on economic issues within the Catholic Church. This concern on economic issues effectively started in May 1891, with the publication of Rerum Novarum, an encyclical by Pope Leo XIII.
The central theme of the letter was the relationship among the State, employers and workers. Mutual support, Increase in productivity

Gautim Et Spes
Pastoral documentation of the Church released during the Second Vatican Council held between 1962 and 1965. The rapid change and technological advancement have led to aggressive demands on individuals, forcing them to indulge in unethical practices. There is an internal fight of values, and basic values of human beings have changed.

Indian Ethical Traditions

The Hindu scriptures such as the Gita and the Upanishads speak of the performance of right duty, at the right time in the right manner. The rich Indian tradition has always emphasized the dignity of human life and the right to live in a respectful manner.

Gandhian Principles of Trusteeship

Implies that an industrialist or businessman should consider himself to be a trustee of the wealth he possesses. The trusteeship concept should also be extended to the labour in industry.
The origin of the trusteeship principle can be traced to the concept of non-possession detailed in the Bhagawad Gita.

Practising Gandhian Principles

In the recent past, social involvement by business has, for the most part, taken the shape of public charity. This has included the building of temples, hospitals and educational institutions.

A few examples include the Birla Temple in Calcutta, the Shree Vivekananda Research and Training Institute set up by Excel Industries in Mandvi, the L&T Welfare Centre in Bombay, the Tata Institute of Fundamental Research and the Voltas Lifeline Express.

Righteousness as the Way in the Gita

The Bhagawad Gita cites numerous instances of how moral values and ethics can be incorporated into one's work life. Many of its verses are directly significant for the modern manager who may be confused about his direction and struggling to find an answer to ethical dilemmas.
The Lord reiterates that work or karma is the driving force of life, and that this work has to be ethical.

Message of the Gita: Chapter II, Verse 47

You have a right to perform your prescribed duty, but you are not entitled to the fruits of action. Never consider yourself the cause of the results of your activities and never be attached to not doing your duty. This stanza implies that the performer of an action has only to perform the prescribed duty and not think about the result of the action, because the result is beyond his control. This teaching of Gita draws one's attention to Nishkama Karma.

Gitas Message in an Organization

When applied to an organization where one is only worried of the result, he is likely to fall into improper activities.

On the other hand, if he is ready to do his duty to the utmost of his ability and set aside the result, he will be an ethical person in the organization.

Message of the Gita: Chapter II, Verse 56

One who is not disturbed in mind amidst the three-fold misery or elated when there is happiness and who is free from attachment, fears and anger, is called a sage of steady mind.

A steady mind gives the right attitude and right direction. Detachment is that quality which enables the individual not to accept anything for his personal gratification. Personal desires and conflicting interests end up in unethical practices.

Business and Islam

All principles covering business emanate from the Holy Quran, as they are explained and amplified in the Hadith (collection of the Prophets sayings).

The Prophet Mohammed ordained that businesses should promote ethical and moral behaviour and should follow honesty, truthfulness and fulfilment of trusts and commitments, while eliminating fraud, cheating, cut-throat competition, lending money at interest to people in need and false advertising.

Shariah and Interest on Capital

Shariah, the canonical law of the followers of Islam,

forbids payment and receipt of interest on capital and money lent Shariah requires that investors profit only from transactions based on the exchange of assets, not money alone, and therefore, interest is banned.

Islamic Bonds or Sukuk

Bankers sell Islamic bonds or sukuk, by using property and other assets to generate income equivalent to interest they would pay on conventional debt.
The money cannot be invested on stocks of companies dealing in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork meat, defence and weapons while computer software, drugs and pharmaceuticals, and automobile ancillaries are all Shariah-compliant.

No Fraud Need mutual Consent Be strict in weights and measurements Holding of goods Forbidden Transactions