GENERAL AND APPLIED ETHICS

The main aim of the course

1. To impart knowledge, analytical skills and development of

managers to apply ethical concepts in business.

2. To introduce various ethical concepts in practical application.

3. To create awareness about moral values and corporate social

responsibility.

4. To develop the abilities to resolve ethical dilemmas.

5. To inculcate high level of integrity.

6. To introduce new ethical aspects in the 21st century.

ASSESSMENT STRATEGY
§ Attendance: 10%

§ Individual assignment: 10%

§ Practical group assignment: 10%

§ Test: 30%

§ Final Exam: 40%

 CHAPTER 1: INTRODUCTION TO ETHICS

1.1 Introduction to Ethics

Daily life, with its ups and downs, with the good and the bad, offers a challenge to man, that of
doing well and avoiding evil in his daily activities. World history contain a series of contrasting
situations: great scientific and technological advances co-exist with serious forms of social and
economic injustice; there are huge capitalist empires, along with whole nations still living under
the effects of underdevelopment and political corruption.

These contrasting situations reveal the need for a radical personal and social conversion, capable
of introducingjustice, solidarity, honesty, transparency, and sincerity into our world. There is a
long road ahead of us, but the key to the door that opens up to a more human life, founded
on authentic ethical values is within reach of those who are willing to struggle to obtain this
goal. And this is precisely the challenge offered through this course of “General and Applied
Ethics.” In other words, to improve society we need to be willing to improve ourselves; this
will help to create a society which respects each human person, and is, therefore , more
humane.

Meaning of Ethics

Ethics is about moral choices. It is about the values that lie behind them, and the reasons people
give for them. It is about innocence and guilt, right and wrong, and what it means to live a good
or bad life.

The word Ethics originated from the Greek word “Ethos”, meaning – character or manners.
Ethics is the discipline dealing with what is good and bad or right and wrong or with moral duty
and obligation, and what ought to be.
 Ethics could be considered as the source of character of a person expressed as right or wrong
conduct or action. Ethics is related to moral questions. It is a study of morals and moral choices.
It focuses on standards, rules and codes of conduct that govern the behaviors of individuals and
groups. It deals with what is right, what is proper and what is just.

Ethical rules are present in all societies, all organizations 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. But all people wherever they are, need rules to govern their conduct, rules that
tell them whether there are right or wrong, moral or immoral, approved or disapproved.

Ethics and Actions

Actions can be divided into three categories:

1. Moral: if they reflect a person’s values and those of society.

2. Immoral: if they go against a person’s or society’s values.
3. Amoral: If they do not reflect choices based on values or social norms.

● What is morality?

Morality is the quality of being in accord with standards of right or good conduct or a system of
ideas that fall into those same categories.

● Morality and Behavior

Morality describes the principles that govern the behavior. Without these principles in place,
society cannot survive for long.

Behavior is external, that is the response one makes with interaction with others. The behaviors
reflect the character of the individual. The character is within and hence core being of an
individual whereas behavior is external. People have different shade of characters from weak to
strong levels.

Morality as it relates to our behavior is important on three levels. Renowned thinker, scholar and
author C.S. Lewis defines them as:

(1) To ensure fair play and harmony between individuals;

(2) To help make us good people in order to have a good society; and
(3) To keep us in a good relationship with the power that created us.

Based on this definition, it's clear that our beliefs are critical to our moral behavior.

● The moral standards.

Man’s beliefs that integrity is good and dishonest is bad are examples of moral standards. The
moral standards include the norms we have about the kinds of actions believed to be morally
right and wrong as well as the values placed on the kinds of objects believed to be morally good
and morally bad

● Morality and Ethics

Every society has its set of moral rules or guidelines that set the boundaries of acceptable
behavior. Often these rules are about behavior that might harm other people (killing, stealing),
behavior that is concerned with the well-being of others (helping those who are in need,
responding to the suffering of others),or actions that touch on issues of respect for other persons
(segregation, using other people for one’s own ends without concern for their welfare). Often
the rules about such behavior are expressed in statements about what you ought to do or should
do. These rules fit together to form a moral code by which a society lives.

Moral codes are seldom completely consistent. There are contradictions in moral rules.
Sometimes our old moral rules do not cover new situations and we have to figure out how to
 cover new situations. e.g. (Right to privacy and access to computer data on other people,
spying on phone of politicians, euthanasia, abortion, etc…).

Ethics is the conscious reflection on our moral beliefs with the aim of improving, extending, or
reflecting those beliefs in some way.

1.2 Moral Development of Persons

There are three levels and six stages in moral development of persons:

Level 1: Pre-conventional Level (Self Orientation)

Stage 1: Punishment avoidance: avoiding punishment by not breaking rules. The person
has little awareness of others’ needs.

Stage 2: Reward seeking: acting to receive rewards for oneself. The person has
awareness of others’ needs but not of right and wrong as abstract concepts.

Level 2: Conventional Level (Others Orientation)

Stage 3: Good person : acting right to be a good person and to be accepted by family and
friends, not to fulfill any moral ideal.

Stage 4: Law and order: acting right to comply with law and order and norms in societal
institutions.

Level 3: Post-conventional, Autonomous, or Principle Level (Universal, Humankind

Orientation).
 Stage 5: Social contract: acting right to reach consensus by due progress and agreement.
The person is aware of relativity of values and tolerates differing views.

Stage 6: Universal Ethical Principles: acting right according to universal, abstract

principles of justice, rights. The person reasons and uses conscience and moral rules to
guide actions.

1.3 Objectives of Ethics

The objectives of ethics are as below:

1. The very basic objective is to define the greatest good of man and establish a standard for the
same.

2. To set/establish moral standards/norms of behavior.

3. An overall study of human behavior: what is moral or immoral should be assessed.

4. To apply judgment upon human behavior based on these standards and norms.

5. To suggest moral behavior, and prescribes recommendations about “Do’s” and “Don’ts”.

6. One’s opinion or attitude about human conduct is expressed in general.

1.4 Nature of Ethics

The nature of ethics can be explained by these points:

 1. 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.
2. The study of ethics is nothing but a field of social science in which a set of systematic
knowledge about moral behavior and human conduct is learned.
3. 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 judgment
regarding set- directed human conduct.
4. The science of ethics is a normative science. It is a search for an ideal litmus test of
proper behavior
5. Normative science involves arriving at moral standards that

regulate right and wrong conduct.

1.5 Definitions:

Ethics is the practical science of the morality of human conduct.

a) Ethics is a science. A science is a relatively complete and systematically arranged

body of connected data together with the causes or reasons by which these data are known
to be true. Ethics squares with this definition, for it is a complete and systematically
arranged body of data which relate to the morality of human conduct; and it presents the
reasons which show these data to be true.

b) Ethics is a practical science.If the data of a science directly imply rules or directions
for thought or action, the science is called practical. If the data of a science enrich the
mind without directly implying rules or directions, the science is called speculative. A
speculative science presents truths that are to be known; a practical science presents truths
that are to be acted upon. Ethics is therefore a practical science since it presents data
which directly imply and indicate directions for human conduct.

c) Ethics is a science of human conduct. By human conduct we mean only human

activity as is deliberate and free. A deliberate and free act, an act performed with consent
and motive, an act determined. (i.e. chosen and given existence) by the free will, is called
human act. Acts performed by human beings without the exercise of free choice are
 called acts of man – they are not human acts in the technical sense of that expression
which is here employed. Ethics treats of human acts; human acts make human conduct:
Ethics is therefore a science of human conduct.

d) Ethics is the science of morality of human conduct.Human conduct is free, knowing,

deliberate human activity. Such activity is either in agreement or disagreement with the
dictates of reason. Now the relation (agreement or disagreement) of human activity with
the dictates of reason is called morality. Ethics studies human activity to determine what it
must be to stand in harmony with the dictates of reason. Hence, Ethics deals with the
morality of human conduct.

e) Moral principles or rules of conduct. The name Ethics is derived from the Greek
word“Ethos” which means a “characteristic way of acting.” Now the characteristic mark
of human conduct is found in the free and deliberate use of the will: in a word, this
characteristic is found in acts. The Latin word “Mos” (stem: Mor) is equivalent of the
Greek “ethos”. Hence, we understand why Ethics is sometimes called “moral Science or
moral philosophy.” –What is good? What is evil? How should I behave and why? How
should I balance my needs against the needs of others?

Note: The term “Ethics” and “Morality” are closely related. We now often refer to ethical
judgments or ethical principles where it would have been more common to speak of moral
judgments or moral principles. These applications are an extension of the meaning of
Ethics.
CHAPTER 2. BUSINESS ETHICS: NATURE AND SCOPE

Introduction

Dated back to Code of Hammurabi some 4,000 years ago, business ethics is a social science,
whose main aim is to define and examine the responsibilities of businesses and their agents as a
part of the general moral environment of a given society. The products of this field of research
are sets of rules and codes of conducts, which serve as a means of protection from the possible
infringements of moral codes as a result from the general activities and responsibilities of a firm
to its stakeholders (e.g. generating profits for shareholders and taxes to the government). This
paper will briefly explain the nature, aspects, scope and the growing importance of business
ethics in today’s economy. I have also included the definitions of ethics, business ethics and
what does they mean. I finally, it will describe several contemporary issues related to business
ethics like corporate social responsibility (CSR) and how they are different from business ethics
as well.
Ethics

Ethics is a branch of social science. It deals with moral principles and social values. It helps us to
classifying, what is good and what is bad? It tells us to do good things and avoid doing bad
things.

So, ethics separate, good and bad, right and wrong, fair and unfair, moral and immoral and
proper and improper human action. In short, ethics means a code of conduct. It is like the 10
commandments of holy Bible. It tells a person how to behave with another person.

What does Business Ethics mean?

In short, business ethics means to conduct business with a human touch in order to give welfare
to the society.

So, the businessmen must give a regular supply of good quality goods and services at reasonable
prices to their consumers. They must avoid indulging in unfair trade practices like adulteration,
promoting misleading advertisements, cheating in weights and measures, black marketing, etc.
They must give fair wages and provide good working conditions to their workers. They must not
exploit the workers. They must encourage competition in the market. They must protect the
interest of small businessmen. They must avoid unfair competition. They must avoid
monopolies. They must pay all their taxes regularly to the government.

Definition of Business Ethics

According to Andrew Crane,

“Business ethics is the study of business situations, activities, and decisions where issues of
right and wrong are addressed.”
According to Raymond C. Baumhart,

. “The ethics of business is the ethics of responsibility. The business man must promise that he
will not harm knowingly”

According to Wikipedia,

“Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that
examines ethical principles and moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.”

Nature of Business Ethics

The characteristics or features of business ethics are:-

Code of conduct : Business ethics is a code of conduct. It tells what to do and what not to do for
the welfare of the society. All businessmen must follow this code of conduct.

Based on moral and social values : Business ethics is based on moral and social values. It
contains moral and social principles (rules) for doing business. This includes self-control,
consumer protection and welfare, service to society, fair treatment to social groups, not to exploit
others, etc.

Gives protection to social groups : Business ethics give protection to different social groups
such as consumers, employees, small businessmen, government, shareholders, creditors, etc.

Provides basic framework : Business ethics provide a basic framework for doing business. It
gives the social cultural, economic, legal and other limits of business. Business must be
conducted within these limits.
Voluntary: Business ethics must be voluntary. The businessmen must accept business ethics on
their own. Business ethics must be like self-discipline. It must not be enforced by law.

Requires education and guidance : Businessmen must be given proper education and guidance
before introducing business ethics. The businessmen must be motivated to use business ethics.
They must be informed about the advantages of using business ethics. Trade Associations and
Chambers of Commerce must also play an active role in this matter.

Relative Term : Business ethics is a relative term. That is, it changes from one business to
another. It also changes from one country to another. What is considered as good in one country
may be taboo in another country.

New concept : Business ethics is a newer concept. It is strictly followed only in developed
countries. It is not followed properly in poor and developing countries.

Importance of Business Ethics

Long-term growth: sustainability comes from an ethical long-term vision which takes into
account all stakeholders. Smaller but sustainable profits long-term must be better than higher but
riskier short-lived profits.

Cost and risk reduction: companies which recognise the importance of business ethics will
need to spend less protecting themselves from internal and external behavioural risks, especially
when supported by sound governance systems and independent research

Anti-capitalist sentiment: the financial crisis marked another blow for the credibility of
capitalism, with resentment towards bank bailouts at the cost of fundamental rights such as
education and healthcare.

Limited resources: the planet has finite resources but a growing population; without ethics,
those resources are repleted for purely individual gain at huge cost both to current and future
generations.
2.3 Significance of Business Ethics

“Good business ethics promotes good business”

This statement is supported by the research findings of some well known authorities–

Raymond Baumhart, Brener and Molander, Strom and Ruch. It was clear from their

findings that only those businesses which conduct activities on ethical grounds, can develop on a
long term basis.

Once Robert Day said that good ethics not only promote professionalism in

management but it purifies the inner mind of every business man.

Another writer Thomas Donaldson(Ethics in business: A new look) observed

that: there are seven key reasons why business ethics is vital and why ethics plays a key

role in business:
(1) Positive Consequences

Business depends on the approval of the society, acceptance of rules, mutual trusts and

confidence. Prof. Robert Day writes: “when ethical conduct is displayed, it puts some kind of
trust and confidence in relationship.” So business with ethics always leads to positive
consequences.

(2) Goodwill of the Business and Businessman

Good ethical behavior will increase the goodwill of both business as well as the businessman.
Strong public image is a symptom of success in the long run. On the other hand, once an
Organization’s image is tarnished it would have direct consequences on sales, profits, morale or
day-to-day running of the business.

(3) Protection—Both Sides

If ethical implications are there in organization, businessmen act more sincerely and the

level of commitment would be higher. Ethics protect people in dealing with each other.

Prof. Robert Day wrote: “Good ethics is sound business insurance.”

(4) Self-satisfaction

In the dynamic world, businessmen are seeking self satisfaction, mental relief, free from anxiety,
release tension. To attain the inner satisfaction certain people consider only good ethics can
promote good business. As a businessman is first a member of the society than a businessman, so
some do not implement a decision which stands on unethical ground because it wouldn’t provide
the satisfaction to their subconscious mind.

(5) Encourage Others

When a few people start following ethics side by side to profit making, they encourage, motivate
others and set examples for them. As Prof. Learned and Associates wrote:

“Businessman who follows the ethical principles in the conduct of business, motivates

others also, to follow the same principles.”

(6) Success and Development

Ethical conduct of business leads to development and series of success. Learned writes:

‘A sincere person who does hard work becomes ethical and always succeed in his efforts but
an unethical person cannot.”

(7) New Management

In the era of global economy, new principles are required in new management. Prof. ‘Day’

writes that “management cannot become a profession so far as it does not follow good

ethics”. An important feature of a profession is that it has a laid down code of conduct

which remains on all the principles of “service to humanity.

So to run the good business in modern scenario you have to develop and follow ethics.

2.4 FACTORS CAUSING UNETHICAL BEHAVIOR

1. Competition—‘Litemer and Molander’ have found in their studies in 1974 that

the important cause of decreasing use of ethical conduct in business is the increasing nature of
competition. When managers try to meet goals and have to cut corners at that moment this acute
competition at national as well as

international level becomes an unavoidable reason for unethical conduct.

2. There is an increasing pressure to earn more profit and to cope with the enlarged

requirements and expectations of all like shareholders, customers, employees or

all the categories of its stakeholders. So this becomes an important factor of

unethical conduct of business.

3. Ambiguous Situations create the ethical dilemma to the manager and selection

of an alternative which gives them higher return at the cost of losing integrity

they don’t think.

4. Political corruption has also become a big issue now-a-days; As business cannot

be aloof from politics and most of the political parties demand gifts, donations

and bribes from the businessmen for their political gain.

5. Social values and customs are not followed by new generation.

6. Now-a-days people want to become rich in a short while even by doing unethical

acts. Money and success becomes the important motivator behind any activity.

7. People neglect the social responsibility, lack of integrity and discipline in the

social values

Many of the business activities which involve unethical activities are objectionable,
exploitative and create big problems to innocent people. A sample of these unethical conducts

is shown below:

a) Encourage practices of corruption

b) False representation of returns and income statements

c) Ignore the social interest

d) Creation of acute competition

e) Exploit the consumer

f) Illegal trade with enemy countries

g) Exploit scare natural resources.

The points mentioned above are some real practical situations which are embedded

in business organization and are sometimes unavoidable and therefore corporate

commitment to ethics is vital, it is a most valuable asset a firm can possess, which pays in

long run. A few practical examples of the corporate world, where the commitment level

of ethics is very high.

 2.5 IMPORTANT FACTORS OF BUILDING AN ETHICAL INFRASTRUCTURE

Some important factors of building an ethical infrastructure in the organization are as

follows:

1. Commitment from Top Management

As the top executives are the leaders, so if an ethical initiation is taken by them, it would

be easy to spread it downside.

Ethical behavior should be fully supported by the top management. They must set

some examples in front of the employees from their own level if commitment to ethics.

Ethics committee: Some boards have established a separate ethics committee which

oversee development and operation of ethics program.

This committee may consist of internal and external directors. According to Koontz

and Weihrich, this committee will perform the following functions:

 a) Holding regular meetings to discuss ethical issues.

b) Dealing with grey areas. (ill-defined situations)

c) Communicating the codes to all members of the organization.

d) Checking of the possible violations of the code.

e) Enforcing the codes.

f) Rewarding compliance and punishing violation.

g) Reporting activities of the committee to the board of directors.

2. Code of Ethics

To establish and to encourage ethical conduct formal codes of ethics for organization

members must be framed. These corporate codes of ethics vary in quality and substance.

Some of these consist of a set of specific rules, a list of do’s and don’ts.
A code of ethics states an organization’s basic and primary values and the ethical

rules, so the rules of conduct are like a general value statement which lacks a framework

of meaning and purpose.

Code of conduct are not merely rules and regulations, their scope is somewhat different!

A code cannot list and mandate every form of ethical and unethical conduct. A good

corporate code of values and conduct should include certain managerial and employee

guidelines for making ethical decisions.

‘Frank Doly’ of Northrop Grumman has suggested—“Codes of conduct should be policies

that are easy to read, easily understood by people or respond much better to visual information.”
Take creative license in the presentation.

Some organization have reduced voluminous codes of conduct to just a few core values,

for Example, Texas Instruments, a global semiconductor company, ended up their codes of

conduct with just 3 words–Integrity, Innovation and Commitment.

A list of code of ethics is given below:

 • Do not use abusive language

• Manage personal finance well

• Demonstrate courtesy, respect, honesty, fairness

• Exhibit good attendance

• Conduct business in compliance with law

• Follow all accounting rules and control

• True claims in product advertisements.

3. Communicating Ethics

The best ethics program in the world is the one which is communicated well. The

communication should be in various forms and frequently occur. Communicating of all

code of ethics, core values can be done by an easy way—written form supplemented with

some questions in the form of feedback. The supervisors can hold meeting with employees
to discuss ethical concerns.

A proper well designed communication network is needed to institutionalizing ethics.

Therefore, Purcell and James Weber suggest that this can be accomplished in 3 ways–

• By establishing appropriate company policy and ethical rules

• By using a formally appointed ethics committee

• By teaching ethics in management development program.

4. Ethics Training

There is a great need for ethics training because only communicating well is not sufficient

to convert values into practice, sometimes employee may think that they know each and

every aspect about ethics, ethical decision making but they might be unaware of the ideas

of the actual evaluation process, implementation and consequences of the decision making.
Therefore ethical training program are very crucial. Effective ethics training should have:

• Employee participation to exchange views with each other open discussion of

realistic ethical issues.

• Clarify the ethical values and enhance the ethical awareness of employees.

• Define criteria for ethical decision making within the organization.

• Being detailed, extensive to accomplish anything significant.

• A clear intense focus on ethical issue of the organization.

• Investigate ethical environment, analysis the activities, strategies, resources,

policies and goals and after examining go on enriching them.

5. Ethics Officer

An ethics specialist is a full-fledged member of the board of director. He has a “kitchen

cabinet” to serve as a sounding board and to drive ownership of the program throughout
all areas of business. He acts as a guide for ethical conduct and ethical decision making.

The ethics officer provides some resources for assistance to the employees of the

organization, so that if they find any wrong doings while working, they can report directly to
him.

For e.g. at USAA, the ethics coordinator is part of the CEO’s office and works closely

with the company's ethical council, a group of senior executive who review issues of major
significance and take appropriate actions.

6. Response and Enforcement

Implementing an ethical program consistently is one of the biggest challenges for

organizations. A consistent response to ethical issues involves so many criteria like– Reward
system (for them who have shown ethical character), built in incentives, this can be further
supported by checklist method.

According to Bennett, employee can be taught to apply the following checklist when

confronted with an ethical dilemma:

1. Identifying the dilemma

 2. Collect the facts

3. Make a list of your options

4. Test each options

5. Make your decision.

A consistent enforcement by carefully coordinating with human resources personnel

or by establishing an ethics coordinating committee that can review or hear appeals on

disciplinary actions.

7. Audits, Revisions and Refinements

Audits should establish to reveal whether communication about ethical codes of conduct

works well or not? What are the results of training program? A detailed investigation

about potential violations of law or regulation. The experts in audit committee would be
executives of the organization or can be hired from outside consultants. Many companies

are finding effective ways to judge the effectiveness of their program like surveys,

focus groups and detailed exit interviews often conducted by outside consultants for

unbiased feedback. A review for value program must be allowed. In this dynamic world,

every month, every year circumstances change which demand managers to reevaluate the goals
and content of their program, sometimes after the evaluation, managers find to begin with a fresh
look as well as a courageous hand to stop the continuation of an idea whose time has passed.