MODULE 2

Ethics is the use of moral judgement to determine the future action. Most people would agree that
high ethical standards require both businesses and individuals to conform to sound moral
principles. However, some special aspects must be considered when applying ethics to business.
First, to survive, businesses must earn profits…but if that profit is realized through misconduct,
then the life of the organization may be shortened. Egs : Arthur Anderson, Enron, Satyam, etc.
Second, Businesses must balance their desires for profits against the needs and desires of society.
Maintaining this balance often requires compromises or tradeoffs. To address these unique
situations, businesses has derived a set of rules and regulations that determine right and wrong.

Business ethics comprises the principles and standards that guide behavior in the world of
business. Whether an action is ethical or unethical, right or wrong is often determined by
investors, interest groups, employees, customers, the legal system and the community. Though
these groups may not always be right, their judgements influence society’s acceptance or
rejection of business and its activities.

Why study business ethics?

1) Business ethics is not always an extension of personal ethics. The situations arising in
business are entirely different and it may require a sound understanding of many other
aspects to make the right and ethical decision.
2) Studying business ethics also helps to recognize the importance of relationship between
legal and ethical decisions.
3) People who have limited business experience suddenly find themselves making decisions
about product quality, advertising, pricing, sales techniques, hiring practices and
pollution control. The values they learned from family, religion, and school may not
provide specific guidelines for these complex business decisions. It may require a person
of experience in the relevant fields to make the decisions. Studying business ethics will
help identify ethical issues when they arise and recognize the approaches abailable for
resolving them.
4) It also helps to learn more about ethical decision making and how to promote ethical
behavior within your organization.
5) Helps to resolve conflicts between personal ethical and organizational ethics.

Benefits of business ethics

1) Business ethics improves the financial performance.
2) Ethics contribute to employee commitment.
3) Ethics contribute to investor loyalty
4) Ethics contribute to customer satisfaction.
5) Ethics contribute to profits.
Relationship between organizational ethics and performance.

Employee
commitment
and trust

Investor
Ethical
loyalty and Profits
Climate
trust

Customer
satisfaction
and trust

The role of Organizational ethics in performance.

Stakeholders.
Customers, investors and shareholders, employees, suppliers, government agencies, communities
and many others who have a “stake” or claim in some aspect of a company’s products,
operations, markets, industry and outcomes are known as stakeholders. They are both influenced
and have the ability to influence a business.

Ethical issues in business

1) Honesty and fairness

2) Conflicts of interest
3) Fraud – Accounting frauds, consumer frauds(shop lifting)
4) Discrimination – To promote hiring qualified individuals from groups that have been
traditionally discriminated, affirmative action programs have been formed.
5) Information technology issues – monitor employees’ use of available technology,
consumer privacy, site development and online marketing, legal protection of intellectual
properties, such as music, books and movies.

Recognizing an ethical issue is very critical. The rule of thumb is that when an activity is
approved by most members of an organization and is customary in the industry is probably
ethical.

An ethical issue is simply a situation, problem or even an opportunity that requires

thought, discussion or investigation to determine the moral impact of the decision.
Because the business world is dynamic, new ethical issues emerge all the time.
Ethical Relativism

The concept of relating any given decision about right or wrong, true of false to the specific
situation at hand seemed appealing, as generated an approach which was the opposite of
absolutistic. This kind of newer approach, a kind of ethical relativism, has been given different
labels, depending on the different emphasis various thinkers have made.
Relativism is the position that all points of view are equally valid and the individual determines
what is true and relative for them. Relativism theorizes that truth is different for different people,
not simply that different people believe different things to be true.
Ethical relativism represents the position that there are no moral absolutes, no moral right or
wrong. This position would assert that our morals evolve and change with social norms over a
period of time. This philosophy allows people to mutate ethically as the culture, knowledge, and
technology change in society.
Two of these labels are:
1) Situation ethics
Situational Ethics is a philosophy which promotes the idea that, when dealing with a crisis,the
end justifies the means and that a rigid interpretation of the rules, laws and moral codes should be
temporarily set aside if a greater good or lesser evil is served by doing so. Understanding
situational ethics in the presence of dissociative thought sometimes explains the apparently
unethical behavior of people who suffer from personality disorders.

Examples of Situational Ethics:

• Breaking a window - to escape a fire.

• Assaulting a stranger - in self defense.
• Killing a person - in war time.
• Driving through a red light - when rushing an injured person to a hospital.
• Killing an animal - to shorten a painful death (euthanasia).

2) Pragmatism is an ideology on the basic tenet that anything must be practical enough and
not just ethical.
1. way of thinking about results: a straightforward practical way of thinking about things or
dealing with problems, concerned with results rather than with theories and principles

2. way of evaluating theories: a philosophical view that a theory or concept should be evaluated
in terms of how it works and its consequences as the standard for action and thought.

Whistleblowers

A person reporting illegal or unethical acts.

Persons who expose organizational misdeeds in order to preserve ethical standards and protect
against wasteful, harmful or illegal acts.
Many whistleblowers were/are fired for their actions.
State and federal laws now offer some protection.
If whistle blowers present an accurate picture of organizational misconduct, they should not fear
for their jobs. Indeed, the Sarbanes-oxley act makes it illegal to discharge, demote, suspend,
threaten, harass or in any manner discriminate against a whistle blower and sets penalties of upto
ten years in jail for executives who retaliate against whistle blowers.

How to manage stress at work-place?

Support Exercise
groups

Management
of stress by
individuals-
Role Strategies. Relaxation
management

Time
management

Strategy for managing stress is very important as stress is caused by a stimulus which is either
physical or pyscological. Stress is defined as a person’s adaptive response to a stimulus that
places excessive psychological or physical demands on him or her.

There are three types of stress consequences

Individual (a) Behavioral (b) Psychological (c) Medical

Organisational (a) Performance (b) Withdrawal (c) Attitude
Burnout – both people and organizations have implications.
Burnout is a general feeling of exhaustion that develops when an individual simultaneously
experiences too much pressure and too few sources of satisfaction.
Dignity of human life

Autonomy

Honesty

Loyalty

Fairness

Humanness

The common good

Seven general moral principles for a manager.

 ENCOURAGE
INVOLVEMENT
AND ASK FOR
LISTEN AND HELP DO WHAT WE SAY
RESPOND WITH WHEN WE SAY WE
EMPATHY WILL DO IT

INDIVIDUALLY
MAINTAIN AND ACCEPT
ENHANCE SELF
ESTEEM
VALUES CONSEQUENCES OF
OUR ACTIONS

APPROACH
ENCOURAGE
CHANGE &
JOB WITH
INNOVATION & POSITIVE
LEARN FROM THE DEAL WITH THE ATTITUDE
PROCESS
FACTS NOT
EMOTIONS

RELEVANCE OF VALUES IN MANAGEMENT

HOLISTIC APPROACH TO DECISION MAKING