Muhammad Naeem Sarwar (BUS560)

Date: 29/06/2011

Business Ethics Module 1

Essay Questions: 1. What is ethics, and what does it mean to put business and ethics together? What would it mean for a company to do this well?

Ethics, also nown as moral !hiloso!hy is a "ranch o# !hiloso!hy that addresses $uestions a"out morality %that is, conce!ts such as &ood and e'il, ri&ht and wron&, 'irtue and 'ice, (ustice, etc) *usiness ethics is the study o# "usiness situations, acti'ities, and decisions where issues o# ri&ht and wron& are addresses) +,rane - Matten 200./, it is im!ortant clari#ied this conce!t #irst, to &et started whit some similar conce!ts later in this re!ort) *usiness ethicists as , 01hat is ri&ht and wron&, &ood and "ad, and harm#ul and "ene#icial re&ardin& decisions and actions in and around or&ani2ational acti'ities34 ethical 0solutions4 to "usiness and or&ani2ational !ro"lems may ha'e more than one ri&ht alternati'e, and sometimes no ri&ht solution may seem a'aila"le) 5earnin& to thin , reason, and act ethically can ena"le to #irst "e aware and reco&ni2e a !otential ethical !ro"lem) 6hen e'aluate 'alues, assum!tions, and (ud&ments re&ardin& the !ro"lem "e#ore act) +7ose!h 1) 1eiss 2008, !)./ there are some situation where ma in& a choice it is not (ust doin& the ri&ht or the wron& thin&, is also thin in& what are the "est o!tion #or the em!loyee or the com!any, howe'er in some cases the "est o!tion is not always are the correct thin& to do, is in this situation when the ethics education and trainin& can hel! to understand what are the "ene#its o# actin& ethically) 0Doin& the ri&ht thin&4 matters to em!loyees, sta eholders, and the !u"lic) 6o com!anies and em!loyers, actin& le&ally and ethically means sa'in& "illion o# dollars each year in lawsuit, settlements, and the#t) Studies ha'e shown that cor!orations also ha'e !aid si&ni#icant #inancial !enalties #or actin& unethically +7ose!h 1) 1eiss 2008, !)9/) 6hus, actin& ethically the com!anies can a'oid law and #inancial !ro"lems, in this way is easy to thin actin& ethically is the "est o!tion #or the com!anies to do, "ut in some cases close a &ood deal is more !ro#ita"le than !ay #or some com!ensation or dealin& with lawsuit, #or this reason com!anies !re#er a'oid actin& ethically "ecause accordin& to 9riedman+19.0/ :there is one and only one social res!onsi"ility o# "usiness, to increase its !ro#its so lon& as it stay within the rules o# &ame, which is to say, en&a&es in a o!en and #ree com!etition without dece!tion and #raud;) <ther to!ic which need "e discussed is the lin "etween ethics and law, how this two theories wor to&ether and i# one can e=ist without the other) 5aw is essentially an institutionali2ation or codi#ication o# ethics into s!eci#ic social rules, re&ulations, and !roscri!tions) Ne'ertheless, the two are no e$ui'alent) >erha!s the "est way o# thin in& a"out ethics and the law is in terms o# two intersectin& domains) +,rane - Matten 200., !)?/ *usiness ethics can "e said to "e&in where the law ends, "usiness ethics is !rimarily concerned with those issues not co'ered "y law, or where there is no de#inite consensus on whether somethin& is ri&ht or wron&+,rane - Matten 200., !)./) Sometimes the law does not o##er enou&h &uidance #or those issues that ethics cannot mana&e, is #or that reason that the em!loyee needs to "e conscious what ind o# deal it is wor in and i# this situation is ruled "y any law, ethics or "oth)

Ethical "eha'ior is de!endent more u!on the ethical or unethical "eha'ior o# the indi'idual who #orm that com!any that u!on any #ormal com!any !olicy also su!eriors are im!ortant role models #or sociali2ation into the or&ani2ation, with em!loyees undou"tedly e'aluatin& ethical decision "ased on the e=am!le set "y, and hence e=!ectations o#, su!eriors)+@laas 1oldrin& 1996, !)9A/) Bn the com!any some ethical decision are made #ollowin& the "eha'ior o# the su!erior, it is this !erson ma in& the ri&ht decisions and e'ery decision is ethically correct, the mana&er "eha'ior can a##ect the em!loyees "eha'ior as well, this can lead to the em!loyees start to "eha'in& in a less ethical manners and use the (usti#ication o# e'eryone else is doin& it) Cs a result in the com!any the !eo!le "eha'ior, ethical or unethical is more in#luential than a #ormal, written or&ani2ational &uideline) 6em!tations to harm in a wor !lace arise #ar more o#ten than many !eo!le li e to admit) E'en i# !eo!le do not !ersonally #ace tem!tations, they li'e in a &lo"al economy where their e##orts o#ten intersect with those o# others who do) +Doward - @or'er 200E, ! 1A6/) 6hus, some !eo!le act to o'ercome this en'ironment where the "i& #ish eat the small #ish, in the &lo"al economy o#ten com!anies ma e their em!loyees act this way and &oes a&ainst their own ethical "elie'es ma in& an un!leasant wor in& en'ironment, howe'er the #inal decision a"out #ollowin& the com!any rules and doin& thin&s ri&ht or doin& wron& always the choices are &oin& to "e made "y the em!loyee themsel'es) 2. What are the three traditions of ethics, and how do they provide guidance to help inform your managerial decision-making? 6he three traditions in ethics are +1ic s, 9reeman, 1erhane - Martin, 2010, !)?/) Actions Cctions are the means !eo!le use to achie'e their &oal) 6his as!ect o# ethical conce!t #ocuses on the !ractices or actions !eo!le tend to use to determine "etween ri&ht or wron& which is nown as deontolo&y) Deontolo&y states that there are certain standards inherent in the indi'iduals that !ro'ide directi'es #or their actions tellin& them which "eha'iors are ri&ht and which "eha'iors are wron& in !ursuin& their &oals) Agents C&ents are the indi'iduals that are !artici!atin& in a situation) 6his as!ect o# ethical conce!t, nown as character ethics, #ocuses on indi'iduals and the !ersonal traits and $ualities that &o'ern them) 6he &ood traits and $ualities such as inte&rity, #airness, etc o# indi'iduals are also nown as 'irtues) Ends Ends are the outcomes or &oals o# an action) Ends are the #inal &oal an indi'idual see s "y way o# his actions) 6his as!ect o# ethical conce!t, also nown as conse$uentialism, #ocuses on the si&ni#icance o# the ends or &oals that an indi'idual !ursues) 6here are two core #eatures o# this as!ect o# ethics) 9irst, the indi'iduals need to ensure that the ends they see to achie'e are morally correct) Second, indi'iduals need to ensure that their course o# action creates the most #a'ora"le conse$uences in their !ursuit o# reali2in& their &oals) 6he three traditions mentioned a"o'e are a si&ni#icant source o# ethical wisdom and !lay a 'ital role in !ro'idin& &uidance durin& mana&erial decisionFma in&) 6hree decision &uides ha'e "een de'elo!ed #rom the three traditions o# ethics that aid the mana&ers in ethical decisionFma in&) 6hese #ollowin& three decision &uides are #ramewor s #or analy2in& the moral dimensions o# a &i'en situation and !ro'ide a "asis o# ma in& de#ensi"le decisions)

Decision Guide 1 H 9rom Deontolo&y +#irst tradition o# ethics/ 6he Standards o# ,onducts, which re#ers to the standards that determine the morally correct and incorrect actions o# a !articular community, are de'elo!ed usin& the #irst tradition o# ethics) 6he mana&ers o# the com!any must analy2e and res!ect the #eelin&s o# 'arious communities and ensure that their or&ani2ational decisions do not result in dama&in& the #eelin&s o# any community) Decision Guide 2 H 9rom ,haracter Ethics +second tradition o# ethics/ 6his decision &uide re$uires the com!any to #ind ways o# doin& "usiness that ena"le them to re!resent the character traits to which they as!ire) 6he mana&ers must reco&ni2e the 'irtues they want to de'elo! in achie'in& their &oals throu&h their decisionFma in&) Bt is 'ital #or the mana&ers to ha'e si&ni#icant le'els o# 'irtues in order to "uild a lon&Fterm sustainin& relationshi! with their em!loyees and customers which will a##ect the success o# the com!any) Decision Guide 8 H 9rom ,onse$uentialism +third tradition o# ethics/ >ur!oses and conse$uences are im!ortant to mana&ers as well as the com!any;s sta eholders) Ethical "eha'ior re$uires that the mana&er should ensure that the &oals or !ur!oses selected are morally correct and de#ensi"le and then a!!ly a course o# action to achie'e them) 6his decision &uide aids the mana&ers in decisionFma in& !rocess to select morally a!!ro!riate &oals and use the or&ani2ation;s resources to achie'e them) 6here#ore, the three traditions o# ethics !ro'ides &uidance and aids the mana&ers in decisionF ma in&)

8) What are the core factors identified in chapter 2 that indicate why bad things happen in organizations? Which seem to be most prevalent in actual cases you have read about or e perienced in your own company?! 6here are si= core #actors res!onsi"le #or the "ad thin&s that ha!!en in the or&ani2ations as identi#ied in the cha!ter are as #ollows +1ic s, 9reeman, 1erhane - Martin, 2010, !)A2/) Authority 6his is on o# the #actors that lead to "ad thin&s in an or&ani2ation) >eo!le tend to chan&e their "eha'ior and resort to unethical !ractices to su"mit to the demand o# a hi&her authority) Cuthority !lays an im!ortant role in the way an indi'idual "eha'es) 6here#ore, authority can alter the ethical "elie#s o# an indi'idual and #orce the indi'idual to indul&e in morally incorrect "eha'ior) Distancing from responsibility 6he tendency o# indi'iduals to restrict their sense o# !ersonal res!onsi"ility es!ecially when #aced with a crisis causes unethical "eha'ior in an or&ani2ation) Bt is this tendency o# the indi'iduals to a'oid e##iciently !er#ormin& their tas s and to "lame others #or the cause o# loss or crisis which is one o# the #actors that lead to "ad thin&s in an or&ani2ation) Tunnel vision 6unnel 'ision is the inherent !ers!ecti'es o# the indi'iduals that are some times s ewed in ways that cause them to miss im!ortant moral cues and hence resultin& in "ad thin&s in an or&ani2ation) Due to !erce!tions o# !eer &rou!s or or&ani2ational culture, indi'iduals de'elo! 'arious !erce!tions in their

minds) Due to tunnel 'ision, indi'iduals are #orced to indul&e in unethical "eha'ior) Dence this is one o# the core #actors that lead to "ad thin&s in an or&ani2ation) Rationalization Iationali2ation is a !rocess where !eo!le con'ince themsel'es that the ina!!ro!riate actions they underta e are acce!ta"le e'en thou&h they are aware that these actions are unethical) Bndi'iduals e=cuse themsel'es #or indul&in& in unethical !ractices due to rationali2ations) 6his is one o# the core #actors that lead to "ad thin&s in an or&ani2ation) External pressure E=ternal !ressures are the #orces that act u!on indi'iduals that lead them to indul&e in unethical !ractices) 9or e=am!le, an indi'idual mi&ht "rea the code o# conduct "y lyin& to sa'e his (o") Due to such !ressures, the indi'idual will "e stressed to indul&e in immoral "eha'ior to a'oid the "ad conse$uence o# the acti'ity !er#ormed "y him) 6his is one o# the reasons why "ad thin&s ha!!en in an or&ani2ation) ommunication brea!do"n 6he una'aila"ility o# an en'ironment where the em!loyees can communicate #reely to the mana&ement a"out the ethical issues in an or&ani2ation is one o# the core #actors that cause "ad thin&s to ha!!en in an or&ani2ation) 6he cor!orate culture in many or&ani2ations !re'ents !eo!le #rom tal in& a"out ethical issues and hence leads the em!loyees to indul&e in unethical "eha'ior) Cccordin& to my e=!erience, the most !re'alent #actor in the or&ani2ations that leads to unethical "eha'ior is authority) 6he em!loyee has to su"mit to the demands o# the mana&er and is #orced to indul&e in unethical !ractices) B encountered a similar situation when my mana&er as ed to modi#y the in'oice #or deli'ery o# !roducts) B had to unwillin&ly su"mit to his demand and indul&e in unethical !ractice) 6here are many indi'iduals who #ollow ethical !rinci!les in !er#ormin& their tas s "ut sometimes are #orced to alter their "eha'ior to #ollow the instructions o# their su!eriors in an or&ani2ation) #. Which factors seem to be most important in diagnosing why bad things happen? What role does the individual, and individual conscience, play in making sure good things happen organizations? 6he #actors that seem most im!ortant in e=aminin& why "ad thin&s ha!!en are sel#Finterest and moral de'elo!ment) Due to the human nature, the indi'idual;s "eha'ior and actions can "e attri"uted to the tendency o# sel#Finterest or sel#F"ene#it) 6he human nature to !ursue sel# interests and "ene#its dri'es the "eha'ior and action o# any indi'idual) Sometimes indi'iduals use e&oFcentrism as an e=cuse to (usti#y unethical "eha'ior in an or&ani2ation +1ic s, 9reeman, 1erhane - Martin, 2010, !)8?/) 6he human "ein&s ha'e a natural tendency to act in their own sel#Finterest and are moti'ated towards creatin& !ersonal &ains e'en i# it in'ol'es the use o# ina!!ro!riate acti'ities and ne&ati'e im!act on others) Due to this human tendency, an indi'idual indul&es in actions o# &reed which results in "ad thin&s to ha!!en) Moral de'elo!ment is another #actor that seems to "e most im!ortant in e=aminin& why "ad thin&s ha!!en) Iesearch su&&ests that some !eo!le may o!erate at lower le'els o# moral de'elo!ment that ham!er their a"ility to em!loy ethics in their actions and decisions) Bt is a natural tendency o# !eo!le to wor towards their !ersonal &ains and a'oid !unishment throu&h their actions) Such a tendency may "e an im!ortant #actor in dia&nosin& why "ad thin&s ha!!en) Bndi'idual and indi'idual conscience !lays an im!ortant role in ma in& sure &ood thin&s ha!!en in or&ani2ations) B# an indi'idual !ossess &ood 'irtues and does not indul&es in acts o# sel#Finterest it will result in &ood thin&s ha!!enin& in an or&ani2ation) B# an indi'idual;s mindset and !erce!tion is &ood, it

hel!s to a'oid rationalism and tunnel 'ision) 6his will ensure that &ood thin&s ha!!en in an or&ani2ation) 6he indi'iduals who em!loy moral !rinci!les in their actions and "eha'ior ensure that &ood thin&s ha!!en in an or&ani2ation) B# indi'idual conscience is not a##ected "y e=ternal #orces li e authority and e=ternal !ressures, it ensures that &ood thin&s ha!!en in or&ani2ations) $ssue to consider% Iead the case, 0Mar&e Norman and Miniscri"e ,or!oration4, !a&es ?E F 6. o# your te=t"oo ) >ro'ide a summary o# this case includin& the ethical dilemmas and how they were handled in this case) Draw on what you learned in cha!ters 1 - 2 as !art o# your res!onse) 6he case e=!lains the unethical !ractices o# the mana&ement o# Miniscri"e ,or!oration to achie'e !ersonal &ains and decei'e the sta eholders which #inally resulted in demise o# the com!any) Mar&e Norman, the !lant mana&er o# the com!any, had "een !romoted to the Sin&a!ore "ranch o# the com!any to mana&e the o!erations) Dowe'er, due to intense com!etition, the com!any &rowth #ell a"ru!tly shortly a#ter her arri'al as the mana&er) D - Q in'estment "an decided to in(ect J20 million in Miniscri"e ,or!oration and a!!ointed 1iles, one o# its !artners, as chairman to sa'e the com!any #rom down#all) 1iles ado!ted a strict a!!roach and im!lemented many chan&es in the way the or&ani2ation o!erates) De di'ided the com!any into many small di'isions and allotted the control o# each di'ision to his #riends who were !art o# the to! mana&ement) De also made ad'erse chan&es to the Cccountin& de!artment o# the com!any "y se!aratin& the accountin& sta## #rom dayFtoFday o!erations) 6he tas o# maintainin& accounts and re!ortin& was assi&ned to the mana&ers o# each di'ision who were the #riends o# 1iles) Knder the leadershi! o# 1iles, Miniscri"e !ros!ered and re!orted !ro#its in the third $uarter o# (ust the #irst year o# his rei&n as ,E<) 6he stoc soared #rom J8 to J1E since 1iles too o'er the com!any) 6his attracted many in'estors who started to in'est su"stantially in the com!any) 6he com!any achie'ed recordF"rea in& &rowth #or three successi'e years) Dowe'er, "y the end o# 19EE, the stoc s o# the com!any were down "y A?L and the re'enue dro!!ed su"stantially) 6he stoc s were down to JA and 1iles resi&ned) 6he new ,E< called #or an in'esti&ation "y outsiders which re'ealed massi'e irre&ularities since 1iles (oined the com!any) Bt was re'ealed that the com!any &enerated #alse in'entory and la"eled scra! and o"solete !arts as acti'e !arts) 6he com!any had hidden the lia"ilities in the #inancial statements released durin& the !eriod when 1iles was in char&e o# the com!any) Clthou&h the new ,E< tried to con'ince in'estors that the com!any was still 'ia"le, they #iled a lawsuit alle&in& that the mana&ement o# the com!any decei'ed them throu&h #inancial misre!resentations) 9inally, Miniscri"e ,or!oration #iled #rom "an ru!tcy !rotection and to! mana&ement includin& 1iles were named in the alle&ations) Mar&e Norman #aced an ethical dilemma as the !lant mana&er immediately a#ter 1iles too o'er as ,E< o# the com!any) Der new "oss had as ed her to o'erloo the !rocess o# re!ac a&in& o# the shi!ment recei'ed #rom ,olorado) She #ound out that the shi!!ed "o=es #rom ,olorado contained scra! and o"solete !arts instead o# the new !roducts as written on the "o=es) She #aced an ethical dilemma whether to re!ort this to the com!any or to ee! $uiet) 6his situation is an e=am!le o# authority and e=ternal !ressure which was discussed in the cha!ter as one o# the #actors why "ad thin&s ha!!en in an or&ani2ation) Mar&e had to indul&e in unethical !ractice due to the demands o# her hi&her authority and the e=ternal !ressure o# sa'in& her (o") She decided to ee! $uiet in the end and did not re!ort the incident which #inally resulted in the demise o# the com!any and hu&e loss to the sta eholders)

Works Cited
Duska , Contemporary Reflections on Business Ethics 2007 Business Ethics: A Managerial Approach !pper "a##el Ri$er, %e& 'ersey: (earson (rentice )all