BEV Module 1•Definition

•Business Ethics•Relationship between Business and Ethics

•Importance of Business Ethics•Significance of Values•Types of Values•Managerial Values

Definitions

• Ethics- Principles of conduct governing an individual or group. It deals with morality but it is not the same as morality. It is a study of morality.

• Business Ethics- It is the process of evaluating decisions, either pre or post, with respect to the moral standards of society’s culture. In order to evaluate decisions we need tool box of moral standards.

Relationship Between Business & Ethics• Earlier in pre-medieval times the Church regulated moral

functioning of business-keeping business closed on Sunday, while classical economists like Adam Smith and Milton Friedman argued that only objective of business was profit maximization.[Two separate views]

• The Unitarian View- Business is a sub-set of moral structure of the society.[Church prescribed business must exist to do good for the society- no other role to play]

• Separatist View – Views of Smith and Friedman- produce goods and services efficiently, and leave the government to solve social problems.

• The integration View – Business, being an economic entity has a right and the need to make profit, but it must also discharge its obligations to the society{sick and bankrupt business is a social liability}.

NATURE OF BUSINESS ETHICS1. In business activities, ethical question could be

overt[problems like bribery, theft, sabotage, collusion] or covert[corporate acquisitions, marketing and personnel policy]

2. Ethical decision possess characteristics : a.Right(morally correct); b. Equitable; c. Good;

d. Proper; e. Fair and f. Just.3. Ethics is unstructured [Depends upon moral

standards which depends upon our value system; which again depends upon their background and childhood experience.

4. Ethical decisions express should express some obligations to others.

Characteristics of Business Ethics• Ethical decisions differ from person to person• Ethical decisions are not limited only to

themselves but affects wide range of other situations as well. So does unethical decisions.

• Most ethical decisions involve a trade-off between costs incurred and benefits received. Both canot be maximized.

• The consequences of most ethical or unethical decisions are not clear. However something positive will result from ethical decision.

• Ethical decisions are voluntary human action. All humn beings have the freedom of choice and of free will.

IMPORTANCE OF BUSINESS ETHICS• Ethical issues can arise in respect of any kind of business

and is an inescapable fact of business life.• Describing something as ethical does not mean it is

ethically correct. All business decisions have an ethical aspect.

• Everyday ethics: The key business concerns the way business is conducted everyday.

• Business ethics is a corporate governance tool.• Lack of business ethics can cost dear, A business that

ignores the demands of business ethics is unlikely to maximize long-term owner value.

• A business which characteristically lies or cheats or breaks promises is difficult and unrewarding to deal with.

Values

• Values are rankings or priorities that a person establishes for his norms and beliefs. They together form his moral standards- helps us to judge if an action is right or wrong.

• Business is driven by values which determine what business people do and how others react.

• Values are potential sources of conflict as well as cooperation.

Types of Values

Values or of many types. It includes:• Cultural norms- Represents expectations

business clients, customers, employees etc.• Moral(ethical)imperatives- Deep seated ideas

that overrule others.• More general and controlling value –capable of

judging acceptability• Ethical implications - Values are collective

representations of what constitutes a good life or a good society. Exercise of good care and skill in producing goods and services may be of value.

MANAGERIAL VALUES

• Pragmatic – Will a certain course of action will work or not?

• Moralistic – Judging the right way. Being evaluative in an ethical way.

• Affective(feeling) – Suggest an evaluative frame work guided by hedonism- pleasure over pain[happyness is the highest good]

Sources of Ethics1. Genetic Inheritance- Evolutionary forces of natural

selection influence traits such as cooperation and altercation.

2. Religion- Judaism, Christianity, Islam- Business people who believe in these religions have ethical beliefs professed by the tenants of their religion. This is known as religious morality

3. Philosophical System - -Epicures(341-270 BC- Greece)-who believed pleasure was the chief good.

4. Legal System – Laws educate about ethics5. Codes of conduct- - company codes, company

operating policies(gifts, customer complaints, hiring policies)

Factors Influencing Business Ethics

Ethical climate or culture that guide employee thought and action are:

i. Leadership-judging the ethics of the leader.ii. Perceived fairnessiii. Employee authority structureiv. Reward systemv. Ethics as a topic of conversion in the

organizationvi. Organisal focus that communicates “care

for the employees and the community”

ETHICS OF LEADERSHIP STYLES

• A leader’s moral style in organizations can be observed and evaluated. They can be:

1.Manipulator leadership style- based on Machiavellian ethic that states ‘end justifies the means’. Power is the driving force behind a manipulator’s motive

2.Bureaucratic administrator- a rule-based moral leadership style. Principles based on chain of command concept, and following law. Driving force behind this style is efficiency.

3. Professional manager- ‘doing things right’. Driving force amoral technique and assumptions for getting work done by using expertise and tools for accomplishing his task. “Group think”-where consensus-dominated decision making based on unethical, biased thinking may occur.

4. Transforming leader- bases leadership on relationship with followers. The leader is involved in growth and self-actualization. This leadership is moral as it elevates ethical level of the leader nd the followers.

5. Encompassing leadership- This style moves beyond transformational leadership which encompasses the shortcomings of the four other styles.

LEADERSHIP STYLE CONTINUUM

LESS ETHICAL MORE ETHICAL

Manipulator

End justifies

the means

Bureaucratic rule addict Professional

ManagerSocial contact

ethic

TransformingLeader-

Personal ethics