Business Ethics

Introduction of Ethics
The word ethics is derived from the Greek word

meaning custom or character The concise Oxford Dictionary defines ethics as the treating of moral questions. But this definition is imprecise & leaves a number of loose ends. whose morals? The Chambers Dictionary comes closest to providing a workable definition Ethics is a code of behaviour considered correct What the society considers correct may have arrived by the crystallization of consumer pressure on corporations & governments & regulatory forces. It is science of morals describing a set of rules of behaviour Ethics, also known as moral philosophy, is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct.

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Principles of Personal Ethics

Personal values are the conception of what an individual or a

group regards as desirable. Personal ethics refer to the application of these values in everything one does. The principles of personal ethics: Concern & respect for the autonomy of others. Honesty & the willingness to comply with the law Fairness & the ability not to take undue advantage of others. Benevolence & preventing harm to any creature. People are motivated to be ethical for the following reasons: Most people want to maintain a clear conscience & would like to act ethically under normal circumstances It is natural for people to ensure that their actions do not cause any injury, whether physical or mental, to others

Business Ethics
Business ethics is the application of the principles

of ethics in the realm of business, trade & commerce Business ethics is the evaluation of business in terms of certain ethical principles & norms Business ethics deals with certain moral principles that can tell us whether a particular business concern is run in a morally right or wrong way. Business ethics is the sum-total of rules & principles which can be regarded as the standard norm to evaluate & guide business activities.

Nature of Business Ethics

Business Ethics as a subject in analytical

nature. Business Ethics is diagnostic in nature. Business Ethics is evaluative Business Ethics is perspective in nature Business Ethics sets the moral standard in business.

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A Crisis in Business Ethics

Consumer trust of businesses is declining No sector is exempt from ethical misconduct Stakeholders determine what is ethical/unethical Investors Employees Customers Interest groups Legal system Community

Typical problems in business ethics

Problems relating to:
The Environment
Human Resource Practices

Marketing and Consumer Protection

Finance

Competition and Business Alliances

Environmental Problems
Air Pollution Water Pollution Noise Pollution Energy Consumption and Carbon Emission Toxic Waste Contamination of Ground Water Oil Spills Soil Erosion Depletion of Ozone Layer

Coca-Cola's Water Sustainability Initiatives

ABSTRACT This case is about the global water sustainability initiatives undertaken by The CocaCola Company (Coca-Cola). It details the activities undertaken by Coca-Cola's management and employees to contribute to the benefit of the society and community in which the company operated by pledging to return all the water it used in its operations back to the environment.

ISSUE

Understand the issues and challenges faced by Coca-Cola with regard to its global environmental responsibility initiatives. Coca-Cola was accused of draining the underground water table and of releasing improperly treated industrial effluents in less Developed countries

SOLUTION In 2007, Coca-Cola initiated a global water project that focused on reducing, recycling, and replenishing water used in the company's beverage production Coca-Cola opened an exclusive website, www.cokefacts.org.

Contribution of Sunita Narain

The Delhi-based Centre for Science and Environment (CSE), which she heads, monitors air pollution levels around India, studies the effects of climate change and even runs training courses that show businesspeople and students how to lead greener lives. But it is her criticism of international soft drink makers Coca-Cola and PepsiCo that has won Narain most attention. Over the past few years the CSE has regularly alleged that soft drinks sold in India contain high level of pesticides a charge both Coke and Pepsi reject A little publicity goes a long way: her pesticide charges spurred some Indian states to ban the sales of Coke and Pepsi last year. Now, she's taking on river polluters.

Marketing and Consumer protection

Pricing -lack of clarity in pricing Dumping selling at a loss to increase market share and destroy competition in order to subsequently raise prices High pressure selling - especially in relation to groups such as the elderly Counterfeit goods and brand piracy Deceptive advertising Selling goods abroad which are banned at home Omitting to provide information on side effects Unsafe products

Tactics to Recover Banks Loans in India Raises Ethical Concerns- A Case of ICICI

ABSTRACT In September 2007, Prakash Sarvankar, a customer of India's second largest bank, ICICI Bank, committed suicide after being publicly humiliated by the bank's loan recovery agents. The case is about that the customer is being harassed by recovery agents of banks. ISSUE

It was alleged that the recovery agents commissioned by banks often resorted to highhanded tactics such as verbal and physical abuse, threatening phone calls, and public humiliation of customers to recover loans.

SOLUTION New guidelines stated by RBI for commercial banks: Recovery agents could not resort to "harassment of any kind, either verbal or physical. Verbal or physical harassment of any person, anonymous and threatening calls, intrusion into the privacy of the defaulter and his or her family and friends were strictly prohibited . RBI issued a warning to the banks that in case of any incident of high-handedness reported in the future, a temporary or permanent ban would be imposed on the concerned banks

Human Resource Practices

HIRING Discrimination Ageism Credentials EQUALITY OF OPPORTUNITY REMUNERATION Need v/s Effort Ability v/s Contribution Seniority v/s Loyalty

Finance
Importance of financial statements Finance underpins what a business does Misinterpreting financial information has a negative impact on long term owner value Ethical audit 1.Concealed liabilities and expenses
2.Fraudulent asset valuations

3. Fabricated revenues
4.Improper or fraudulent disclosures or omission

Need of Importance of Business Ethics

Stop business malpractices Improve consumers confidence

Survival of business
Protecting consumer rights Protecting employees, share holders etc., Creates good image of business Smooth functioning of business Consumer satisfaction Healthy competition

Approaches to Business Ethics

Profit based morality approach Law-based morality approach Natural laws & spiritual practices & advices

Veracity principle: A business firm follow the truth under all situations Non-injury (no harm) principle: A business firm should not harm anybody Fairness(Honesty) Principle: A business firm must remain honest in its dealings Human Rights principle: A business firm respect & maintain human rights Autonomy Principle: A business firm must ensure that it does not make infringement of human choice for goods & services

Sources of Ethical Knowledge for Business

Empiricism: Intuition Principle of rationality Principle of revelation

American Business in general, follow the 6 primary sources of ethical knowledge: Philosophical system Legal system Codes of conduct Cultural experience Genetic inheritance Religion

Roots of Unethical Behaviour & Ethical Decision Making

There are certain factors that employees think & act in unethical ways:
Pressure to balance work & family
Poor communications Poor leadership Long working hours,

Heavy work load

Lack of management support Pressure to meet sales or profit goals Little or no recognition of achievements

Company politics
Personal financial worries

 Ethical Decision Making Process is the processes of choosing the best

alternative for achieving the best results or outcomes compliance with individual and social values, moral, and regulations.

Ethical decision-making helps people make difficult choices when faced

with an ethical dilemma,

A situation in which there is no clear right or wrong answer.

Frame work of understanding the Ethical Decision Making

Ethical Issue Intensity

Individual Factors
Organizational Factors opportunity

Profession or Business Ethics

Ethical or Unethical Behavior

Frame work of understanding the Ethical Decision Making

Ethical issue intensity can be defined as the relevance

or importance of an ethical issue in the eyes of the individual, work group, and/or organization. Ethical issue intensity reflects the ethical sensitivity of the individual or work group that faces the ethical decision making process. Individual Factors
Genderwomen are generally more ethical than men.

Education or work experiencethe more education or work

experience that one has, the better he or she is at ethical decision making. Nationalitycultural appears to be significant in affect of ethical decision making. Agethe older you are, the more ethical you are.

Frame work of understanding the Ethical Decision Making

Organizational Factors The organizations values often have greater influence on decisions than a persons own values. The more ethical employees perceive an organizations culture to be, the less likely they are to make unethical decisions.

Opportunity: Opportunity describes the conditions in

an organization that limit or permit ethical or unethical behavior. Opportunity results from conditions that either provide rewards, whether internal or external, or fail to erect barriers against unethical behavior.

Three theories of ethics

The ethical decision-making process that applies

three predominant ethics theories: 1) Utilitarian perspective 2) Rights perspective 3) Justice perspective

Three theories of Ethics

A utilitarian perspective: Where the decision

maker considers the consequences or out-comes of an action and seeks to maximize the greatest good for the greatest number of those affected by the decision. Rights perspective: A decision maker who considers a rights perspective would consider the entitlements of those affected by the decision. Justice perspective: A justice perspective may focus on either the equitable distribution of the benefits and costs resulting from the plant closing and employee layoffs (distributive justice)or the maintenance of rules and standards(procedural justice).