M.Phil. (TU) 01/2010), Ph.D. in Progress BBA VI Semester Business and Society POST RAJ POKHAREL M.Phil. (TU) 01/2010), Ph.D. in Progress

Unit IV: Business Ethics 9 hours Concept of business ethics; Causes and consequences of ethical problems; Core elements of ethical character; Making ethics work in organizations - top management commitment and involvement, codes of ethics, principle-based international standards; Ethics training programs - encouraging ethical behavior, ethics audits, corporate ethics awards; Whistle blowing; Impact of ethics on business and society.

Business Ethics Ethics is the discipline that deals with what is good and bad and with moral duty and obligation. Ethics can also be regarded as a set of moral principles or values. Business ethics, therefore, is concerned with good and bad or right and wrong behavior and practices that take place within a business context. Descriptive ethics is concerned with describing, characterizing, and studying the morality of a people, an organization, a culture, or a society Normative ethics, by contrast, is concerned with supplying and justifying a coherent moral system of thinking and judging. Normative ethics seeks to uncover, develop, and justify basic moral principles that are intended to guide behavior, actions, and decisions.

Business Ethics Comprises principles, values, and standards that guide behavior in the world of business Ethical decisions occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment Values and judgments are critical in ethical decisions Principles: Specific boundaries for behavior that are universal and absolute Freedom of speech, civil liberties Values: Used to develop socially enforced norms Integrity, accountability, trust Business Ethics Application of general ethical ideas to business behavior

Key Reasons Business Should be Ethical To meet demands of business stakeholders Meeting demands of stakeholders is good business To enhance business performance Research shows linkage between ethically responsible behavior and favorable corporate financial performance Imparts trust, promoting positive alliances among business partners To comply with legal requirements To prevent or minimize harm principle that business should “do no harm”. Examples include not harming society with toxic waste, protecting business from unethical employees and unethical competitors. To promote personal morality Knowing one works in a supportive ethical climate contributes to sense of psychological security People want to work for companies that do the right thing

Book: Business and Society, Page 241

Causes of ethical problems Personal gain and self-interest or Greed: People do exist who only work for money lifelong and concern about their personal benefits like promotions and money no matter whether it is ethical or not. Competitive pressure on profits Conflicts of interest Cross-cultural contradictions Employee Behavior : Discrimination to the employee Employee Working Conditions: Safety work envt. Supplier/Customer Relations: use their information correctly Small Business Ethics: Hiring, firing, conflict of interest

Consequences of ethical problems Employee Performance --- Diminish (employees are not motivated to work for unethical company) Employee relations: … Good employees do not like to maintain coordinal relationship with unethical practice management Company creditability: …. Go down Reduced turnover / sales, Drop in stock price … …. ….. …

Why ethical problems occur in business ?

Core elements of ethical character Trustworthiness Respect for Others Responsibility Caring: Citizenship: Good citizen Fairness

Making ethics work in organizations Top Management Commitment and Involvement Critical to fostering employee ethical behavior Do remember core elements of ethical character at all respects Trustworthiness Respect for Others Responsibility Caring: Citizenship: Good citizen Fairness Ethics Reporting Mechanisms Purposes include providing interpretations of proper ethical behavior, avenue for reporting unethical conduct, and information-sharing tool Employees can place a call on the company’s ethics assist or helpline Executives tend to use the helpline more often than middle managers

Making ethics work in organizations Ethics Policies or Codes Provides guidance to managers and employees on what to do when faced with an ethical dilemma In Japan policies tend to be combination of legal compliance and company values Just having a code or policy is insufficient, must be widely distributed and have associated training

Ethics training programs Is very effective method for promoting workplace ethical behavior Most expensive and time-consuming element of an ethics program Encouraging Ethical Behavior: Making employees behave ethically for sustained competitive personal and organizational development Complying code of ethics: written guideline to accept and ethical behavior, outlining uniform policies and procedures. Codes of ethics are formalized rules and standards that describe what a company expects from its employees.

Ethics Audits Neutral, third-party verifiable process to understand, measure, report on, and help improve an organization's social and environmental performance. Systematic evaluation of an organization's ethics program and performance to determine whether it is effective. Includes: Corporate decision and compliance Communication of decision and the implementation Management sincerity Incentive and reward systems Management commitments and implementation Formal study of deviations from company ethical standards Management must report on corrective action to be taken in response to found deviations

Why Managers and Employees Behave Ethically

Impact of ethics on business and society. Classroom Activities

A Pyramid of Values Philanthropic Responsibilities: Be a good corporate citizen. Contribute resources to the community; improve quality of life. Ethical Responsibilities: Be ethical. Obligation to do what is right, just and fair. Avoid harm. Legal Responsibilities: Obey the law. Law is society's codification of right and wrong. Play by the rules of the game. Economic Responsibilities: Be profitable. The foundation upon which all others rest.

To make some extra money during college, I got a part-time job in a mailroom at a rather large business. This business would send out hundreds of pieces of mail each day, all going through the mailroom. Our job as the staff of the mailroom was to package this mail to be shipped, put the proper amount of postage on it, and then take it to the post office. To put the postage on the items, we used a postage meter that was in the mailroom. The postage meter would weigh the mail and then stamp it with the correct amount of postage; my employers would pay the postage costs in lump sums periodically throughout the year. Occasionally, my boss would run some of his personal mail along with the business mail. When I asked him if sending personal mail through the meter was basically stealing money from the company, he justified it by saying that he only used the meter to mail his bills, and he would never use it for anything that cost more than 60 cents. He also said that he had been working there for 13 years, and he compensated for his low pay by being able to send out the occasional bill or letter. I figured that a few cents here and there would not hurt the company and looked the other way. ETHICS I N THE MAILROOM 1. Define “what is” and “what ought to be” in this case. 2. Was my boss’s practice ethical? Does working for a company for 13 years justify sending out personal mail that the company pays for? 3. Does my boss’s low pay justify his using company resources to send out personal mail to compensate for the low pay? After all, isn’t it just “balancing things out”? 4. Is there any reasonable way to get from “what is” to “what ought to be” without getting fired? 5. Did I do the right thing by looking the other way, or should I have turned my boss in for stealing company money, even though it was just a few cents here and there? What should I have done?

Three Approaches to Management Ethics Immoral Management Amoral Management Moral Management Ethical Norms Management decisions, actions, and behavior imply a positive and active opposition to what is moral (ethical). Decisions are discordant with accepted ethical principles. An active negation of what is moral is implied. Management is neither moral nor immoral, but decisions lie outside the sphere to which moral judgments apply. Management activity is outside or beyond the moral order of a particular code. May imply a lack of ethical perception and moral awareness. Management activity conforms to a standard of ethical, or right, behavior. Conforms to accepted professional standards of conduct. Ethical leadership is commonplace on the part of management. Motives Selfish. Management cares only about its or the company’s gains. Well-intentioned but selfish in the sense that impact on others is not considered. Good. Management wants to succeed but only within the confines of sound ethical precepts (fairness, justice, due process). Goals Profitability and organizational success at any price. Profitability. Other goals are not considered. Profitability within the confines of legal obedience and ethical standards. Orientation towards Law Legal standards are barriers that management must overcome to accomplish what it wants. Law is the ethical guide, preferably the letter of the law. The central question is what we can do legally. Obedience toward letter and spirit of the law. Law is a minimal ethical behavior. Prefer to operate well above what law mandates.