Business Ethics – Introduction

Top 100 Management Theory Article

Business ethics is applied ethics. It is the application of our understanding of what good and right to that assortment of institutions, technologies, transactions, activities, and pursuits which we call "business"

First we need to understand what is meant by the terms "good" and "right" to discuss the implications of these for the business world.

A dictionary meaning of ethics is "the study of morality." Just as chemistry refers to a study of the properties of chemicals, ethics studies morality. It is not quiet the same as morality. Ethics is investigation of scientific study and the results of that investigation. Morality is the subject of investigation. 

What is morality?

Morality

Morality can be defined as the standards that an individual or a group has about what is right and wrong or good and evil.

How to distinguish moral standards from standards that are not moral?

Ethicists suggested five characteristics to identify moral standards.

1. Moral standards deal with matters which people think can seriously injure or seriously benefit human beings.

2. Moral standards are not established or changed by political or legal authoritative bodies. The validity of moral standards rests on the adequacy of the reasons.

3. Moral standards are preferred to other standards including even self-interest when choice is there.

4. Moral standards are impartial. They are based on impartial reasons that an impartial observer would accept.

5. Moral standards are associated with special emotions. When people act in violation of a moral standard, they feel guilty, ashamed and remorseful.

(More detailed essay: The Definition of Morality  https://plato.stanford.edu/entries/morality-definition/ )

Ethics

Ethics is the activity of examining the moral standards of a society or of an individual. Whether the standards are reasonable or not and how to apply the standard in particular situations are examined by ethicists. The aim of ethics is develop a body of moral standards that a person feels reasonable to hold based on careful thought.

Business Ethics

Business ethics is an enquiry of ethics in the field of business. It concentrates on moral standards that the system of business, business organizations, and individuals with in the business organizations and individuals who deal with business organizations have to evaluate and follow in their day to day dealings and decisions.

Business ethics can be studied at three levels: systemic, corporate and individual. Systemic issues deal with economic, political, legal and other related systems within which production and distribution activities are carried out. Questions related to the morality of capitalism, regulation of business etc. fall into this level. Corporate level issues deal with actions of corporate concerns or corporate citizens.

Individual levels issues deal with every individual working in a business firm and it can include customers/consumers.

Do Moral Standards Apply to Corporations?

While some people do argue that corporations have no moral standards to adhere to and only people have. Velasquez concludes that as corporate citizens they have moral standards to live up to but at the same time they are mainly acted upon by people. People are behind corporate decisions.

Moral Development

Some people believe that a person's values are formed during childhood and then do not change.But psychological research reveals that as persons mature, they change values in very deep and profound ways.

Lawrence Kohlberg proposed that a person’s ability to deal with moral issues develops in six identifiable stages.

Level 1.  Preconventional stages

As a child

Stage 1: For child, the physical consequences determine the goodness or badness of an act. It means, he will not things for which his parents impose physical punishment. They are bad things.

Stage 2: Right activities are those that satisfy the needs of the child or the needs of persons he cares about.

Level 2. Conventional stages

As adolescent

Stage 3: Good behavior is living up to the expectations of the group of people one loves or trusts such as family or friends.

Stage 4: At more mature stage law is followed for determining right or wrong acts.

Level 3. Postconventional, autonomous, or principles stages

Stage 5: Conflicting personal views are recognized.
Stage 6: Moral principles are chosen because of their logical comprehensiveness in ethics enquiry.

Carol Gilligan, a psychologist who worked under Kohlberg, became of a critic of his theory.  She argued that Kohlberg observed only males and developed the theory.  When females are observed, we realize that they they tend to see themselves as part of a "web" of relationships with family and when they encounter moral issues they are concerned with sustaining these relationships. In this role, morality is primarily a matter of "caring" and "being responsible" for others with whom one is involved in personal relationships, and not a matter of adhering to impartial and impersonal rules.

Subsequent research, agrees that moral issues can be dealt with from a perspective of impersonal partiality, or from a perspective of caring for persons, and these two perspectives are distinct.

From more on Gilligan's theory
http://humangrowth.tripod.com/id2.html
http://www.ncbi.nlm.nih.gov/pubmed/3381683
http://highered.mheducation.com/sites/dl/free/0073010189/228359/diffvoice2.html

Moral Reasoning

Moral reasoning is the process by which actions are judged with reference to moral standards. It involves knowledge of moral standard and whether a situation has arisen wherein moral standard needs to be applied.

Moral reasoning has to be logical. The factual evidence regarding the situation must be accurate, relevant and complete. The set of moral standards invoked has to be consistent.

(For more detailed essay see: Moral Reasoning  https://plato.stanford.edu/entries/reasoning-moral/)

Arguments For and Against Business Ethics

Arguments against Business Ethics

1. The pursuit of profit will by itself ensure social responsible behavior in perfectly competitive markets.

2. Managers are loyal agents and they should pursue the interests of their firms and should ignore ethical considerations.

3. It is sufficient if business firms obey law.

Arguments for Expecting Ethical Behavior from Business Concerns

1. Businesses cannot survive unless moral standards exist in business concerns and outside.
2. Ethical concerns are consistent with profits of businesses.

3. Analogy to Prisoners’ dilemma problem reveals that in repeated interactions, cooperation is the best solution and ethical behavior is the best solution.

4. Most people value ethical behavior and punish business men and organizations that are not ethical. In organizations, where people feel there is no fair play, there is more absenteeism, avoidance of work and lack of respect. In organizations where people feel there is fair play, there is enthusiasm, cooperation and trust.

Main source:

Manuel G. Velasquez, Business Ethics: Concepts and Cases, 

Fourth Edition,  Prentice Hall Inc., Upper Saddle River, N.J., 1998,

Business Ethics by Manuel G. Velasquez - Book Information and Review

References

Business Ethics: The new bottom line

Full view Google book http://books.google.co.in/books?id=SgNtH27P5PcC

A Contemporary Look at Business Ethics

Ronald R. Sims

IAP, 01-Jul-2017 - Business & Economics - 579 pages

A Contemporary Look at Business Ethics provides a ‘present day’ look at business ethics to include the challenges, opportunities and increased need for ethical leadership in today’s and tomorrow’s organizations. The book discusses current and future business ethics challenges, issues and opportunities which provides the context leaders and their organizations must navigate. The book includes an in?depth look at lessons learned about the causes of unethical behavior by examining a number of real?world examples of ethical scandals from around the world that have taken place over the past few decades. The analysis of the various ethical scandals focuses on concepts like ethical versus unethical leadership, received wisdom, the bottom?line mentality, groupthink and moral muteness, all of which contribute to the kind of organizational culture and ethical behavior one finds in an organization. The book discusses ethical decision making in general and the increased role of religion and spirituality, in confronting unethical behavior in contemporary organizations. The book also takes an in?depth look at the impact ethical scandals have on employees and more specifically the psychological contract and person?organization ethical fit with the goal of identifying, along with other things, what leaders can do to restore relationships with employees and rebuild the organization’s reputation in the eyes of various stakeholders.

https://books.google.co.in/books?id=J6csDwAAQBAJ

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Dharma and Morality: Common Sense Explanation - Comparison to Theory in Management

 

Morality - Dictionary meanings.

a set of personal or social standards for good or bad behaviour and character:

https://dictionary.cambridge.org/dictionary/english/morality

principles relating to right and wrong or good and bad behaviour

https://www.oxfordlearnersdictionaries.com/definition/english/morality

Morality is the belief that some behaviour is right and acceptable and that other behaviour is wrong.

https://www.collinsdictionary.com/dictionary/english/morality

The term “morality” can be used either

descriptively to refer to certain codes of conduct put forward by a society or a group (such as a religion), or accepted by an individual for her own behavior, or

normatively to refer to a code of conduct that, given specified conditions, would be put forward by all rational people.

https://plato.stanford.edu/entries/morality-definition/

Supply Chain Management - Ethics

 

Ethics - Supply Chain

Code of ethics - SCMA
https://scma.com/en/about-scma/join-scma/code-of-ethics

The ethical supply chain
New research from APICS, Supply Chain Management Review and Loyola University Chicago finds that operating a responsible supply chain is an increasing priority. But gaps remain between practice and the goal.
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Moral Standards and Moral Judgments – Approaches

Velasquez discussed four approaches in his chapter “Ethical Principles in Business.”

Approach of Utilitarianism

The action that has highest net social benefit is to be undertaken when we do not have the resources for attaining everyone’s objectives. Jeremy Bentham is its proponent.

Principle of Rights

Any behavior by an individual or a group should respect the basic rights of the individual affected by the action. Special agreements also create rights.

Principle of Justice

Standards of justice indicate how benefits and burdens should be distributed among the members of a group. These standards are to be utilized when activities and benefits different substantially among members in important ways. Capitalism and Socialism differ in the principle of justice regarding duties and rewards of members of a society.

Principle of Care

Every person has some special concrete relationships with others.  He has to take care of them in preference to others or some of his own objectives. A parent has a responsibility to take care of his children even at the expense of his future or career.

References

Manuel G. Velasquez, Business Ethics: Concepts and Cases, Fourth Edition, Prentice Hall Inc., Upper Saddle River, N.J., 1998, Business Ethis by Manuel G. Velasquez - Book Information and Review

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Business Ethics - Study Materials - Notes

Business Ethics 

Business Ethics – Introduction
Moral Standards and Moral Judgments – Approaches



Business System - Free Markets - Ethics
Ethics in the Market Place and Distribution System

Ethics in the Factory
Ethics in the Supply Chain

Ethics - Supply Chain

Code of ethics - SCMA
https://scma.com/en/about-scma/join-scma/code-of-ethics

The ethical supply chain
New research from APICS, Supply Chain Management Review and Loyola University Chicago finds that operating a responsible supply chain is an increasing priority. But gaps remain between practice and the goal.
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https://www.scmr.com/article/the_ethical_supply_chain

Diversity and Ethics Issues - Relevance to Organizational Behavior

Organizational Behavior – Theoretical Frameworks

Social Cognitive theory say behavior, personal factors and social factors reciprocally influence each other. Attention to diversity and ethics by organizations is part of social factors that reciprocally influences personal factors and behavior. Hence the study of diversity and ethics  as important trend in organizational change dimensions is done in OB.

Specific characteristics of diversity

Age

In USA, work force is getting progressively older. Now with no mandatory retirement age, number of age discrimination complaints are increasing.

Gender

Women are entering employment in record numbers. By end of century, that by end of 2000, in USA women are likely to make up half the workforce.

Ethnicity

According to census projections by 2050 US population will increase to 392 million, and Latinos will emerge as the nation's largest minority overtaking African Americans.

Education

Educational level of the US workforce is increasing.

In addition to the above language also may become diversity issue.


Organizational behavior recognizes the increasing diversity in the society and workforce and therefore is advocating development of multicultural organizations.

Some featues of multicultural organizations

1. They reflect the contributions and interests of diverse cultural and social groups in their mission, operations, and product or services.
2. Acts on a commitment to eradicate social oppression in all forms within the organization.
3. Includes the members of diverse cultural and social groups as full participants, especially in decisions that shape the organization.
4.Supports efforts in society and in other organizations efforts to eliminate all forms of social oppression.

Managers have to learn about personal values of various constituent groups and how the individuals would like to be treated. They also have to practice empathy. They have put themselves in the place of others and see things from their point of view to know their challenges.

Organizational Approaches to Managing Diversity

Testing: Test conducted for recruitment were modified to prevent culturally bias that leads to handicap for certain groups.

Mentoring: Mentors used to remove handicaps faced by disadvantaged groups.

Work/Family Programs: To take care of gender diversity,  very innovative family-friendly programs are emerging.

Ethics and Ethical Behavior in Organizations

Ethics involves moral issues and deals with right and wrong behavior.

What is morality? (https://plato.stanford.edu/entries/morality-definition/)

Some psychologist, take morality to include concern with, at least, all three of the triad of (1) harm, (2) purity, and (3) loyalty. Most societies have moralities that are concerned with, at least, all three members of this triad. Concern with harm appears in the form of enforceable rules against killing, causing pain, mutilating, etc. Some may appeal to religion, others to tradition, and others to rational human nature in declaring morals and moral behavior. Descriptive moralities are morals of a specific societies or tribes. The descriptive moralities are put forward by an  individual or a group, usually a society, and  they provide a guide for the behavior of the people in that group or society.

While morals and morality are not academic subjects, ethics is the name of a subject. In the subjects of ethics, morals is the subject matter. It is like chemistry having chemicals as the subject matter. Ethics has morals as the subject matter. Various issues or attributes related to morals are studied in the Ethics subject. Ethical behavior refers to moral behavior. (See for more Business Ethics – Introduction)

Cultural , organizational and external environment determine ethical behavior. Cultural influences on ethical behavior come from family, friends, neighbors, education, religion, and the media. Organizational influences come from ethical codes, role models, policies and practices, and reward and punishment systems. The external forces (forces external to an organization) that impact ethical behavior include religious, political, legal, economic, and international developments.

Luthans indicated that ethics is a recent addition to OB textbooks.  Alexander Stajkovic and Fred Luthans authored "Business Ethics across Cultures: A Social Cognitive Model," Journal of World Business, Spring 1997, pp. 17-34. The paper may provide the background for introduction of ethics content in OB textbooks.

Luthans indicated that in the area of ethical behavior, issues related to sexual harassment, discrimination in pay and promotion, and the right to privacy are especially relevant to the study of organizational behavior.

Sexual harassment: Sexual harassment in the workplace can be defined as unwelcome sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature. Employers have to uphold the rights of employees to a work environment free of sexual harassment.

One of the important organizational mechanism is to create a state of the art policy.

Pay and Promotion discrimination

Organizations must design and implement programs that systematically attack discrimination and segregation at multiple levels of the structure.

Employee Privacy Issues

The Electronic Communication Privacy Act (ECPA) makes employers potentially liable for invading employees' email or stored communications.

Introduction to Organizational Behavior - Online Book

May - Management Knowledge Revision - Cost and Management Accounting and Organizational Behavior





Updated 15 May 2019,  13 May 2019,    9.7.2014, 24.2.2014

Lectures on Ethics - Moral Reasoning and Ethics

Overview of Moral Reasoning and Ethical Theory
Shannon E. French Ph.D. - Inamori Professor of Ethics and Director,
Inamori International Center for Ethics and Excellence
Category
Education
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Ethical guidelines given by a profession are well thought out Moral guidelines of a profession.

Ethics in the Marketplace - Review Notes

Perfectly competitive free markets satisfy three of the moral criteria: justice, utility, and rights.




But, the virtues of loyalty, kindness, and caring will diminish, while the vices of being greedy, self-seeking, avaricious, and calculating are encouraged.


Bribery

When used to secure the sale of a product, political bribery can also introduce diseconomies into the operations of markets.




The following considerations are relevant to judging bribery issues.

1. Is the offer of payment initiated by the payer or demanded by the payee with the threat of injury to the payer. If the payee demands payment and the threatened injury is large enough, the payer may not be morally responsible for his payment, or the moral responsibility may at least be diminished.

2. If the payment is made to induce the payee to act against official rules, the payer is a party to immoral act. But if the payment is done to induce the party to do his official duty only, the moral responsibility if diminished.

3. There are cases where it is a local custom to make payments in the normal course of things, then it would appear to be ethically permissible on utilitarian grounds. But it might be a legal violation of the Foreign Corrupt Practices Act of 1977, USA)

References

Business Ethics: Concepts and Cases, Fourth Edition, Manuel Velasquez, Prentice Hall International

Business and Managerial Ethics - Panel Discussions and Lectures

2014

The Return on Integrity: Ethics, Values and Business
15th Minnesota Business Ethcis Award Key Note Address
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Ohio Wesleyan University Business Ethics Lecture - Susan Willeke
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Business System - Free Markets - Ethics

Free market system may have variety of competitive market systems depending on the product life cycle and competitive situation in a product market (industry). Perfect competition, oligopoly, duopoly, and monopoly are some of the types.

Perfect competition

In a perfectly competitiive market, there are numerous buyers and sellers and none of them will have sizeable market share. Entry and exit of buyers and sellers is free. In a perfectly competitive market, prices and quantities always move toward the equilibrium point.

Velasquez wrote, perfectly competitive free market achieves or satisfies three moral criteria: Justice, Utility and Rights.

Capitalist criterion of justice: Benefits and burdens are distributed justly when a person receives in return at least the value of the contribution he or she made to an enterprise. Fairness is getting paid fully, in return for what one contributes. It is this form of justice (capitalist criterion of justice) that is achieved in perfectly free competitive markets.

Monopoly

Unregulated monopoly markets can fall short of the three values - capitalist justice, economic efficiency, and respect for negative rights that perfect competitive markets achieve.

Oligopoly

Oligopoly also can result in shortfall of the three values: capitalist justice, economic efficiency, and respect for negative rights that perfect competitive markets achieve. In oligopoly markets price-fixing, manipulation of supply, exclusive dealing arrangements, tying arrangements, retail price maintenance arrangements, price discrimination are identified as unethical practices.



References

Manuel G. Velasquez, Business Ethics: Concepts and Cases, Fourth Edition, Prentice Hall Inc., Upper Saddle River, N.J., 1998, Business Ethis by Manuel G. Velasquez - Book Information and Review

First published in
http://knol.google.com/k/narayana-rao/free-or-competitive-markets-and/2utb2lsm2k7a/1720#