ETHICS, BUSINESS DECISIONS, COMPETITVE ADVANTAGE AND CODE OF BUSINESS PRINCIPLE

SEQUENCE
What are business ethics? What are some of the approaches of dealing with ethics?
Utilitarianism Universalism Rights

Why should companies be concerned with

ethic?

Which theories should be used? Competitive Advantage Code of Business Principle

Some Surveys
International Survey of more than 300 companies worldwide top ethical issues Employees conflict of interest 91%
Inappropriate gifts 91% Sexual Harassment 91% Unauthorized Payments 85%

Wall Street J survey of 1400 working women

Managers lying, expense-account abuses, office nepotism, taking credit for other work
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Business Ethics

Business Ethics means conducting all aspects of business and dealing with all stakeholders in an ethical manner
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Common examples
Individual values and the company
Receiving or offering kickbacks Stealing from company Padding expense accounts to obtain reimbursements for questionable expenses Divulging confidential information or trade secrets Using company property and materials for personal use Conflict of interest
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Language of Ethical Lapse Everybody else does it Not a valid choice specially if law is being broken If we dont do it, someone else will Well wait until the law enforcers tell us its wrong Whats legal may not be ethical It does not really hurt anyone The system is unfair
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Individual determinants

Religion Belief that the divine reveals the nature of right and wrong in various areas of life Ex: Reciprocity, promise keeping, fairness, charity and responsibility to others all found in Confucianism, Hinduism, Buddhism, Judaism, Christianity and Islam

Other determinants

Moral philosophy Lawrence Kohlberg's stages of development Kantian Ethics on morality Cultural differences Ethical philosophies

Lawrence Kohlbergs Six stages

Pre-Conventional
1. Obedience and punishment orientation (How can I avoid punishment?) 2. Self Interest Orientation

Conventional
3. Interpersonal accord and conformity (social norms)

4. Authority and Social order maintaining Orientation

(law and order morality)

Post Conventional 5. Social contract Orientation

6. Universal ethical principles
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Common approaches to Business ethics

Utilitarianism basic premise is that an action is judged as right or wrong depending on the consequences of the action Universalism the means justify the ends of an action, not consequences Rights based on entitlements and unquestionable claims
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Problems with Utilitarianism

Not always possible to calculate utility or to analyze massive amount of information Ignores distribution of good is it uniformly distributed or favours specific group? No common definition of what is good? Assumes that all can be measured in a common numerical scale Action that produces the greatest balance of value for greatest number of people.
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Kantian Ethics Universality it counters the natural temptation to make exceptions for ourselves or to apply double standards Also provides hypothetical answers underlying the common question What if everyone did that? Provides a strong foundation for rights

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Weaknesses Does not lend itself to precise method for decision making Difficult to think of all humanity each time a decision has to be made Places greater emphasis on welfare of every person, but does not really draw a line Hard to receive conflicts when criteria has to treat everyone equally decisions typically involve conflicts of interests
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Why Ethics?

Laws are insufficient and do not cover all aspects or gray areas of a problem Free market and regulated market mechanism do not effectively inform owners and managers about how to respond to complex crises

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Globalization, Business Ethics & Competitive Advantage

Globalization has brought about greater involvement with ethical considerations and most importantly achieving competitive advantage through business ethics. Globalization and business ethics are linked as they affect a companys ability to commit to its shareholders, in particular to external investors, and preserve the trust needed for further investment and growth.
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Ethics of Scandal Versus Ethics of Strategy

It is increasingly important for companies to deal with ethics as a corporate strategy that, if uniquely implemented, could achieve competitive advantage for the company rather than waiting to react to possible ethical issues of importance to the targeted stakeholders. It is the necessity of being ethically proactive company rather than being ethically reactive company.
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Business Ethics as Competitive Advantage

As the speed of comparable tangible assets acquisition accelerates and the pace of imitation quickens, firms that want to sustain distinctive global competitive advantages need to protect, exploit and enhance their unique intangible assets, particularly INTEGRITY (building firms of integrity is the hidden logic of business ethics).
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Business Ethics as Competitive Advantage (Cont.)

both inside and outside of the organization behavior
that is trusting, trustworthy, and cooperative, not opportunistic, will give the firm a competitive advantage. Sustainable global competitive advantage occurs when a company implements a value-creating strategy which other companies are unable to imitate. For example, a company with superior business leadership skills in enhancing integrity capacity increases its reputation capital with multiple stakeholders and positions itself for competitive advantage. The purpose of ethics is to enhance our lives and our relationships
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The Code Our impact on all stakeholders, internally and externally

Impact on Society Mutually Beneficial Relationships

Responsible Management Practices

Employees Competition

Consumers
Business Partners

Innovation

Public Activities

Community

Shareholders

Environment

Standard of Conduct

Obeying The Law

Business Integrity

Conflict of Interest
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Foundation of Trust

Standard Of Conduct
Be open in your communication Respect others, guarding against oppressive

behaviour
Treat people fairly and equally; no favouritism Manage Organisations and your own reputation

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Foundation of Trust

Obeying the Law We must obey the laws of the country

Obeying the countrys law is the minimum

standard you are expected to follow

Manage your personal conduct Adhere to proper corporate conduct Pleading ignorance is no defense

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Foundation of Trust

Business integrity We must never give or receive bribes or improper advantages

Improper advantages include things like gifts over a certain amount, excessive entertainment, consulting fees

Make sure there is proper accounting, including

accurate financials, data integrity

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Foundation of Trust

Conflict of interest Our personal activities should not conflict with our responsibilities to the company
Ensure there is no conflict of interest in recruiting family members or people you have personal connections with Ensure there is no conflict of interest when providing business opportunities to people you are connected with

You have a duty to protect proprietary information

Do not abuse your Organisation position for personal gain

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Foundation of Trust

Community involvement Organisation must strive to be a good corporate citizen and work in partnership with the communities in which we operate

Have strong tradition of doing well by doing good

Have a robust CSR programme of campaigns, partnerships and ongoing activities Conduct brand imprints

Mutually Beneficial Relationship

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Business partners Expect business partners to behave in a way that is consistent with the business principles!
Ask business partners to obey the law and respect
our Code & encourage them to sign up to it as well We conduct due diligence on our business partners We source alternative partners

Mutually Beneficial Relationship

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Business partners The basic requirements all should follow

Obey the law Do not take, give or encourage bribery Respect employees dignity Recognize the right to freedom of association Ensure safe and healthy working conditions Ensure product safety Care for the environment
Mutually Beneficial Relationship
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Employees Respect the basic rights of employees & the dignity of colleagues
Practice respectful management methods Do not discriminate-gender, sex, race, religion, age Do not harass or bully and do not accept it (physical or psychological) You have a right to air your views

Mutually Beneficial Relationship

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Employees Beliefs)
Communicate and consult with employees Encourage and appreciate diversity, mutual trust and respect Develop individuals skills and capabilities

Mutually Beneficial Relationship

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Shareholders Provide all shareholders with reliable information on activities and financial performance

Practice international standards of corporate

governance Ensure timely and accurate disclosure of material information Non compliance can lead to wide ranging consequences
Responsible Management Practices

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Innovation
Our scientific innovations need to respect the concerns of our consumers and of society. We must ensure the health of consumers We must ensure the highest standards of product safety

Responsible Management Practices

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Competition Organisation should believe in vigorous, yet fair competition

We manage fairly our pricing, promotion and

sale of products (no illicit agreements that

distorts market) We manage fairly our relationships with suppliers and competitors We follow global guidelines to ensure

compliance with competition/anti-trust laws

Responsible Management Practices
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Consumers committed to offering products that offer good quality and value
Ensure that products are safe and clearly and accurately advertised and labeled Products are designed to increase the quality of life

We aim to foster complete trust

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