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1. BUSINESS ETHICS Definitions of Business ethics Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the…
  • 1. BUSINESS ETHICS Definitions of Business ethics Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce. Those who are interested in business ethics examine various kinds of business activities and ask, "Is the conduct ethically right or wrong?" Business ethics is a form of the art of applied ethics that examines ethical rules and principles within a commercial context, the various moral or ethical problems that can arise in a business setting and any special duties or obligations that apply to persons who are engaged in commerce. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). Overview of issues in business ethics General business ethics • This part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company's main purpose is to maximize the returns to its shareholders, then it could be seen as unethical for a company to consider the interests and rights of anyone else. • Corporate social responsibility or CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated. • Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept.
  • 2. • Ethical issues concerning relations between different companies: e.g. hostile take- overs, industrial espionage. • Leadership issues: corporate governance. • Political contributions made by corporations. • Law reform, such as the ethical debate over introducing a crime of corporate manslaughter. • The misuse of corporate ethics policies as marketing instruments. Professional ethics Professional ethics covers the myriad of practical ethical problems and phenomena which arise out of specific functional areas of companies or in relation to recognized business professions. Ethics of accounting information • Creative accounting, earnings management, misleading financial analysis. • Insider trading, securities fraud, bucket shop, forex scams: concerns (criminal) manipulation of the financial markets. • Executive compensation: concerns excessive payments made to corporate CEO's. • Bribery, kickbacks, facilitation payments: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anti-competitive or offend against the values of society. Ethics of human resource management The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee. • Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness. See also: affirmative action, sexual harassment. • Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking. • Issues affecting the privacy of the employee: workplace surveillance, drug testing. See also: privacy. • Issues affecting the privacy of the employer: whistle-blowing. • Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery, indentured servitude, employment law. • Occupational safety and health.
  • 3. Ethics of sales and marketing Marketing which goes beyond the mere provision of information about (and access to) a product may seek to manipulate our values and behaviour. To some extent society regards this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media. However, media ethics is a much larger topic and extends outside business ethics. • Pricing: price fixing, price discrimination, price skimming. • Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law. • Specific marketing strategies: green wash, bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence. • Content of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful • Children and marketing: marketing in schools. • Black markets, grey markets. Ethics of production This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk. • Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping). • Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading • Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health. • Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects. • The permissibility of international commerce with pariah states. VALUES, ETHICS AND CONDUCT - THE DEFINITIONS The terms 'values', 'ethics', 'integrity' and 'conduct' are often used interchangeably and uncertain language is one of the barriers to establishing a widely understood framework for ethics. For the purposes of this paper, the following definitions will apply: • Ethics - what ought to be; the ideals of what is just, good and proper;
  • 4. • Values - the commonly held beliefs that guide judgment about what is good and proper, and from which ethical principles derive; • Integrity - normally one of the key ethical values; but also used in the current Departmental Performance Assessment as synonymous with a departmental framework for ethics (see Part Five); • Codes of conduct - the rules that translate ideals and values into everyday practice; and • Conduct - the actual behaviour and actions of public servants. Normative ethics is largely about values and the accepted norms for 'right' conduct. Applied ethics is the practical application of values and standards, which sometimes involves choosing between values in a particular context. This paper is concerned with applied ethics, where values are translated into conduct. CULTURE IN AN ORGANIZATION (a) Culture is `alive’ Culture is an evolutionary concept. It is developed by individuals (managers) in an organization. A good organization is represented by its culture. Hence, culture is alive. (b) Culture has `values’ Culture is certain set of `practices’ followed by individuals. Such practices are evolved through proper experimentations. A live organization has got values. Such values are inseparable and are a product of labour. (c) Culture has `image’ Since an organization is represented by its practiced culture, it is `alive’ and has `values’. Image is nothing but an expression of `culture’ as is patronized by the `society’. It has a form and the same is imprinted in the minds and hearts of individuals. (d) Culture is `representative’ Culture is represented by each and every organisation in one way or the other and such practices forms part of organizational culture. It is through steady efforts and practices that such a culture is represented to the outside world, in the form of organizational culture. (e) Culture is `fundamental’ Culture is the backbone of each and every organization. It is based on this image that an organization is built and hence culture acts as a foundation based on which it is formed. (f) Culture is an `unique’ property The essential quality of culture is that it is unique for each and every organization. It is built based on steady and steadfast efforts as nourished by the individuals through hard core labour.
  • 5. (g) Culture and `polygamy’ When an organization absorbs another organization then a `wedding’ of different culture takes place. This is the principle of polygamy. (B) Business ethos principles practiced by Indian Companies:- Indian companies are guided by certain rules of conduct in the form of ethical and moral standards. Some of the business ethos principles, practiced by Indian companies are listed below: 1. Principle of `sacrifice’ An individual is trained by the principle of `sacrifice’ through the process of `give and take’ policy. A person, who is willing to sacrifice part of his bread or effort, commands a superior place in the organization. 2. Principle of `harmony’ An individual is trained in such a way that to avoid conflicts and friction one should be guided by certain set of moral conducts and principles. 3. Principle of `non-violence’ This principle protects an organization from strikes and lockouts and unnecessary avoidable conflicts. 4. Principle of `reward’ The one who performs well are encouraged to do so. This implies that the activities of individuals need to be monitored and encouragement in th form of `rewards’ may cultivate the spirit of higher productivity among groups. 5. Principle of `justice’ The one who works hard is `rewarded’ and the one who fails to do so is `punished’. This is essence the principle of Justice. 6. Principle of `taxation’ The one who is taxed more is encouraged to stay fit for a longer period by proper appreciation and encouragement. This principle applies to individuals who are hardworking and productive. 7. Principle of `Integrity’ An integrated mind is more productive. Groups are encouraged to stay united in order to reap the benefits of division of labour. 8. Principle of `Polygamy’ This is nothing but the wedding of two different cultures by absorption or takeover.
  • 6. (c) How are `values’ formed? Values are formed through the process of efforts. Such efforts never go invain. The following point throws valuable insights on formation of values, from an organizational perspective. 1) Efforts and values. Efforts undertaken in order to enrich productivity among labourers by the process of experimentation, never go in vain. Efforts are milestones and the frequency with which one labours the more, the value in an organization grows, in the same proportion. 2) Vision and values The vision of the entrepreneur generally tallies with the organizational goals. Vision acts as a foundation stone and pillar for enriching values in each and every organization. 3) Dedication and values A dedicated mind is God’s workshop. Values are formed through dedicated efforts. 4) Morality and values The more an organization concentrates on morality or ethics, the more it brings fertility to the ‘tree’ called values. 5) Culture and values A well developed culture evolves positive values. 6) Ethics and values Ethics are guided by certain moral principles. An ethical organization has got values and hence it thrives for a longer period. Such organizations generally have an infinite existence. SECULAR Vs SPIRITUAL VALUES IN MANGEMENT 1) By secular view on values in management, it refers to the worldly thoughts and philosophies as reproduced by management Gurus or experts. By spiritual values in management, it refers to the insights thrown on management by Vedas and Upanishads (or) by spiritual Gurus. 2) Secularists thoughts and views on management finds its way from Maslows need hierarchy and culminate till the most modern thoughts on management. Spiritual values in management find its base from the age old Vedas and Upanishads with special reference to Bhagavat Gita.
  • 7. 3) Secularists treat management values, as a science rather than ordaining it as a philosophy. Spiritualists treat management values as a philosophy rather than by ordaining it as a science. 4) Secularists treat management values as an evolutionary concept. Spiritualists believe sources like Bhagavat Gita, as a ready reckoner on value based management. 5) Secularists views on values in management are not generally ethical by nature. Spiritualists find their reference one value based management as ethical or moral, in its true sense. 6) The contribution of Indian thoughts towards secular values on management as reproduced by management science is comparatively poor, with reference to spiritual values on management. The contribution of Indian thoughts towards spiritual values on management has magnificent theories, when compared to secular values on management. 7) The secular views on management as propounded by management experts lack any ideals. The Indian spiritual values in management have divinity as the ideal to be portrayed. Ethics management:- Ethics management is a new science in the field of management. With the rapid evolution in the field of management, the role of ethics has been recognized, by and large, by the management experts. By ethics, it refers to the principles of conduct governing an individual or group in a society is known as ethics management. Role of organizational culture in ethics:- By culture, it refers to the ideas, customs, skills, arts etc. of a people or group, which are transferred, communicated or passed along, as in or to succeeding generations. The organization that manages such ideas, customs etc. of a particular people or group in a particular period evolves a distinct culture as drastically different from that of other similar organizations in the field. This is known as organizational culture. With the involvement of management in ethical related issues in an undertaking, the roles of organizational culture in ethics need to be recognized. The rapid involvement of the organization towards upbringing an emerging culture or nourishing a new culture enforces rigid constraints on the working style on group or individuals by emphasising on a set of code of conduct, in terms of morality.
  • 8. ETHICS OFFICERS Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991, which set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching. In the wake of numerous corporate scandals between 2001-04 (affecting large corporations like Enron, WorldCom and Tyco), even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. The effectiveness of ethics officers in the marketplace is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect the efficacy to be minimal, at least, over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior, a culture and climate that usually emanates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary. WHISTLE BLOWER A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action. Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest— fraud, health, safety violations, and corruption are just a few examples. Overview Any kind of misconduct may prompt whistle blowing. The vast majority of cases are based on relatively minor misconduct. The most common type of whistleblowers is internal whistleblowers, who report misconduct to another employee or superior within their company or agency. In contrast, external whistleblowers report misconduct to outside persons or entities.
  • 9. In these cases, depending on the severity and nature of the wrong-doing, whistleblowers may report the misconduct to lawyers, the media, law enforcement or watchdog agencies, or to other local, state, or federal agencies. Legal protection for whistleblowers Legal protection for whistle blowing varies from country to country. In the United Kingdom, the Public Interest Disclosure Act 1998 provides a framework of legal protection for individuals who disclose information so as to expose malpractice and matters of similar concern. In the vernacular, it protects whistleblowers from victimization and dismissal. ETHICAL RELATIVISM Ethical relativism is the position that there are no moral absolutes, no moral right and wrongs. Instead, right and wrong are based on social norms. Some have heard of the term situational ethics which is a category of ethical relativism. At any rate, ethical relativism would mean that our morals have evolved, that they have changed over time, and that they are not absolute. Ethical relativism is the theory that holds that morality is relative to the norms of one's culture. That is, whether an action is right or wrong depends on the moral norms of the society in which it is practiced. The same action may be morally right in one society but be morally wrong in another. For the ethical relativist, there are no universal moral standards -- standards that can be universally applied to all
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