MBA I - 428

BUSINESS ETHICS

UNIT - III: ETHICAL VALUES

WORK ETHICS
Ethics allow employees to distinguish the differencebetween right and wrong. Work
ethics refers to the application of moral principles, standards ofbehavior, or set of values
regarding properconduct in the workplace as individuals and members of a group. Ethics
applies to any relationship between individuals. The people involved in the context of
organization are:
• Management/Supervisors
• Colleagues/Employees
• Customers
Ground rules - Companies differbut there are some common principles followed by
any.They are: Trustworthiness, Respect, Responsibility, Fairnessand Caring.

Unethical practices – Some of the unethical practices found in organizations are: Illegal
practices, Ignoring procedures and policies, Abusing confidentiality agreements, Falsifying
information, Withholding information, Making decisions for personal benefits, Stealing,
fraud, embezzlement, lying, bribing, black mailing, sexual harassment , discrimination,
spreading rumors to assassinate characters, etc.

Causes for poor ethics - Poor ethics may be result of organization systems like Stricter rules,
Fewer privileges, undesirable work environment, supervisor practices like domination,
suppression, and disrespect to subordinates, and individual values like dishonesty and
criminal mind.

Benefits of workplace ethics – By fostering ethics at workplace, an organization can get the
following benefits: Loyalty of employees, Desirable work environment, good office morale,
good results and image.

How to enforce workplace ethics –It begins at the time of hiring. Every company has certain
guidelines to which its employees must adhere. They are frequently outlined in employee
handbooks.Many even summarize expected conduct in job descriptions or during the
interview process. Behavior guidelines typically address topics, such as harassment, work
attire and language. Workers who don’t follow codes of conduct may receive written and
verbal warnings, and ultimately be fired.Adherence to the ethical and behavioral guidelines
in the workplace should be recognized and rewarded.
WORK CULTURE
Work culture is important for the growth of a company, and in turn the growth of a
country. There exist many differences, pros, and cons in work culture of any country.

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Companies have to pick and adapt the best practices of work culture around the globe and
implement them in their organizations.

Work culture in anyorganization is the outcome of a set of values and beliefs, carried
forward for a longtime and has substantial impact on the work place behaviours and
achievements.

US and Indian cultures- A comparison

Some important difference in work cultures between US and India are as follows.

Time management
● Working hours -In all the Western countries, especially USA, people strictly adhere to
the time. They work in the office for eight hours a day. On the contrary, in India,
people do not adhere to the timings. No doubt, they work for long hours
approximately for 10-12hrs a day and sometimes even on weekends
● Breaks -They take lunch break for half an hour.Indian managers take long tea breaks
and lunch breaks.
● Meetings–US managers attend the meetings sharply in scheduled timings. In India,
sometimes scheduled meetings are canceled, due to absence of some key persons.
● Time deadlines- For Americans, strict adherence to time commitments is seen as a basic
principle of professionalism and courteous behavior. In India managers are not very
imperative on deadlines and keep negotiating for extension of timeline.

Work life balance

● Value of work - In US, work is a part of their life, but not the life itself. Nevertheless,
they stay back at office occasionally, when they need to work. In India, there may be
a greater sense of ownership of work and they value work more than that of
personal life. Most of the Indians think workplace as an opportunity to build their
future and put forth extensive efforts to climb the corporate ladder and earn
monetary benefits.

● Overtime work- In Western work-culture, they give more value to the time spent for
their personal life. They do not carry the workplace pressures or stress to home.
Indians work day and night beyond limits, which results in losing work-life balance.
This also makes them encounter a lot of pressure, as the demands at work place and
family are almost opposite.

Top driven decisions – In US, decisions tend to be less top-down, authority ismore
delegated, and managers expect team members totake responsibility and assume
ownership of result. In India, decisions flow down from top.

Superior –subordinate interactions

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 ● Relationship - In western work culture, the relation between boss and subordinate is
not more formal and hierarchical, superiors treat subordinates with respect and do
not demonstrate ranks. In India, the relationship between the boss and subordinates
is believed to be more formal and hierarchical. People in power openly display their
ranks according to which importance is given.
● Delegation –In US, subordinates are entrusted with important assignments. Indian
employees are not supposed to expect clear guidance from the managers and they
are often not assigned with important work.
● Sharing credit or blame –In US, blame for things that go wrong is either shared or is
often accepted bythe superior, due to it being their responsibility to manage. In
India, subordinates are expected to take the blame for things that go wrong. The
relationship between boss and subordinate is rarely close/personal.
● Meetings -Western managers often socialize with subordinates. Meetings are
interactive sessions to arrive at best decisions. In India, in general company
meetings only few people dominate, even though their decisions are wrong.
However, it may varyfrom company to company.
● Mentoring In the US, managers tend to be unbiased in giving critical assessments to
their mentees. Indian managers are a bit soft in criticalassessments. Seniors tend to
lean more on positivefeedback during an appraisal, leaving the criticismunsaid.
Agreements
Americans have a preference for clear, detailed agreements and are uneasy with vague
expressions of general commitment. In business interactions, commitments are taken
literally and seriously. Failure to follow through on them precisely is viewed as a sign that
a person isn’t trustworthy. Indian business culture tends to view agreements more flexibly
as intentions and guidelines for future action.

Results vs. Process Orientation-

In American business culture, it’s all about results. Americans don’t like to be told all the
procedural reasons why something can’t be or hasn’t been done. In Indian business culture,
following the rules and implementing correct processes is highly valued.
Communication
The American style of communication is characteristically direct, candid and relatively
unconcerned with face-saving or the avoidance of conflict. The expectation is that questions
will get answered with a clear “yes” or “no,” and that disagreements will be dealt with
openly and straightforwardly, in a “tell it like it is” manner.
Indians and people from other cultures that tend to avoid conflict and loss of face often find
it hard to say “no” or raise problematic issues effectively with their American counterparts.

Change

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In western work-culture, people are adaptive and conductive to change implementation.
In Indian work-culture, people do not accept changeeasily; lot of resistance is encountered
in order toimplement change.

ETHICAL THEORIES
Different philosophers have developed different theories of ethics. A brief description of
the ethical theories is as follows.

1. CHARACTER BASED THEORIES

They maintain that ethical traits determine ethical behavior.

Virtues theory - Aristotle, espoused moral virtues, such as courage and truthfulness. These
are formed through habitual action. The virtues are dispositions to find the golden mean
between two extremes and help us find happiness and fulfillment. In Mahabaratha epic, the
virtues of Dharma raja and in Ramayana the virtues of Sri Rama are told to children to
emulate and develop character. They represent virtues like kindness, truthfulness, honesty,
integrity, unity, equality, equity and society interest above self -interest.

Eternal law- Many church leaders and some philosophers (Thomas Aquinas and Thomas
Jefferson among them) believe that there is an Eternal Law, incorporated in the mind of
God, apparent in the state of Nature, revealed in the Holy Scripture, and immediately
obvious to any man or woman who will take the time to study either nature or the
Scripture.
If people had rights to “life, liberty and the pursuit of happiness,” then they had
obligations to ensure those rights to others. If we are loved, then we must love others.
This reciprocal exchange is summarized in Christian theology by the Golden Rule: Do unto
others as you would have others do unto you.
● Golden rule principle: You act on the basis of placing yourself in the position of
someone affected by the decision and try to determine how that person would
feel.

Hedonism It refers to the self -serving philosophy of individuals who seek to maximize
their pleasure in the world they are living.The following ethical principles attempt to
justify self-serving decisions and behaviors.

● Hedonist Principle: You do whatever is in your own self-interest, but not clearly
illegal.
● Might-equal-right principle: You do whatever you are powerful enough to impose
without respect to ordinary social conventions and widespread practices or
customs, but not clearly illegal.

2. TELEOLOGICAL ETHICS THEORIES

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They maintain that good ends or results determine the ethical value of actions.
Utilitarianism –This is originated by Jeremy Bentham (1748-1832), a British thinker. Utility
measures our degree of preference for a given good or service relative to price. The theory
focuses on net consequences not individual intentions.

According to the theory, the good course of action is one being that brings the greatest
amount of good over bad, both over the long term and the short-term.

● Utilitarian principle: You act on the basis of whether the harm inherent in the
decision is outweighed by the good in it, but not clearly illegal.
● Means-end principle: You act on the basis of whether some overall good justifies
any moral transgression, but not clearly illegal.
● Organization interests’ principle: You act on the basis of what is good for the
organization and the achievement of its goals, but not clearly illegal.

It uses a quantitative method for making ethical decisions by looking at how to provide the
greatest good for the greatest number. The use of a cost and benefit analysis is one of the
ways in which one can make a decision. “The greatest good for the greatest number” takes
precedence in Utilitarian theory over “The greatest good for a smaller, more elite number.”

Following the utilitarian view, a manager might conclude that laying off 20 per cent of a
plant’s workforce is justified because it will increase the plant’s profitability, improve job
security for the remaining 80 percent, and be in the best interest of stockholders.

To save time, and to avoid the need to compute the full consequences of every decision and
action, most Utilitarian theory recommend the adoption of simplifying rules.

Examples: The following are expected to lead to beneficial outcomes in all foreseeable
cases.

● Always tell the truth - It enhances trust; one may lose by this temporarily, but it is
truth that triumphs ultimately.
● Never renege on a contract - It shows reliability. a
● Give value to efficiency and productivity - It ensures profit maximization.

Utilitarianism is criticized for its biased nature of causing loss to some for the benefit of
many.

In case of business, can we ignore shareholders for benefiting customers?

If a manger harasses his subordinate, do you ignore it because manager is more important
for the organization than worker?

Utilitarianism fails because there are some actions that are simply wrong, despite great
apparent net benefits for a huge majority.

Example: Testing a drug on some people, for providing a new medicine for a serious
disease like cancer.

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Case: Giftvs Donation

You won a prize money of Rs. 5000. Now you would like to do something good with it.
You have readily two options: (i) Donate it to an orphanage (ii) give a costly gift to your
boss to secure his favour. What do you do?

The utility of the money to the orphanage is more. It benefits others, whereas gift to boss
may serve your own needs. It will be a selfish act. Utilitarian principle, suggests donation,
whereas Hedonist principle recommends gifting.

3. DEONTOLOGICAL ETHICSTHEORIES
The deontological approach is the reverse of teleological theory. Deontology is derived
from another Greek term referring to the duties or the obligations of an individual.Since
personal duties are universal, applicable to everyone, deontological theory is also termed
Universalism.

Universalism A common observation is:

Everyone, who secured a loan, should repay it and no one, needing money, should rob
banks.

FeaturesThe following points describe the tenets of universalism.

It emphasizes on intentions and not outcomes.The moral worth of an action depends upon the
intentions of the person making the decision or performing an act. One cannot judge moral
worth of a decision or action based on outcomes, because at the time the decision or action,
the outcomes are in general indefinite and uncertain

Intentions guide actions Decisions and actions are driven by intentions. Intentions translate
into personal duties or obligations. If a person intends to help others, he will act in a way
to that ensure benefits to them.

Actions become duties. The actions that bring the greatest benefits to othersare duties. They
are incumbent upon us rather than choices that are open to us. It is our duty to tell the
truth; it is our duty to adhere to contracts; it is our duty not to take property that belongs to
others.

Treat others as endsTreat others as ends and not as means. Other people should be seem as
valuable ends in themselves, worth of dignity and respect, and not as impersonal means to
achieve our own ends. For example, engaging a worker for 12 hours, for a pay of 8 hours
to increase profits is exploitation. Such an act, injures human rights.

Categorical Imperative

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Immanuel Kant (1724-1804) proposed a simple test for personal duty and goodwill. The
Categorical Imperative; “categorical,” of course, means absolute or unqualified, and the
percept is that an act or decision can be judged to be “good” or “right” or “proper” only if
everyone must, without qualification, perform the same act or reach the same decision,
given similar circumstances. The two formulations by Kant are:

1. To act only in ways that I would wish all others to act, faced with the same set
of circumstance, and
2. Always to treat other people with dignity and respect.

The first version says that what is morally right for me must be morally right for others.
The second one says everyone is of equal value. If this is so, then no person’s rights should
be subordinated to those of anyone else.

● Professional standards principle: One can act on the basis of code of conduct laid down
the apex association of profession to which he or she belongs.
Universalism, particularly when supported by the Categorical Imperative test and
professional standards principle is a familiar and useful guide to behavior. However, it is
not without limitations.

For example, copying in exams, is what many do, when they are not prepared for
examination. Thus, what others do, may not be always good to follow.

When it comes to treating individuals as ends and not means, controversy arises. Sending
youth to join military and die in a war and employing people in sanitary works, will be
unethical.

4. Distributive Justice
The theory of Distributive Justice, was proposed by John Rawls, a member of the Harvard
faculty. It is based upon the primacy of a single value: justice. Justice is felt to be the first
virtue of social institutions; our laws and institutions. No matter how efficient or accepted,
institutions must be reformed or abolished if they are unjust.

Justice refers to fairness. Rawls asks: ‘What sort of society would you design from behind
this “veil ofignorance”? When people are totally ignorant of a situation, they will be
speaking behind a veil of ignorance. Rawls states that the people behind the veil of
ignorance will almost certainlyagree on the following two things:

● Everyone will be equally free (freedom of religion, speech, etc.).

● All inequalities within society must: (a) benefit everyone in the society, and (b) result
from opportunities that were available to everyone (i.e., all people have an equal
opportunity).

Four concepts associated with the definition of justice are: Fairness, Equality, Desert and
rights. :

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 1. Fairness: It refers to treatment of similar cases in the same way. For instance, it
would be unfair if one gets death sentence and another gets life time sentence, for
the same crime.
2. Equality: It refers to treating peopleequally. Forinstance, treating men as superiors
is immoral discrimination.
3. Desert: People ought to get what they deserve (i.e., good deeds should be rewarded,
and bad deeds should be punished). For instance, a poor performer is left
unpunished. Then we say “injustice” has occurred.
4. Rights: They refer to certain moral claims that everyone ought to be able to exercise
against others. For instance, right to life, right to the freedom of speech, andfreedom
of religion.

If someone tries to violate them, then the affected person has alegitimate claim against it.

Modern systems develop the distributive systems on the following bases:

● To each person equally

● To each according to his or her need
● To each according to his or her effort
● To each according to his or her contribution
● To each according to his or her competence

For instance, companies provide equal opportunities, to both men and women in respect of
selection, training, assignments, and promotion. Failure to do so is called gender
discrimination. Public distribution systems are designed to make free distribution of
essential commodities to poor. Wages and salary systems are designed to reward
employees based on effort, contribution and competence.

Distributive justice principle: You act on the basis of treating an individual or group equitably
rather than on arbitrarily defined characteristics, but not clearly illegal.

The theory of distributive justice is not cherished universally.

While the distributive justice based on effort, contribution and competence, is appreciated
by advocates of capitalism, distributive justice based on equality and need are valued by
champions of socialism.

Case -Star Employee

Company A has 55 workers on its payroll. Sunitha has superior abilities than everyone
else. She is faster in work. She makes fewer mistakes and generally out-performs every co-
worker. Should she receive more pay than all of the other employees who have the same
job?

There are two ways we might answer this question:

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No Sunitha has certain advantages like recognition and appreciation for her
abilities.
If pay rise is given, the disparity between her and her co-workers will increase. .
If others are doing their best, but not able to compete with her, they will be
discouraged by the pay rise given to her. Not to create inequality, she should
not be given pay rise.
Yes Sunitha, has more competences. She is contributing more. As such, if anyone is
getting higher pay, fairness demands that she should be given a pay rise.

Concerns of fairness and equality suggest one answer; desert suggests another.

Case -2 Progressive taxation

Government of India has adopted a policy of progressive taxation by which rich people are
taxed more and poor are not taxed. Is taxing the rich in order to promote welfare of the
poor, an ethical decision?

The decision is justified based on utilitarian principle, and principle of distributive justice.

5. Personal Liberty and rights (Entitlement theory)

The theory of Personal Liberty is proposed by Robert Nozick, a member of the Harvard
faculty. He opined that justice depends upon equal opportunities for choice and exchange,
not upon equal allocations of wealth and income. He proposed a system based upon the
primacy of single value- liberty. Individuals must be allowed to make informed choices
towards their own welfare.Such choices are “just” or “right” or “proper” as long as the
same opportunities for informed choices are extended to others. Anyinstitution that
violates individual liberty in making choices, has to be regarded as unethical and rejected, even
if it giveshappiness and benefitsto others.

Three principles of justice are discussed.

● Justice of Acquisition: If one owns something that he previously not owned, in a just way,
then he is entitled to it.
● Justice of transfer – If something owned is transferred based on mutual agreement, it is
just. Entire trading system is based on this.
● Rectification of injustice- If someone owns something in an unjustified means, it is
necessary to rectify it.

Case: Compulsory rural service

An A.P and Telengana States, junior doctors went on a month long strike against the
condition that forced them to put up one year rural service to get their degree. They
contend that the condition has robbed them of individual choice of choosing a career early
in life.

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However, the High court ruled that they should serve one year in rural areas, as
government has invested huge money for their education and they have right to impose
such rule in public interest.

When viewed, with reference to utilitarian principle, it is ethical. A large number of hapless
rural people are benefited and limited number of doctors are made to sacrifice one year.
However, when viewed from liberty and rights, the rule curtails the freedom to make
choice of junior doctors. Hence unethical.

5. Rightstheory
The Rights based theory is proposed by John Locke.

It states that human beings have duties because people have rights. It is concerned with
respecting and protecting individual liberties and privileges such as the rights to privacy,
freedom of conscience, free speech, life and safety, and due process. Negative rights, on the
other hand, place duties on other people not to interfere with one’s life. One may also talk
of having rights to certain goods and services, health care, a clean environment or
education.

● Principle of Individual Rights: This behavior gives the due respect to the rights of all the
affected persons in terms of the basic human rights.
When emphasis is on protecting individuals’ rights, organizational needs receive less
attention.

6. Public disclosure principle

Disclosure principle: You act on the basis of how the general public would likely respond to
the disclosure of the rationale and facts related to the decision, but not clearly illegal.

ETHICAL VALUES
Ethics is based on a set of moral values. Some of the time tested values are:
● Honesty. The old adage, "honesty is the best policy" is true today more than ever.
● Integrity. Integrity means taking the high road by practicing the highest ethical
standards.
● Responsibility. Ethical people take responsibility for their actions. They do not pass
blame on others.
● Quality.Ethical people try to do justice to their job, by maintaining quality in their
performance. From memostopresentations, everything an employee touches should
communicate professionalism and quality.
● Trust.Trust is created by reliability and credibility. Everyone who comes in contact with
the managers must have trust and confidence in how they do business.
● Respect. Respect is demonstration of honor, value, and reverence for something or
someone. Managers should respect the laws, and thepeople with whom they work.

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● Teamwork. Team work is a necessity today. Team work is possible when people work
openly supporting each other. .
● Corporate Citizenship. Every company has to become good citizen in the community. .For
that it should provide a safe workplace and protect the environment.
● Shareholder Value. The common goals of every employees should be to build a strong,
profitable company that will last.
Developing values

The values set up by companies become the values of employees. They have little
freedomto choose their own ethical values. As such, thevalues must be absolute. They
should be provide guidance to employees when they are in a critical or dilemmatic
situation.
How to enlist employee commitment or dedication to values?
● First, preach values. Every employee from top to bottom must be informed and
made accountable to the same values. Corporate values must be "sold"
aggressively throughout the company. Every forum and medium should be used to
spread the good message.
● Second, practice values. Management must lead by example.
● Third, training must be provided to get everyone on the same page.
● Fourth, sustain the spirit. The ethics fervor should extend to a long period. The
longer it lasts, the more they will be internalized by employees.
ENVIRONMENTAL ETHICS
Environmental ethics is the philosophical discipline that considers the moral and ethical
relationship of human beings to the environment.

Evolution -In 1970s, environmental ethics has emerged as the result of increased awareness
of the people- planet issues. On one side, the rapidly growing world population was
impacting the environment. The undesirable environmental consequences that came with
the growing use of pesticides, technology, and industry are analyzed. On the other side,
environmental degradation is endangering lifeof humans, plants and animals. It is in this
context, environmental has come into limelight.

The “shallow ecology movement”, focuses on the “fight against pollution and resource
depletion”, whereas the “deep ecology movement”, endorses “bio-spheric egalitarianism”,
the view that all living things are alike in having value in their own right, independent of
their usefulness to others.

Objectives --The aim of environmental ethics is to promote sustainable environment and

quality of life for mankind.

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Issues - Water and air pollution, the depletion of natural resources, loss of biodiversity,
destruction of ecosystems, and global climate change are all part of the environmental
ethics debate.

Is it acceptable for poor farmers in undeveloped countries to cut down forest to make room
for farmland, even if this action harms the environment? Is it morally wrong for humans to
continue to burn fossil fuels knowing that this action leads to air pollution and global
climate changes? Is it ethically permissible for man to build a hydroelectric dam knowing
that this will disrupt the migration pattern of certain fish, leading to their extinction? Does
a mining company have a moral obligation to restore the natural environment destroyed by
their mining techniques?

Ethics are relative - Human values are unique and relative. Individuals differ in placing
importance on each element of life. For example, in a developingcountry cutting down the
forest to make room for industry to enhance livelihood of people is acceptable. However,
for a developed country, such an action is morally unacceptable because the destruction of
forests increases carbon dioxide emissions into the atmosphere.

CONSUMER PROTECTION.
The consumer is to be protected against any unfair practices of trade. Because consumer is
relatively in a weak position, it is very essential for the consumers to haverights .The
definition of Consumer right is 'the right to have information about the quality, potency,
quantity, purity, price and standard of goods or services’.

The Consumer Protection Act of 1986 was enacted with an objective to provide better
protection of the interests of the Consumers. The Act enshrines the following rights:

● The right to be protected against the marketing of goodswhich are hazardous to life
and property;
● The right to be informed about the quality, quantity,potency, purity, standard and
price of goods so as toprotect the consumer against unfair trade practices;
● The right to be assured, wherever possible access tovariety of goods at competitive
prices;
● The right to be heard;
● The right to seek redressal against unfair trade practicesor unscrupulous
exploitation of consumer; and
● The right to consumer education.

If there is infringement of rights of consumer then a complaint can be made under the
following circumstances and reported to the close by designated consumer court:
● The goods or services purchased by a person or agreed to be purchased by a person
has one or more defects or deficiencies in any respect
● A trader or a service provider resort to unfair or restrictive practices of trade

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● A trader or a service provider if charges a price more than the price displayed on
the goods or the price that was agreed upon between the parties or the price that
was stipulated under any law that exist.
● Goods or services that bring a hazard to the safety or life of a person offered for sale,
unknowingly or knowingly, that cause injury to health, safety or life.

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