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However, these actions can be amoral which means that they are beyond the spare of morality. For example: a petrol pump owner sells both petrol & diesel to the customers for a profit. It is an example of amoral conduct of business. But if he mixes petrol with Kerosenes & sells it to the customers, than this is said to be immoral. Hence right, wrong, & moral & immoral are called/known as moral judgement. Moral judgements require moral standards by which human conduct can be judged. Hence, Ethics can be defined as - The science of character of a person expressed as right or wrong conduct of action.
NATURE OF ETHICS
1) Ethics deals with human ethics. Human beings by nature are capable of judging between right & wrong, good & bad behaviour as human being are associated with values & morals. 2) There was an agreement within, Ethics is a science or an art but experts say that Ethics is a science & not an art because it is a systematic knowledge about moral behaviour & conduct of human being. 3) Ethics is a normative science. Normative means a guide or control of action i.e. they tell us what we should do. 4) Ethics deal with human conduct i.e. voluntarily not forced by any person or situation.
OBJECTIVES OF ETHICS
1) 2) 3) 4) 5) It access whether a particular act or decision taken by an individual is moral or not. To establish moral standards & norms of the behaviour. To judge human behaviour based on these standards & norms. To access human behaviour & express an opinion & attitude about the behaviour. To set a standards or code for the moral behaviour & make recommendations about the desired behaviour.
There are 3 views explaining relationship between business & ethics: (A) Unitarian view: - It says business is a part of moral structure & moral ethics. If business wants to exist, survive & florist in the long run then morality & ethics cannot be separated from the business & its operations. This view also stress that the business should also contracted in society & plays a major role in society & doing a social welfare. (B) Separatist view: - It says that businesses in order to florist should concentrate on its goals i.e. profit maximization. It says morality & ethics has no role in business: - Business should concentrate on production & distribution of goods & services. - Social problems are the responsibility of the government & not of business. - Business is a district entity & does not include ethics & morality. If ethics were introduced in business it will create imbalance in market dynamics. This view stress on reducing production cost, Optimizing labour, etc. These issues are related to market place & not to ethical & moral issues. Many people believe that if ethics & morality were given that opportunity to enter into business, then there will be a danger of social values dominating over business values. And this will damage the efficiency of business. They also believe that business should concentrate on profits & managers should manage the interest of shareholders. Shareholders should be given the opportunity to decide above effective utilization of resources. In other words, business should focus on achieving its economic objectives. (C) Integration view: - It says that ethical behaviour & business should be integrated or combines in a new area called business ethics. He argues that as a business is an economic activity. It has the right to make profits, but at the same time it should discharge its social obligations also. As per this view business & morality are interrelated & are guided by external factors like: - Government - Market system - Legal system - Society Thus government & market system are related to business i.e. the rules laid down by the government directly or indirectly affect the business & this intern quit market system. Similarly, loss will guide business & decide what is right or wrong in the business.
4) Profit maximizing in long term: - Here there is a shift in focus from business to ethics. The business acknowledges & agrees that Sound ethics is good business in the long run. Although the interest of shareholders is the primary concern of business, there is equal concern for conducting business in a manner which is both right & will be profitable also in the long run even if other alternatives may give greater short term profits. In this stage co. create the post of an ethical officer to supervise ethical aspects. 5) Stakeholders concept: - In this stage the companies concentrate on profits to have a social as well as economic mission. Business ethics includes: - Profit sharing - Development to community given projects - Philanthropy Business ensures that it has to strike a bal. b/w providing service to stakeholders & working towards the welfare of society. The focus is on building & maintaining cordial mutual relationship which creates value for others & justified the profits. Success is measured not just in financial terms but also in terms of social contribution. Some cos even publish regular annual social reports similar to these annual financial reports. 6) Corporate citizenship: - Here the company adopts higher level of ethical consciousness & redefine its mission. The company believes that it has a major responsibility to contribute to for necessary transmission of unhealthy society into a healthy society. There believe is based on the concept that a business can be healthy only if the society around it is healthy because it has the necessary resources to bring this transformission. Companies operating at this level try to achieve certain social objectives like: - Promoting community health - Participating in job creation - Employing handicapped people - Self-realization of employees - Financial success of the company.
While taking such strategic decisions organisations may face ethical problems. In this topic we will study the ethical issues which arise during strategic decisions. Ethical issues in strategic managements are: 1) Developing vision statement: - Vision statement plays a major role in influencing the strategy of an organisation. It reflects the values & priorities of the management. It provides unity of direction to the manager & gives a sense of worth & meaning that can be identified & understood by the people inside & outside the organisation (i.e. stakeholders). There are no hard rules for writing/drawing a vision statement. Genuinely top management do this. But in some organisations even employees are involved in this task. Here the ethical question is that to what extent do the stakeholders have a right to be involved in developing & articulating the strategic vision. 2) Leadership & top management compensation: - A leader has to maintain a healthy relationship with stakeholders to: - Avoid risk - Ensure smooth functioning of business Because of his leadership qualities i.e. abilities to face risk & contact. He is awarded with huge amounts (salary) even at the time of recession. In this case, the ethical issue is the huge compensation package offered to senior managers. Stakeholders often feel that the compensation for senior managers is very high. For this problem many organisations setup a remenusation committee so as to give a sense of justice to both parties i.e. senior leader & other employees. 3) Implementing strategic changes: - In business world nothing is constant except change. And strategic management is generally associated & related with: - Changes in work - People - Work space - Lifestyles Here the ethical question is to what extent are these changes necessary. The outcome of a change can be both positive & negative. Ex: - computerization of a company is beneficial because it helps employees to excess information easily & quickly. At the same time, some employees may be laid off. Now here, the organisations must ensure that their decision has a minimum negative impact on stakeholders. 4) Changes in organisation ownership: - In todays global environment rapid changes in technology, competition & customer demands have increased the rate (speed) at which the companies must alter their strategies to survive in the market place. No company is secure or safe from the possibility of a takeover. If seen positively, mergers & acquisition are essential for the: - Successful expansion of the business/organisation. - Successful entry into new markets. Companies have to opt for merger & acquisition at some stage of their development. The advantage of this strategic decision by the company for merger & acquisitions increase the value & efficiency of a company & reallocate resources for their best use. The strategic rational behind such decision is to: - Either diversify or - Gain a more dominant position in an industry. But in the process of restructuring they arise many ethical issues like: a) Are these activities i.e. Merger & acquisitions & Restructuring Good or bad for the economic health of the company. b) Do they divert managerial efforts from economic activity to financial manipulation?
5) Global strategic operations: - MNCs can invest in a foreign country as they invested in their host country & can quickly become global leader if they sustain the competition. Many times host countries deliberately lower employment standards to attract MNCs & also relax a consumer regulation which creates Dumping of unsafe or inappropriate products. They also apply low standards of rights & safety while operating in another country. Here the ethical question is should a company operating in another company adopt a different set of standards which is inferior from the standards it follows in its domestic/host country.
UNIT-2
ETHICAL ISSUES
1) Bribery (kickbacks): - It is a form of corruption, it is an act of employing & giving money or gives which alters the behaviour of the receiver. Bribery constitutes a crime & is defined as the offering, giving, receiving or soliciting any object of value to influence the actions of an authority or other person who is in charge of a public or legal duty. The bribe is the gift given to influence the conduct of the receiver. It may be anything either in cash or any other like money, property, privileges, advantages & a promise to induce or influence the action or influence a person in an official or public capacity. Forms of Bribery Many forms of bribe exist like: Tips Gifts Perks & benefits Favours & discounts Free food, trips & tickets Donations Secrete commission or promotion Work must be careful of differentiating b/w social & cultural norms & situation while studying & examining the concept of bribery. The meaning of a monetary transaction can differ from place to place. E.g.: - political contributions in the form of cash are considered as criminal acts of bribery in some countries, while in the US they are perfectly legal & legitimate. Bribery as an offence can be divided into 2 major classes: a) Where a person with power is offered a payment to use it in a wrong way. b) Where power is obtained by purchasing it from the people who can impart it. In many cases, the briber might hold a powerful role & control the transaction or in other cases, a bribe is extracted from the person who is paying it, better known as extrication. Bribers & recipients of bribery are many but most bribers have one common factor & i.e. their financial ability to bribe. Types of Bribery Active bribery: - It is the promise or an offering given by any person, directly or indirectly to any public official for getting any undue advantages for himself or for anyone else without using any channel or interface. Passive bribery: - It is the request or receipt of any undue advantages by any public official directly or indirectly for himself or for anyone else. We must differentiate b/w active & passive bribery. The reason for this differentiation is to take early steps to identify a corrupt deal as an offence & too clearly specify that bribery is not acceptable. Also such differentiations makes the trial of bribery offence much easier because it is very difficult to prove that 2 parties in the bribery i.e. bribe gives & bribe taker have formally agreed upon a corrupt deal. Generally in bribery there is no formal deal but only a mutual understanding. E.g.: - It is common knowledge that in a municipality one has to pay a fee to obtain a building permit to the decision maker or official & get a favourable decision. Employees, managers or sales people may offer money or gifts to a potential client in exchange for business. E.g.: - In 2006, a German court conducted or investigation of a company called semens AG to find if its employees paid bribes in exchange for getting business. In some cases, where the legal system is well implemented, bribes are the common way for the companies to continue or run their business. E.g.: - Custom officials may harsh a certain company by officially stating that they are checking for irregularities & hence halting or stalling other normal activities. This disruption causes loss to the firm which is more than the amount of money to be paid to the official. Bribing the officials is a common way to deal with this issue in the countries where there is no active system of reporting these illegal activities. Generally in bribing a third party may be involved to act as a middle man.
There is specialist consultancies setup to help MNCs with a commitment towards: - Anticorruption - More ethical trading & - Benefit by combing with the law The consultancies ensure that the contract are business transaction involve the payment or transfer of bribes are converted & become null & void are not implemented. 2) Coercion: - Coercion can be defined as The use of threatening force, including the limited use of actual force to backup the threat & to induce in the opponent behaviour to behave differently than it otherwise would. Coercion is the practise of forcing another party to behave in an involuntary manner whether through action or inaction by the use of: Threats Intimidations Some type of pressure or force. In legal terms, Coercion is defined as a crime & offence. Such actions are used as a tool to force the victim to act in a particular & desired way. Question may involve the actual infliction of: Physical pain/injury or psychological harm In order to increase the influence the credibility weight & influence of the threat. The threat of further harm or damage may lead to the: Corporation Obedience of the person being coerced. Torchers is one of the most extreme e.g. of coercion i.e. extreme & saviour pain is inflicted until the victim provides the desired information/result/action. The purpose of coercion is to change the Aim & Ideology of the victim. For this reason, coercion is considered as total opposite to freedom. Types of Coercion (3 types) 1) Physical coercion: - It is the most commonly considered & used form of coercion where the content of the conditional threat is basically the use of force against: - A victim - There dear ones - Property A common e.g. is putting a gun to someones head (at gun point) or putting a knife under the throat (at knife point) to compile the desired action. Armed forces in many countries use firing swots to maintain discipline & intermediate the masses or opposition into Submission, silent compliance. 2) Psychological coercion: - Here the bases of threat consider the victim relationships with other people. The most obvious example is Blackmail where the threat consists of revealing some damaging information about the victim. Other types of psychological coercion are: Emotional blackmail: - It includes: - Threat of rejection - Disapproval by peer group - Creating feelings of guilt & obligation by display of anger. - Hurting someone whom the victim loves or respect. Coercive persuasion: - Govt. agencies may use highly intermediating methods during investigations. E.g. By giving threat of harsh legal penalties. Such type of coercion is typically legal. Plea bargain: - It is an incentive offered to the victim to corporate in some form i.e. it is an offer to drop or reduce criminal charges against a suspect in written for Full Corporation. 3) Cultural coercion: - It occur with the fear of getting out casted from the social group which may force people to wear a certain style of dress or publically showing an alliance or adopting or habit which they dont like & would have preferred not to engage in the habit otherwise. All such things are called psychological coercion only if it is due to the fear of falling out from the group due to purposeful threats by someone.
DECEPTION
Activities like: - Bluff - Deceit - Mystification - Bad faith are the acts which imply & propaganda belief which are not true & not the total truth. Deception can involve: - Propaganda - Dissimulation - Distraction - Camouflage - Consignment Deception is a major relational misbehaviour which often leads to feelings so betrayal & distrust b/w relational partners. Deception violets relational rules & is considered to be a negative violation of expectations. Most people expect: - Friends - Relational partner - Strangers to be truthful most of the time. A significant amount of deception occurs b/w official relations.
TYPES OF DECEPTION
Deception includes many types of communications or omissions which distraught or omit the complete truth. Deception is about intentionally managing: - Verbal messages - Non verbal messages. So that the message receiver believes that the message sender is: - Sending wrong information or - His knowledge is false. In this case, the intent or the content of the information is critical with respect to deception. Intent/content is the factor which differentiates b/w deception & honest mistakes. The 5 primary forms of deception are: a) Lies: - It is: - Making up an information - Crafting an information or - Giving an info which is opposite or very different from the truth. b) Equivocations: - It is about making an: - Indirect - Ambiguous or contradictory statement c) Consignments: - It is omitting/hiding the information i.e. important or relevant or it is about engaging or behaviour of such behaviour which helps to hide relevant info. d) Exaggerations: - It is overstating or stretching the truths to a certain degrees. e) Understatements: - It is the minimizations or downplaying diff. aspects of the truth or the relevant info. There are 3 primary motivations for deception: a) Primary focused motives: - It is using deception to: Avoid hurting the partner Help the partner to enhance or maintain his or her self esteem. Avoid varying the partner Protect partners relationships with the 3rd party Partner motivated deception can sometimes been seen as socially polite & relationally beneficial.
b) Self focused motives: - It is using deceptions to: Increased or product self image Trying to shield themselves from anger, embarrassment or criticism. Self focused deception is generally considered as a more serious misbehaviour compared to partner focused deception. Because here the deceiver is acting for selfish reasons rather than for betterment of relationships. c) Relationship focused motives: - it is using deception to limit relationship damage by avoiding conflict or relational problems. This deception can be beneficial sometimes but other times it can be harmful by further complicating matters.
DISCRIMINATION
It is the predized treatment of an individual in a certain group or category. It involves actual behaviour like: - Exclusion - Restriction of members of one group from the opportunities which are available to another group. Discriminatory laws like Red lining exist in many countries. In some places, controversial activities like racial quotas. Discrimination can also be called as disadvantages treatment or disadvantages consideration. Individual needs not to be actually harmed in order to be discriminated. He or she just needs to be treated worse than others for some foolish or arbitrary reason. E.g.: - If someone decides to denote to help often childrens, but denotes less to black childrens due to racial attitude than it can be said that he or she is acting in a discriminatory way even if the donation actually benefits the people against whom he or she is discriminating by giving some money to them.
TYPES OF DISCRIMINATION
These are of 3 types: 1) Realistic discrimination: - It is delivered by self interest & is aimed at obtaining material resources like food, money and customers for the people of his or her group to which the person belongs i.e. favouring & in-group in order to obtain more resources for its members including the self. 2) Social discrimination: - It is driven by the need for self esteem & is aimed at achieving a positive social status for the in-group members compared to out-groups & their members i.e. favouring or in-group in order to make it better than an out-group. 3) Consensual discrimination: - It is driven by the need for accuracy. It reflects stable & legitimate status in the hierarchies of in-group i.e. favouring a high status in the in-group because it gives power & respect.
GENDER DISCRIMINATION
Gender discrimination refers to beliefs & attitude with respect to gender of a person. Such beliefs & attitude exist in social strength & do not have any legal consequences. But gender discrimination in the work place may have legal consequences. Gender discrimination varies b/w countries. The main issue is that it is an adverse action taken by one person against another person that would not have occurred if the person was of same gender. This discrimination is the form of prejudice & illegal in many countries. Gender discrimination can arise in diff context e.g. an employee may be discriminated against by: - Being asked discriminatory questions during a job interview - Employer not hiring or promoting - Unequal pay/compensation - Wrongful termination based on their gender Another example is in an educational scenario. E.g. there could be claims that a student was excluded from an educational Institution, Program, Opportunity, Loan, Student group & some scholarship due to their gender.
Generally gender discrimination is being used to justify different notes for men & women: - Socially - Professionally Ethically & morally this justification cannot be called as right & legitimate.
EMPLOY THEFT
Employ theft is a big problem for many companies. It is estimated that 25 to 40% of all employees steal from their employers. Internal theft of money or goods by employees is a primary cost of small business failures. Employ theft account for one out of five business failures, many of which were smaller firms that were unable to bear the loss. It is argue that small business is more exposed to internal theft. Small companies often have employees with multiple responsibilities with give bigger opportunity to comment theft & greater means to hide such actions. Generally owners of small companies see their work force as a family that work in a personal & friendly atmosphere. Owners have too much faith on "1st name basis" which act as an effective deterrent (stops doing something). Moreover people have different views about company culture. Example: - One employ agree with the owner that the company environment is friendly & open, whereas a fellow worker feel that the owner employ relations are selfish & meaningless. Many employees consider & think that stealing is an unofficial compensation & is a justified payback for employers greed. Owners are also too willing to rely on self policing among employees in internal theft. Workers who do not steal from their employers may not approve of theft but in most cases, they will not report such thefts either, since their colleagues are also members of their family or social circle. Some owners adopt careless attitude towards employee theft. They do not bother to study the issue or adopt measures to control or stop it. Employee theft is difficult to detect, but it can be curtailed if the employer makes it an important business goal. Sometimes companies view employee theft as something which cannot be controlled. But this attitude increases losses which can seriously train profits. Minimizing the theft should receive same attention like cutting cost, improving operational efficiencies & optimizing revenues.