Business Ethics Content

Business Ethics
REQUIRED READINGS MANUEL G. VELASQUEZ: Business Ethics: Concepts and Cases (Pearson: Latest Edition) P. S. BAJAJ & RAJ AGGRAWAL: Business Ethics (Biztantra)
Awasthi.neha89@gmail.com, SP4 Tania.arora0908@gmail.com; SP2, sp2ss1012@gmail.com Sf6ss.cr@gmail.com, sf6ss1012@gmail.com, soniatokas2002@gmail.com
Business Ethics
MOVIE: Should CEOs/managers have ethics Before Study of ethics let us learn something about ourselves and our society
Questions to Ponder and answer

Majority of People are not happy and satisfied in their personal lives Majority of People are not happy and satisfied in their Jobs
NASSCOM Study of 18000 employees in IT industry is an eye opener
Interactive exercise to understand How We Think and Why We Think The Way We Think
Questionnaire 1 The following pairs of statements represent assumptions about how people behave in relation to their work. Example: On considering the pair numbered I, If you agree totally with statement given on left, circle number 1, if you agree totally with statement given on right; circle number 4. If your view is somewhat closer to statement on left, circle number 2
if your view is somewhat closer to statement on right, circle number 3.

I) Most people have no real interest in their work 1 2 3 4 People enjoy work and achievement
II)
People are interested only in their own benefit
1 2 3
People like to help each other
Questionnaire 2 The following pairs of statements represent assumptions about how I behave in relation to My work. Example: On considering the pair numbered I, If you agree totally with statement given on left, circle number 1, if you agree totally with statement given on right; circle number 4.
If your view is somewhat closer to statement on left, circle number 2

if your view is somewhat closer to statement on right, circle number 3.
I)
I have no real interest in my work
1 2
I enjoy work and achievement I like to help people
II) I am interested only in my own benefit
1 2 3
Business Exercise
Close the exercise with results & Let us absorb the learning
Business Ethics - Basic Principles

Questions that need addressing
What is Ethics and business ethics (Students to answer) MOVIE: What is ethics

Merck Example for River blindness (1979) of medicine for animals , Ivermectin Cost of devpt 100 million USD Population affected 18 million by 1979 Population at risk 85 million WHO, Govt. not willing to fund Mectizan (Dr. Vagelos CEO) WHY DID HE DO IT? (Streptomycin) (SATBARI), previous slide not done
Ethical Dilemmas in workplace

Ethics and business seem to be a contradiction to each other Whenever ethics conflicts with profits, businesses choose profits over ethics

Latest research indicates that businesses that do not so, gain in the long term?? Test cases Wipro, Infosys v/s HCL, Reliance Analysis of 100 companies over a 25 years period & stock valuation

Ethics A study of morality, basically investigating it and generating results of that investigation
Morality Standards that an individual or a group has about what is wrong and what is right, or good and evil CASE STUDY: Goodrich, an employees dilemma

Moral Standards
The norms about the actions that we believe are morally right or wrong
Example: Stealing is bad, helping others is good
Where do these come from Even though we may believe in them, we dont live up to them all the time

Non Moral Standards
Where we dont get caught into dilemmas Language grammatically correct or not Athletic standards etc.

Characteristics that distinguish Moral standards and Non Moral standards
Matters that can seriously injure or benefit human beings (murder, rape, child abuse, fraud etc.) Moral standards are not established by authoritative bodies like law etc. These are felt to be preferred over other values (even
over self interest, Kermit example)
Are based on impartial considerations (universal viewpoint,

or put yourself as the recipient of the behavior)
These are associated with special emotions, shame, guilt, or pride, self respect

Ethics
discipline that examines ones moral standards or that of a society It is normative study, i.e. defines what is wrong or right, and is not a descriptive study like sociology or anthropology

MOVIE: Ethical dilemmas in workplace_ Ethics Guy

Business ethics
Study of right and wrong as applied to business Can one claim that a Corporation /organizations are morally responsible? Investigates three types of issues
Systemic (Micro and Macro environment) Corporate (issues related to organization) Individual (issues related to individuals in orgs)

Ethics and Globalization & rise of MNCs Before we start, let us see a good video on Career advice
Ethical Arguments that are pro this process
Products standardization, Economic sizes, more people can access,
Ethical Arguments that are against these processes

Shifting of businesses from places like US with tough environmental laws, selling goods banned elsewhere, differing ethical views of different cultures leading to ethical relativism, polygamy, abortion etc.

Movie: What is ethical relativism Arguments against Ethical relativism When two people or two groups have different beliefs, philosophers point out that at least one of them is wrong Read the handout about Philosopher James Rachels views on this (Handout -1) There seem to be some universal rights or wrongs, Nazi holocaust, human slavery, discrimination between people on basis of color, caste, creed, religion etc.

Technology & Business Ethics
IT creating new ethical challenges on information ownership, individual privacy, Facebook crisis, employee oversight
Biotechnology is raising new questions about fiddling with plants, animal and humans genetically
Arguments against bringing ethics into business (students
Arguments

against bringing ethics into business
Profits will increase Less restraints in doing business Business expansion easier More flexibility for employees Prices more competitive Recruitment becomes easier Retrenchment is easy Can copy technology, product etc. of competition Less chances of strikes Can handle legal hassles more easily
Arguments for Bringing ethics into business (students)
Arguments for bringing ethics into business

Goodwill Less frauds & less legal issues Stakeholders satisfaction & loyalty Smooth functioning of the org Healthy work environment Valuation increase over long run Government support Increase in profits over long run Quality of products & services will be better New employee attraction and retention of existing employees

Arguments against bringing Ethics into Business
1. Businesses should focus on profits and produce what the society wants and do so in the most efficient manner
Dangers: deceptive advertising, pollution control measures not taken, tax evasion etc., deemed universities case, bhopal case

2. Employees have a duty to their employers and hence are duty bound to follow whatever employers want and not bring their moral standards to office (law of agency)
Counters: Would an employee have a limit defined or not, Nazi officers defending their actions as government approved, Police encounters in India

3. It is enough for business people to follow the law and not worry about ethics
Counters: Not following a transparent, well laid out, impartial promotion/ recognition policy may not break a law, but would it be good for the organization , ethics turn into law ultimately if not followed by self, smoking indoors, taking care of parents etc., consumer protection getting stronger day by day

Arguments for bringing Ethics into business 1. System Argument: Any business activity involves interacting with various systems in the ecosystem and if some do not follow ethics then the system would not work in the long run and harm would be incalculable
Employees might steal from their org, organizations may give inferior offering to customers, not declare side effects of medicine, may dump effluents into fresh water rivers, may push products like cigarettes, energy drinks, steroids etc.

Arguments for bringing Ethics into business
2. Rewards: Enough evidence exists that corporations known for their ethical ways get rewarded by the system (customers, employees etc., Government bodies),
Eli lily, Tatas, Wipro, Infosys

Arguments for bringing Ethics into business 3. Self Interest: If a business tries to take advantage of employee or customers or suppliers, or creditors, the retaliation will be multifold and harmful for the business
Employees would not like to work or shortchange the org, customers would walk away, vendors will become extra careful etc.

Moral Development process Lawrence Kohlbergs model Six Stages
Level One: Preconventional Stages
Stage One: Punishment & Obedience orientation Stage Two: Instrumental & Relative Orientation
Actions as Instruments for satisfying childs needs

Moral Development process Lawrence Kohlbergs model- Six Stages
Level Two: Conventional Stages
Stage Three: Interpersonal Concordance Orientation (peer group, relatives etc.) Stage Four: Law and Order orientation (country, society)

Moral Development process Lawrence Kohlbergs model- Six Stages
Level Three: Postconventional, Autonomous or Principled Stages
Stage Five: Social Contract Orientation (people hold
conflicting views and consensus should be worked out, less rigid, others may also be right in having different views)
Stage Six: Universal Ethical Principles Orientation (logical comprehensiveness, Universality, consistency, justice,
equality, dignity)

Moral Development process Lawrence Kohlbergs model
All do not pass through all stages Most remain stuck at one or other level (maslow)

WorldComs Whistleblower case study

Moral Reasoning Process
Moral Standard ---> evidence or information about a person/ institution regarding some behavior which is not in conformity to moral standards --- Moral Judgment Example: Innocents should not be harmed is a moral standard Capital punishment sometimes leads to death of innocents- Capital punishment should be banned

Moral responsibility and Blame
Moral responsibility of an individual /institution for an injury or a wrong requires three criteria to be fulfilled

Moral Responsibility- criteria
1. one must cause / fail to prevent the injury or wrong when one could and should have done so
If you remove the word should, then when you read newspaper and know that people are starving and do not act, then you are a murderer, coal mines, stone crushers, chemical factories

2. The person must know what he / she is doing
Although ignorance doesnt always excuse a person. Dont tell me what you are going to do, just get results.

3. The person must act of his own free will
It should not be a mistake, physically forced to do, or mental impairment

Presentation: Indian work ethic Movie: Is the Indian work ethic better Movie: Indian vs. US population Work ethic by TYT

Caltex & South Africa (1948, Nelson Mandela) Arguments for and against doing business in South Africa ( Handout 4), this was a moral debate Arguments for and against appealed to 4 moral considerations
Utilitarianism, Rights, Justice and Caring

Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach) As per this theory, an action is right if it satisfies 3 steps
Determine all the alternative actions or policies available for any issue / problem Estimate the direct and indirect benefits and costs that action will generate for each and every person it touches The action that produces the greatest sum total of utility at the least costs is the right action

Utilitarianism: Weighing Social Costs and Benefits (also referred as Consequentialist approach)
Ford example , development of Pinto
This theory advocates that right action or policy is one that will produce the greatest net benefits or the lowest net costs (if only costs are being considered)
In this case costs that were missed out were physical pain, emotion pain due to loss of family members etc.

Ford example , development of Pinto, petrol tank problem ( at 20 MPH, rear placed tank burst more often) Cost of modifying tank = 137 million USD (11 usd per car, 12.5 million cars) No modification would result in 180 burn deaths, 180 serious burn injuries, and 2100 burned vehicles Insurance payouts for above would be = 49.15 million USD Arguments : Handout 5

An attractive theory, people use it for their actions by saying it is for greater good, useful in economics Measurement problems is considered an argument against this principle, particularly for non economic goods like , freedom, equality, health, love, beauty etc., some are difficult to measure, some are difficult to forecast, confusion on benefit and cost (who defines it)

An example of Utilitarianism application and its problems with moral issues viz. Rights & Justice Handout 5
Unethical practices
David Batstone: Unethical Behavior (Done) Actual examples from India:
employment of ladies in the night jobs in BPOs, does ethics have to do anything about this business decision, Implications Should employment bonds be there Should a company monitor its employees continuously through CCTVs and other means, like snooping on key strokes (Discuss after seeing movies)
MOVIE: email in the workplace Movie: Workplace under Surveillance
Ethics and company philosophies
Movie: Scandals in business, What to do Worldcom Whistleblower Case Study
Movie: How to Manage unethical employees I

Concept of a Right
1948 UN adopted a Universal declaration of human rights Legal right ( freedom of speech, right to education, right to work) Moral right or human rights (right not to be tortured, right to worship)
Tightly correlated with duties (others have duties) Provide individuals with autonomy and equality (worship) Act as a basis for justifying actions and getting protection
Rights V/s Utilitarianism Rights individuals, utilitarianism society as a whole Negative rights & Positive Rights (19th century to 20th century, Indias NREGA scheme) Contractual rights and Duties

Kants Ethical theory Basis of moral right
Immanuel Kant 1724-1804 Theory based on a moral principal that he called Categorical Imperative which requires that
Everyone should be treated as a free person equal to every one else Has two implications, expect this treatment for yourself as well as give this treatment to others

First formulation of Categorical Imperative
An action is morally right for a person in a certain situation if, and only if, the persons reason for carrying out the action is a reason that he or she would be willing to have every other person act on, in any similar situation Two criteria
Unversalizability Reversibility

Second formulation of Categorical Imperative
An action is morally right for a person if, and only if, in performing the action, the person doesnt use others merely as a means for advancing his or her own interests, but also both respects and develops their capacity to choose for themselves Deception, force. Coercion fail to follow this, hence are immoral Case Study: Eli Lily

Justice and Fairness
Distributive justice
Concerned with the fair distribution of societys benefits and burdens
Retributive justice
Just imposition of punishments and penalties
Compensatory justice
Just way of compensating people for what they lost when they were wronged by someone

Justice as equality: egalitarianism
All are equal, hence should get equal share of societys benefits and burdens, arguments against (lazy
person, sick person, handicapped person)
Political equality & economic equality
Justice based on contribution: Capitalist Justice

Benefits should be distributed according to the value of the contribution the individual makes to a society, task, a group, Effort v/s Output

Justice Based on Needs and Abilities: Socialism
Work burden should be distributed according to the
peoples abilities, and benefits should be distributed according to peoples needs (family,
motivation)
Justice as Fairness: Rawls (a more comprehensive

theory)

Justice and Fairness: Rawls
Distribution of benefits and burdens in a society is just if and only if it follows three principles:
1. Each person has an equal right for the basic liberties compatible with similar liberties for all (Principle of equal liberty) and 2. Social and economical inequalities are arranged so that they are both
A) To the greatest benefit of the least advantaged person (Difference Principle) B) Attached to positions open to all under conditions of fair equality of opportunity (principle of fair equality of opportunity)
2 to take priority over 1, (b) to take priority over (a) in case of conflict

Conflict diamonds Exxon mobile
Business System Basics

Globalization , For & Against argument
Handout of two arguments
Economic Systems
Command economy, Market economy
Various ideologies of great thinkers

Free Markets and Rights : John Locke
Human beings have a natural right to liberty and property All are free and equal Each person owns his body and labor, and whatever he mixes his labor into People agree to form a Government to protect their right to freedom and property Criticisms (unproven assumption, clash between negative & positive rights,
widening disparity between haves and have-nots in capitalistic societies, role of caring for others, top 20% US population have 49% of wealth)

Free Markets and Utility: Adam Smith
Market competition ensures that the pursuit of self interest in markets advances the publics welfare Government interference in markets doesnt advance the publics welfare Fluctuating prices divert resources appropriately Criticism (unlike his time monopolies and large orgs have emerged and hence can
influence markets in their favor w/o Govt interference, manufacturers consume certain resources for which they dont pay and hence become ruthless in exploiting those like polluting the environment groundwater being used by coke or dumping of harmful chemicals into rivers, human beings dont get always governed by self interest, they also get influenced by concern for others

Keynesian view (John Keynes)
Aggregate Demand (households, businesses and
Government)
Proposes that free markets are not necessarily the most efficient means for using the societys resources and Govt. intervention is useful (Stagflation)

Marx and Justice Marx claims of injustice in Capitalism
Exploitation of workers whose surplus is taken by owners as profit Alienation of workers from product, work, self and others Subordination of Govt. to interests of ruling economic class Immiseration (combined effect of increased concentration, cyclic crises, rising unemployment and declining relative compensation) of workers The solution that he recommends is collective ownership of societys resources and use of central planning
Ethics & Markets

Three Degrees of Competition
Perfect Competition
A free market in which no buyer and seller has the power to significantly affect the prices at which goods are being exchanged All markets in this tend to move towards equilibrium point where the amount of goods buyers want to buy exactly equals the amount of goods sellers want to sell and price desired by both parties match It also satisfies three moral criteria- Justice, Utility and Rights????
Ethics & Markets

Perfect Competition
The answer as to why perfectly competitive markets achieve moral outcomes can be explained in two stages Stage I & II
Why these markets move towards the equilibrium point Why the markets that move toward equilibrium point achieve 3 moral outcomes
Ethics & Markets

Perfect Competition
Stage I
Demand Curve based on principle of diminishing marginal utility Supply Curve based on principle of increasing marginal costs Merging of these curves gives rise to the equilibrium point
Ethics & Markets

Perfect Competition
Stage II
At equilibrium point the buyer as well as seller is getting a just return for their contribution These markets maximize utility Motivates producers to invest in areas where consumer demand is high Encourage producers to minimize resources consumed & use the most efficient technology Distribute commodities in such a way that matches their needs and the money available
Ethics & Markets

Perfect Competition
Stage II
Rights Buyers and Sellers are free to enter or leave the market All exchanges are voluntary No single buyer or seller dominates the market
Criticism of these theories
Ethics & Markets

Monopolies
Class to try to answer if Justice, Utility, Rights are violated or not in this form of competition What about Oligopolistic competition
Explicit agreements, Price fixing, Tacit agreements, Bribery Antitrust view (break up large companies), Regulation View (do not break, regulate
e.g.)
Ethics of production and marketing

Market approach view to consumer protection
(motor / vacuum cleaner will get heated if run for more than 30 minutes at a stretch)
Criticism: Full info generally not available nor customer is a RUM
Customer is supposed to be a Rational Utility Maximizer (RUM) (but research says it is not true) Contract View of Business Firms Duties to Consumers (as per Kants theory misrepresentation is to be avoided, both parties
should have full knowledge, no influence to be used, disclose the nature of product)

The Duty to Comply (Contract View)
Comply with all claims made expressly Comply with all claims that are implied Frederick Sturdivant classified these claims in four areas
Reliability Service Life (should it include obsolescence) Maintainability Product Safety

The Duty of Disclosure (Contract View) The Duty Not to Misrepresent (Contract View)
(paid testimonials)
The Duty not to Coerce ,cognitive dissonance (Contract View) Problems with Contractual Theory
Buyers are capable & knowledgeable any other???? Students to fill in

The Due Care Theory
This theory holds that because consumers must depend on the greater expertise of the manufacturer, the manufacturer not only has a duty to deliver a product that lives up to the express and implied claims but also has a duty to prevent injury to others even if the manufacturer explicitly disclaims such responsibility and the buyer agrees to the disclaimer Caveat Emptor replaces Caveat Vendor

The Due Care Theory
Producers Responsibilities under this theory
Design Production Information Caveat Vendor & not Caveat Emptor
Problems with this theory

Clear method for determining Due Care diligence Assumes that manufacturer can discover all risks before it reaches customer

The Social Costs View
Caveat Vendor (legal parlance Strict Liability) In this theory a manufacturer has a duty to assume the risks of even those injuries that arise out of the defects in the product that could not have been foreseen or eliminated Based on Utilitarian arguments (Class to generate these arguments , handout) Problems with this theory : (Unfair to one party, will increase
carelessness by consumers, will increase litigation, US society healthcare)

Advertising Ethics Critics of Advertising state that
It degrades peoples tastes It wastes valuable resources It creates monopoly power
Psychological arguments against these criticisms

Consumer Privacy
Psychological Privacy Physical Privacy
Balancing privacy with legitimate business needs

Relevance Informing Consent Accuracy Purpose Recipient & Security
Ethics and the Environment

Dimensions of Pollution
Air Pollution
Global Warming Greenhouse Gases Ozone Depletion Acid Rain Airborne Toxics Air Quality Water Pollution Land Pollution

Ecological Ethics
It is the view that nonhuman parts for the environment deserve to be preserved for their own sake, regardless of whether this benefits human beings This view has found favor with a lot of environmentalists It raises costs for businesses and hence consumers

Kinds of Ethical approaches to Environmental Protection
Ecological approach:- Nonhumans have intrinsic value Environmental Rights approach: Humans have a right to a livable environment Market Approach: external costs violate utility, rights and justice

Private costs & Social Costs If private costs are reduced social costs go up and vice versa

Rights of future generations Arguments against
Future generations do not exist now and may never exist Why should present be sacrificed for the future How do we know what will interest the future generation

Conservation based on Justice
Rawls: Leave the world no worse than we found it Care: Leave our children a world no worse than we received Attfield: Leave the world as productive as we found it
Ethics of Job Discrimination

Discrimination:
The wrongful act of distinguishing illicitly among people not on the basis of individual merit, but on the basis of prejudice or some other invidious or morally reprehensible attitude
Affirmative action program:

A program designed to ensure the proportion of minorities within an organization matches their proportion in the available workforce

Arguments against Discrimination
Utility: Discrimination leads to inefficient use of human resources Rights: Discrimination violates basic human rights Justice: It results in unjust distributions of benefits and burdens

Affirmative Action (AA)
Compensation argument claims AA compensates groups for past discrimination Criticism is that it is unfair as those who benefit now were not those who were harmed

Utilitarian argument claims AA reduces need by attempting to fulfill them and so increases utility Criticism is that costs outweigh benefits and that other ways will produce greater utility

Equal Justice argument claims AA will secure equal opportunity and is a morally legitimate means
Criticism is it discriminates against other groups, preferential treatment violates principle of equality

Business Ethics Content

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Business Ethics

Awasthi.neha89@gmail.com, SP4 Tania.arora0908@gmail.com; SP2, sp2ss1012@gmail.com Sf6ss.cr@gmail.com, sf6ss1012@gmail.com, soniatokas2002@gmail.com

Questions to Ponder and answer

NASSCOM Study of 18000 employees in IT industry is an eye opener

if your view is somewhat closer to statement on right, circle number 3.

People are interested only in their own benefit

People like to help each other

If your view is somewhat closer to statement on left, circle number 2

I have no real interest in my work

I enjoy work and achievement I like to help people

II) I am interested only in my own benefit

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Are based on impartial considerations (universal viewpoint,

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Ethical Arguments that are against these processes

Ethical Dilemmas in workplace

Ethical Dilemmas in workplace

Arguments against bringing ethics into business (students

against bringing ethics into business

Arguments for Bringing ethics into business (students)

Arguments for bringing ethics into business

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

MOVIE: email in the workplace Movie: Workplace under Surveillance

Ethics and company philosophies

Movie: Scandals in business, What to do Worldcom Whistleblower Case Study

Movie: How to Manage unethical employees I

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles

Business Ethics - Basic Principles