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Professional EthicsProfessional Ethics

Lecture 5Lecture 5

Shahid IqbalShahid Iqbal

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Ethics in the World of Business

Ethical dilemma

Benefits of business ethics

Ethical behavior

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Ethics: A Common-Sense Definition

Ethical behavior is what you do when no one is looking

Will you do the right thing even when it is not in your best interest?

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Ethical Dilemmas

On the weekend, you stop at an ATM for Rs 1000. The machine dispense Rs 2000 to you, but only debit your account for the Rs 1000 you requested. What do you do now?

You are going home at 2:00 am and stop for a red light. Looking around, you see no one in any direction as far as the eye can see. What do you do now? What do you do now?

The auto body repairman offers to fix damages not caused by your recent collision as part of your insurance claim. What do you do now?

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The reputation of a thousand years may be determined by the conduct of one hour.

Japanese proverb

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“To see what is right and not to do it is want of courage.” (Confucius)

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Why Business Ethics?

A business that makes nothing but money is a poor kind of business

Avoiding that kind of poverty is where ethics begin

A business that makes nothing but money (mostly) does not make it for long

A ‘boom’ is followed by a ‘bust’

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Benefits of Business Ethics

Linkage between business ethics and financial performance

Building an ethical reputation amongst:-

– Employees

– Customers

– General public

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Role of Organizational Ethics in Performance

Ethical Climate

EmployeeCommitment

and Trust

Investor Loyalty and

Trust

Customer Satisfaction

and Trust

Profits

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Benefits of Business Ethics

Ethics Contribute to Employees Commitment

– Beliefs that their future is tied to that of organization

– Willingness to make personal sacrifice

– Fostering Factors

Safe work environment

Competitive salaries

Fulfillment of contractual obligation

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Benefits of Business Ethics

Ethics Contribute to Employees Commitment– Programs to improve ethical climate

Work-family programsStock ownership

– Positive perception about ethical environment leads to:-

Performance-enhancing outcomesHigher level of trust

Companies viewed highly ethical enjoy six time more worker’s loyalty

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Benefits of Business Ethics

Ethics Contribute to Customer Satisfaction– Important factor of successful business

strategy– Development of long term relationship with

customers & employees– Examples:

Exxon Valdez The GapNike

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Exxon Valdez

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The Gap

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NikeNike

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Benefits of Business Ethics

Ethics Contribute to Profits– Direct impact on employees and customers– Companies convicted of misconduct

experience decline in profits– Examples:

BCBS Healthcare: overcharging the GovtSears: selling auto parts not needed by customersBeech-Nut: selling chemical equivalent instead of claiming 100% pure juice

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BCBS Healthcare

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SearsRichard Warren Sears was a manager, Richard Warren Sears was a manager, businessman, and the founder of businessman, and the founder of Sears, Roebuck and CompanySears, Roebuck and Company

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Beech-Nut

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What is ethical behavior?

Utilitarian view of ethicsUtilitarian view of ethics —— greatest good to the greatest greatest good to the greatest number of people.number of people.

Individualism view of ethicsIndividualism view of ethics —— primary commitment is to primary commitment is to oneone’’s longs long--term sacrifice of selfterm sacrifice of self--interests.interests.

MoralMoral--rights view of ethicsrights view of ethics —— respects and protects the respects and protects the fundamental rights of all people.fundamental rights of all people.

Justice view of ethicsJustice view of ethics —— fair and impartial treatment of fair and impartial treatment of people according to legal rules and standards.people according to legal rules and standards.

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Four Views of Ethical Behavior

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Cultural issues in ethical behaviorCultural issues in ethical behavior::

–– Cultural relativismCultural relativism

Ethical behavior is always determined by Ethical behavior is always determined by cultural context.cultural context.

–– Cultural universalismCultural universalism

Behavior that is unacceptable in oneBehavior that is unacceptable in one’’s s home environment should not be home environment should not be acceptable anywhere else.acceptable anywhere else.

What is ethical behavior?

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The Extremes of Cultural Relativism and Ethical Imperialism in International

Business Ethics

Source: Developed from Thomas Donaldson, “Values in Tension: Ethics Away from Home,”Harvard Business Review, vol. 74 (September-October 1996), pp. 48-62.

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What is ethical behavior?

How international businesses can respect core or How international businesses can respect core or universal values:universal values:Respect for human dignityRespect for human dignity•• Create culture that values employees, Create culture that values employees,

customers, and suppliers.customers, and suppliers.•• Keep a safe workplace.Keep a safe workplace.•• Produce safe products and services.Produce safe products and services.

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What is ethical behavior?

How international businesses can respect core or How international businesses can respect core or universal values:universal values:Respect for basic rightsRespect for basic rights•• Protect rights of employees, customers, and Protect rights of employees, customers, and

communities.communities.•• Avoid anything that threatening safety, health, Avoid anything that threatening safety, health,

education, and living standards.education, and living standards.Be good citizensBe good citizens•• Support social institutions, including economic Support social institutions, including economic

and educational systems.and educational systems.•• Work with local government and institutions to Work with local government and institutions to

protect environment.protect environment.

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An ethical dilemma occurs when choices, An ethical dilemma occurs when choices, although having potential for personal although having potential for personal and/or organizational benefit, may be and/or organizational benefit, may be considered unethical.considered unethical.Ethical dilemmas include:Ethical dilemmas include:–– DiscriminationDiscrimination–– Conflicts of interestConflicts of interest–– Customer confidenceCustomer confidence–– Organizational resourcesOrganizational resources

How do ethical dilemmas complicate the workplace?

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How do ethical dilemmas complicate the workplace?

Ethical behavior can be rationalized by Ethical behavior can be rationalized by convincing yourself that:convincing yourself that:

–– Behavior is not really illegal.Behavior is not really illegal.

–– Behavior is really in everyoneBehavior is really in everyone’’s best s best interests.interests.

–– Nobody will ever find out.Nobody will ever find out.

–– The organization will The organization will ““protectprotect”” you.you.

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Factors influencing ethical behavior include:Factors influencing ethical behavior include:

–– The personThe person

Family influences, religious values, Family influences, religious values, personal standards, and personal needs.personal standards, and personal needs.

–– The organizationThe organization

Supervisory behavior, peer group norms Supervisory behavior, peer group norms and behavior, and policy statements and and behavior, and policy statements and written ruleswritten rules

How do ethical dilemmas complicate the workplace?

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Factors influencing ethical behavior include:Factors influencing ethical behavior include:

–– The environmentThe environment

Government laws and regulations, Government laws and regulations, societal norms and values, and societal norms and values, and competitive climate in an industry.competitive climate in an industry.

How do ethical dilemmas complicate the workplace?

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