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Business Ethics

Learning Points: What is business ethics? Morality & Ethics Why is business ethics important? Globalization: a key context for business ethics? Sustainability: a key goal for business ethics?

What is ethics and Morals?

Ethics vs Morals Any action can be judged as right, fair or proper basing on moral standards which differ from person to person, time to time and place to place- example, a frog caught by a snake. Rama refusing Sita after the defeat of Ravana. Moral judgements are relative judgements Most of the times, what is moral or immoral depends on various religious tenets of the world- example, cow slaughter. Ethics aims at defining highest good of man and strives for maximum good for maximum number of people

Ethics and Morals

Morals Deals with principles of Right or Wrong Moral implies Customdetermined by group or authority like religion Morals are absorbed from family, friends, school, religion and associations Morals work on smaller scale Ethics Deals with what is Good and Bad Ethics implies Character which is personal attribute Adopted/ absorbed by taking reasonable actions/ decisions at appropriate situations Ethics has wider scope

What is ethics and Morals?- cont

Morality is concerned with norms, values, and beliefs embedded in social process which define right and wrong for an individual or a communityRama banishing Sita after the Dhobis episode. Ethics is concerned with the study of morality and the application of reason to elucidate specific rules that determine right or wrong for a given situation leading to ethical theories- example fair treatment of women or recognizing women on par with men, equal remuneration etc.

The relationship between morality, ethics and ethical theory

Ethics rationalize s morality

to produce ethical theory



Ethical theory

that can be applied to any situation.

Potential solutions to ethical problems

What is ethics?- cont

As per Oxford Dictionary, ethics is a system of moral principles, rules and conduct. Etimology- Latin ethicus or in Greek, ethikos which means ethos or character. Ethics is a treatise or science of morals. A code of conduct governing a group. A group of moral principles or set of values.

What is ethics?- cont

Nature of ethics: It deals with human beings only- since they alone can distinguish what is good and evil. It is a social science- since it studies moral behaviour and conduct It is a normative science- since it is concerned not with factual judgements but with judgements as what ought to be. It deals with human conduct which is voluntary and not forced by circumstances- example, injuring or killing a person for self defence as against cold- blooded murder

What is business ethics?

Business ethics is not an oxymoron- business is not against ethics or vice versa. A business is considered ethical if it tries to reach a trade off between economic objectives and social obligations- obligations to society, people and enviornment. Everyday business activities require the maintenance of basic ethical standards, such as honesty, trustworthiness and co-operation (Collins & Watson, 1994).

What is business ethics?- cont

Definition of Business Ethics: Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed for the given situation.

Ethics & Law

Law is the codification of ethics into specific social rules, regulations, and proscriptions. The law deals more of what not to do than of what to do- example taking care of old parents Many moral issues are not explicitly covered by law- example, in many countries, there is no law preventing experimentation of drugs on animals. Ethics, therefore begins where law ends. It leads to ETHICAL DILEMMAS. Many times ethics leads to codification of law.

Ethics & Law- continued

Where law is absent, the BE operates in grey area and aims at taking better decisions. Unlike subjects such as accounting, finance, engineering where specific procedures and facts are learnt, in BE we learn as to how to take decisions for largest public goodeconomical and environment friendly , in a way better decisions.

Ethics & Law- continued

In majority of cases law and ethics match (prohibition of insider trading/child marriages) In some cases they are independent of each other (Gambling is legal in some cases but not ethical. Drinking alcohol may be illegal in some states but it not considered unethical by many people)

Ethics and the law


grey area


Why is business ethics important?

1. Power and influence of business in society- it is increasing day by day and viewed by many with uneasiness. BE helps in understanding and addressing the situation- Example, money bag politics. 2. Business has potential to provide major contribution to society. BE addresses the ethical issues involved in production, process etc- example, engaging child labor in Shiv Kashi. 3. Business mal practices have potential to inflict harm on communities and environment. BE, by suggesting moral decisions, tries to improve the human condition.

Why is business ethics important?continued

4. Increasing demands from stakeholders. BE provides the means to appreciate and understand the challenges in tune with society and ecology. 5. Lack of business ethics education or training lead to ethical problems. BE provides necessary intellectual tools to deal with each situation. 6. Continued occurrence of ethical infractions- BE diagnoses reasons and try to address the root problems 7. Evaluating different ways of managing business ethics 8. Interesting and rewarding subject since it addresses the problems of society and deals with life situations.

Why is business ethics important?continued

9. Use of societys resources by Business demands an implied demand for social responsibility by the Business 10. Long term orientation- Business depends on customers and it cannot remain immune while the rest of the society is destroyed. 11. Give- take relationship

Globalization and ethics

What is globalization? According to Scholte (2005) globalization is not:
internationalization cross border transactions liberalization means trade de-regulation which is there for a quite long years. universalization means increasing spread of products, lifestyle and ideas. westernization western ideas getting implanted in developing countries.

Globalization is: a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations.

Effects of Globalization
In globalised environment if USA sneezes, the Asia catches cold and vice versa. Markets are inter dependent Confidentiality is difficult to maintain. MNCs are centre of attention- they pitch developing countries against each other by the dangle of FDI- favor low tax and low level of environmental regulation & restricted human rights etc.

Effects of Globalization
Global communications, global products, global financial systems and market are the examples of de- territorialization in world economy.

Relevance of Globalization for Business Ethics

Cultural issues Legal issues Accountability issues Globalization can affect all stakeholders of the corporation

Relevance of Globalization for Business Ethics - cont

Cultural issues- Moral values taken for granted in home countries may be questioned elsewhere. Example, nude and semi nude ads, engaging child labour, observing pardah etc Legal issues- Managers find it difficult reorient themselves whenever they are asked to supervise the shifted production chain to alien country due different set of local laws. Deterritorialized economic activities demand BE in greater way since BE starts where the law ends- example, difficulty in banning child pornography.

Relevance of Globalization for Business Ethics - cont

Accountability issues MNCs are economically as powerful as many governments, example, the GDP of Denmark is same as the turn over of General Motors. General Motors is accountable to a few share holders where as Denmark government is accountable to entire citizens. There is clamour for direct accountability of MNCs to the governments. Corporate accountability to the general public is the buzz word today.

Ethical impacts of globalization

Stakeholder s

Ethical impacts of globalization

Globalization provides potential for greater profitability, but also greater risks. Lack of regulation of global capital markets, leading to additional financial risks and instability. Corporations outsource production to developing countries in order to reduce costs in global marketplace - this provides jobs but also raises the potential for exploitation of employees through poor working conditions. Global products provide social benefits to consumers across the globe, but may also meet protests about cultural imperialism and westernization. Globalization can bring cheaper prices to customers, but vulnerable consumers in developing countries may also face the possibility of exploitation by MNCs. Suppliers in developing countries face regulation from MNCs through supply chain management. Small scale indigenous competitors exposed to powerful global players. Global business activities brings the company in direct interaction to local communities with possibility for erosion of traditional community life; globally active pressure groups emerge with aim to police the corporation where governments are weak and tolerant. Globalization weakens governments and increases the corporate responsibility for jobs, welfare, maintenance of ethical standards, etc. Globalization also confronts governments with corporations from different cultural expectations about issues such as bribery, corruption, taxation, and philanthropy.


Suppliers & competitors Civil society (NGOs, etc) Government & regulation

Sustainability- a key goal of BE

Defining Sustainability:
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (World Commission on Environment and Development 1987) Sustainability refers to the long-term maintenance of systems according to environmental, economic and social considerations

Sustainability- a key goal of BE

The need of sustainability

Environmental pollution- caused by production,
transportation and use of chlorofluorocarbons(CFCs) there by depleting ozone layer. Waste disposal- due to throwaway culture Plant closings and downsizing of staff- leading to individual & community problems Erosion of local cultures due to Internet intrusion, influx of mass tourism etc.

The need of sustainability- cont

The Rio Earth Summit, 1992 talked on perpetuation of disparities between and within nations, a worsening of poverty, hunger, ill health and illiteracy, the continuing deterioration of the ecosystems, integration of environment and development, fulfilment of basic needs, improved living standards for all, better protected and managed ecosystems and a safer, more prosperous future. No nation can achieve this on its own; but together we can in a global partnership for sustainable development. BE on global scale is the clear answer for all the maladies.

The need of sustainability- cont

UNO emphasizes sustainability and talks of eight Millennium Development Goals, viz,
Eradication of poverty and hunger Universal primary education Gender equality and women empowerment Reducing child mortality Improve maternal health Combat diseases such as HIV/AIDS Environmental sustainability Develop global partnership for development

The need of sustainability- cont

Sustainability emphasizes on The needs of future generations Intergenerational equity and Ethics in action at each business decision

Sustainability- Triple Bottom Line theory

John Elkington has propagated the theory of TBL (Economic Value, Environmental Value and Social Value) "People, planet and profit" succinctly describes the triple bottom lines and the goal of sustainability.

Sustainability- Triple Bottom Line theory

People- A TBL business would not use child labour. Would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours. Would not exploit a community or its labour force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on the social impact of a business.

Sustainability- Triple Bottom Line theory

Planet- A TBL tries to reduces its ecological footprint by
carefully managing its consumption of energy and nonrenewables Reduces manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. Life Cycle Assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. A triple bottom line company does not produce harmful or destructive products example, weapons, toxic chemicals or batteries containing dangerous heavy metals.

Sustainability- Triple Bottom Line theory

Profit- TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefits.

The three components of sustainability

Economic Social


Sustainability from vedic roots

" " " Loka Samasta Sukino Bhavantu Aum ShantiH ShantiH ShantiH" May all the worlds be happy. May all the beings be happy. May none suffer from grief or sorrow. May peace be to all

Sustainability- continued
" I do not know what weapons World War III will be fought with, but world War IV will be fought with sticks and stones- Albert Einstein. It is paramount or supreme or number one priority for all of us to make our world worth living- of peace and prosperity.