Ethics in Business: Ethics or Ethical law, what comes first?

ByAnshul Jindal

NMIMS University, MumbaiPh : (0)9967292959

“A Business that makes nothing but Money is a Poor kind of Business.”

~ Henry Ford

• Chanakya : (350 : 283 BC) wrote NitiShastra popularly known as ChankyaNiti

What do you understand by Ethics?

• Possible Answers:

– “Ethics has to do with what my feelings tell me is right or wrong.”

• Feelings change and your feelings aren't always right!

– "Ethics has to do with my religious beliefs.”

• Ethics apply only to religious people!

– "Being ethical is doing what the law requires.”

• How about apartheid laws of present-day South Africa?

– "Ethics consists of the standards of behavior our society accepts.”

• Some sections accept Abortion but many others do not, What to do?

Then, What is ETHICS?

• Ethics refers to– well based standards of right and wrong that

prescribe what humans ought to do

– in terms of rights, obligations, benefits to society, fairness, or specific virtues.

• Secondly– ethics refers to the study and development of one's

ethical standards

– Standards are supported by consistent and well founded reasons

What is Law?

• Law is an enforceable rule of conduct in a society.

What is Ethics?

• Deciding what is right or wrong in a reasoned impartial manner

What is Business Ethics?

Laura Nash defines business ethics as

“the study of how personal moral norms apply to the activities and goals of commercial enterprise,”

as dealing with three basic areas of managerial decision making:

1. Choices about what the laws should be and whether to follow them

2. Choices about economic and social issues outside the domain of law

3. Choices about the priority of self-interest over the company’s interests

Source: the Ethics Dilemma, John Eckmire

Justifications by Managers

• ‘do what- ever you have to in order to satisfy the client’

• ‘performance at all cost’

• ‘pulls and pressures’-by seniors

• ‘system’s like this’ or ‘this can’t be done otherwise’

Why Business Ethics

• Nothing New:- Caveat Emptor : 16th century

• After QMS-TQM, CMM, 6-Sigma, CSR : it’s turn of Business Ethics

– Increasing IT & Technology

– Emerging Trust based Partnerships

– Global Environment

– Focus from “Shareholder” to “Stakeholder”

– Increasing Intangible Assets

– Culture Issues

Triple Bottom Line

Source: Ernst & Young

Business Ethics

Managerial Mischief

Illegal practices

Questionable practices

Moral Mazes

Daily Ethical Issues

White Area

• Perfectly Right Decisions

• e.g. Good Quality,JustifiedCosts

Gray Area

• Ambiguous,FuzzyArea

• Critical Area for Decisions

Black Area

• Illegal & Unacceptable Acts

• e.g. Murder of Competitor

Not Right but not Wrong -

Confused

Ashok’s Supplier

Evaluation Case Study

Ethics and

Environment Bhopal

MarketingCoca cola v/s Pepsi

Finance Satyam

HRM Jet-Airways

Business Alliances & Competitors

Kingfisher n Jet

All said and done! How to Change or Improve???

Organizational Changes

Individual Execution

Ethical Enterprise

What / who are we?

How are we?

Is this what we want and need?

What / who do we want and need to be?

Self Analysis : Essential for Individual’s & Organizations both

Individual Change

Code based on Ethics Law

Ethical Organization

Ethics or Ethical Law, What Comes First?

Who’ll set the Stepping Stone?

TYPES OF MANAGERIAL ETHICS

Immoral management

• Lacks ethical principles, concern for profit only

Amoral management

• Ignores, or oblivious to, ethical issues

Moral management

• Conscious attention to ethical standards and issues

Transitio

nR

eqd

.

Most of us are Here!

Golden Rule

Underlying Meaning : Above all, do no harm.

SIMPLE GUIDELINES FOR MANAGERS

• Obey the law.

• Tell the truth.

• Show respect for people.

• Don’t ignore; Take Initiatives.

• Participation not paternalism.

• Responsibility requires action.

• Stick to the Golden Rule.

Roadmap for Organizations:Get Ethics in DNA

1. Top Management Commitment

2. Enable 3R’s in core philosophy

3. Make Ethics as “Competitive Advantage” rather than a restriction

4. “Ethics of Scandal” Versus “Ethics of Strategy”

5. Establish Ethics Policy Procedures

6. Follow Ethical Decision Making Framework

1. Top Management Commitment

• Foremost step in any Organizational Change

• Incorporate Ethics into Vision & Mission of the organization

– “Practice what you Preach”

Example of Negligence:

Rocket Singh Bollywood movie(2009)

“When salesman(Ranbir Kapoor) took an Ethical initiative to avoid Corruption, his

stand was disregarded and he was criticized by the Top Management”

2. Embed 3R Philosophy

Respect

People

Organization

Environment

Responsibility

Stakeholders

Oneself

Result

Ethical Results = Results

Non Ethical Result = ‘Theft’

Statement by neighborhood Kirana Store

owner

3. Ethics as ‘Competitive Advantage’

• Behavior that is trusting, trustworthy, and cooperative, not opportunistic, will give the firm a Competitive Advantage.

• Competitive advantage-when a company implements a value-creating strategy which other companies are unable to imitate

• Example:

a company with superior leadership skills in enhancing integrity capacity increases its reputation capital (Goodwill) with multiple stakeholders, investors and positions itself for competitive advantage…

4. “Ethics of Scandal” Versus“Ethics of Strategy”

• Deal with ethics as a corporate strategy

• If uniquely implemented, company could achieve competitive advantage

• Don’t wait to react to possible ethical issues of importance to the targeted shareholders

• being ethically proactive company rather than being ethically reactive company.

5. Ethics Policy Procedure

Establish/Amend the Code

Communicate

Go PublicProvide Support

Structure

Review Code

6. Follow Ethical Decision Making Framework – if a conflicting issue occurs

1. Recognizing an issue as an ethical one

2. Making an ethical judgment

3. Resolving to do the ethical thing

4. Actually behaving ethically

Source: Thomas M. Jones, Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model

Other Measures

• Establish

–Awareness Programs

– Ethics committees

– Ethics audits

– Ethics hotlines

– Ethics training

– Ethics Award

Pitfalls to Avoid

• Employees sometimes view the ethics program as superficial– Make Ethics Objective Achievable

• Ethics Code should serve as Guide Post– Comprehensive Policy covering all gray areas can’t be made– Embed ethics in DNA (again)

• Update the code regularly– With respect to various Governmental, Societal changes

• Designing Ethics Code for Global Companies– Keep in mind the Cultural Differences, Laws, Regulations

• Address Cynicism effectively

Conclusion

• Competition is game metaphor rather than the war metaphor – important to include ethics in the corporation’s

strategy• Sportsman who takes drugs can never be a winner

• Organizations: Go beyond Legal Compliance & set your own standards– The purpose of ethics is to enhance our lives and

our relationships both inside and outside of the organization.