Business Ethics

What is meant by ethics?

An ethic is a moral principle or set of moral values held by an individual or a group.

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Ethical behaviour is behaviour which is considered to be right and moral.

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Business ethics are the values and principles which operate in the world of business. They form the moral framework of the organisation.

“Ethics is about how we meet the challenge of doing the right thing when that will cost more than we want to pay”

The Josephson Institute of Ethics

Business ethics help firms decide what actions are right or wrong in certain circumstances.

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E.g. Should a firm relocate to a country paying lower level of wages?

Should a firm release a life-saving drug after limited testing?

Should advertising aimed at children be restrained?

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Important Ethical Questions

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Does it violate the law or policies?

ETHICAL DECISION

Would this sacrifice long-term benefits for short-term gain?

What if everyone did this, but it’s bad?

UNETHICAL

NO

NO

NO

YES

YES

YES

MAY BE UNETHICAL

UNETHICAL

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• Ethics is a greek word, it means character or manners
• Business ethics refers to right or wrong behaviour in business
• Business Ethics or Ethical standards are the principles, practices that guide the business people in the day to day business decisions.
• The term 'business ethics' came into common use in the early 1970s
• The Society for Business Ethics was started in 1980.
•  In 1982 the first single-authored books in the field of ethics has appeared

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Comparing Working Conditions

Bangladesh The UK

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Wage per month: £12 £813

Wage per week: £3 £203

Wage per hour: 33p £5.35

Hours per week: 90hrs 38hrs

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What ethical issues are faced by business?

• Should firms use child labour?

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• Is animal testing needed in products and ingredients?

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• What wages should firms pay to poor countries?

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• To what extent should firms seek to be environmentally friendly?

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• Should firms get involved in certain activities?

e.g making weapons

Common Causes of Unethical Behavior

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• Pressure
• Fear
• Greed
• Convenience

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Who cares about business ethics?

• Customers
• Managers/Owners/Shareholders
• Pressure Groups/Activists
• Workforce
• The Community
• Trading Partners

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Common Misconduct in Organizations

• Misrepresenting hours worked
• Employees lying to supervisors
• Management lying to employees, customers, vendors or the public
• Misuse of organizational assets
• Lying on reports/falsifying records
• Sexual harassment
• Accepting or giving bribes Withholding needed information from employees, customers, vendors or public

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Why be ethical?

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• Create good image and good press
• To act within the law
• Because the owners want to be
• It is one of their unique selling points
• To attract customers/employees/investors
• To be socially responsible

Two sides to every story

• Companies often find it difficult to please all of its stakeholders, as they have different interests.

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• Being ethical depends on an individual view of what is right and wrong. What might be considered

good behaviour to one individual, may

seem bad to another.

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• Ultimately companies aim to make a profit and

sometimes this can conflict with acting in a responsible way.

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• Larger, global companies can often find it difficult to regulate their activities in other countries.

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The worst offenders

The Fraser 2006 rating on ethical reputation (1st being regarded as least ethical), based on interviews with 1,300 adults:

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1. McDonald's
2. Nike
3. Shell
4. Adidas
5. Barclays
6. Coca-Cola
7. BP
8. Camelot (National Lottery)
9. American Express

Bad Ethical Company��Wal-Mart

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• The standard business practices of "bigger is better" does not seem to hold true when it comes to ethics, for sheer size by itself raises allegations of poor business ethics, as seen in the case of Wal-Mart.
• Wal-Mart very often finds itself slapped with lawsuits that accuse it of predatory pricing, or pricing products too low to drive competition out of business and gain a monopoly in local markets. Among several lawsuits, the one in 2003 struck, where Germany's High Court ruled Wal-Mart's low-cost pricing strategy "undermined competition."

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Wal-mart

• Wal-Mart also faced charges of monopoly, by making suppliers dependent on them and forcing them to indulge in self-defeating practices, such as pressuring them to sell goods below cost or at prices lower than they would get elsewhere.

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• The simple step of a simple courageous man is to not take part in the lie, not to support deceit. Let the lie come into the world, even dominate the world, but not through me.”

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The World's Most Ethical Companies 2014 by Forbes�

• 3-M Company - USA - Industrial manufacturing company

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• ABB Asea Brown Boveri Ltd - Switzerland - Energy, Oil and Gas Company

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• Adobe Systems Incorporated - USA - Computer Software

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• Wipro and Tata Power are the only Indian Entities named in the Forbes 2014 world’s Most ethical Companies

Principles of Business Ethics

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• Sacredness of means and ends
• Co-operation with others
• Equivalent price
• Principle of proportionality
• Avoid profit
• Pay taxes regularly
• Fair treatment to employees

True or False?

Is the following statement true or false?

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“Ethics has to do with whether my feelings are right or wrong.”

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True – but we must realise that sometimes our feelings can cloud are judgement and make it difficult to see both sides.

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True or False?

Is the following statement true or false?

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“Ethics has to do with my religious beliefs.”

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True – it can be linked to religious beliefs, but remember it is much more than this.

True or False?

Is the following statement true or false?

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“Being ethical is doing what the law always requires.”

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True – people and business have to follow law, but remember that some laws may be unethical.

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True or False?

Is the following statement true or false?

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“Ethics consists of the standards of behaviour our society expects.”

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True – but remember that society is sometimes unpredictable and cruel.

Ethical Theories

• Virtue Ethics – living to achieve a “clear” ideal
• Utilitarianism (Ethics for the Greater Good)
• Universal Ethics – certain universal principles should apply to all ethical judgments (Ex. Never kill, lie, steal)

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Virtue Theory�

• The term “virtue” is not exclusively a technical term, but it is also not used much in everyday language. Virtues are basically positive character traits, such as honesty and generosity. (The opposite of a virtue is a vice. Vices are negative character traits like dishonesty and greed.) Virtue theory has its historical roots in the work of the ancient Greek philosopher, Aristotle, who argued that each virtue is a mean or “middle-point” between two vices, one of defect and one of excess. So courage, for example, can be understood as a middle-point between cowardice (the defect or lack), on one hand, and rashness (the excess) on the other.
• Virtue theorists tend also to be interested in the process by which individuals acquire various virtues. It is often pointed out that virtues (and vices) are habits, and that habits are acquired by repetition: each time you tell the truth in a difficult situation, it makes it slightly easier to do so the next time. Over time, through repetition, we acquire the habit of truth-telling. This gives special significance to individual actions. The problem with telling a lie is not (as a utilitarian would say) the damage that it does, nor (as a Kantian would say) the fact that lying amounts to disrespecting someone, but rather that in telling a lie we are likely acting in a way that we do not think is worthy of imitation, and we are contributing to the process building ourselves into liars.

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Utilitarianism

Universal Ethics

• A human being is a part of the whole called by us universe, a part limited in time and space. He experiences himself, his thoughts and feeling as something separated from the rest, a kind of optical delusion of his consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest to us. Our task must be to free ourselves from this prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty. – Albert Einstein