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All about Business Ethics

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  1. 1. Ethics  Ethics is a subject that deals with human being. Human by their nature are capable of judging between right and wrong, good and bad behavior. Thus, the question of ethics arises, as the human beings are associated with values and morals.
  2. 2. Nature of Ethics  It is associated with values and morals.  Ethics deals with human conduct i.e. voluntary, force by any persons or circumstances.  Ethics is both Science & Art, but it is more a science, because it provides systematic knowledge about moral behaviour and conduct of human beings.
  3. 3. Objectives of Ethics  Ethics deals with human behavior. It assesses whether a particular act or decision taken by an individual is moral or not.  To establish moral standards and norms of the behavior  To judge human behavior based on these standards and norms.  To assess human behavior and express an opinion or attitude about the behavior.  To set a standard or code for the moral behavior and make recommendations about the desired behavior.
  4. 4. Business Ethics  It refers to the application of ethical judgements to business activities.
  5. 5. Need for Business Ethics  All businesses exist and operate within society and therefore they should contribute to welfare of society.  To survive in the market, businesses should gain loyal customers and perform social responsibility.
  6. 6. Nature of business ethics  Most businesses encounter two types of ethical problems known as overt and covert ethical problems.  Overt ethical problems deal with bribery, theft, collusion, etc. They are clear.  Where as covert ethical situations occur in corporate acquisitions, marketing and personnel policies, capital investment etc. They are complex, clear and have skillful ethical solutions.
  7. 7. Business Ethics and Profits  Survival is the name of any business game. If a company wants to survive it has to think about its profits. Most businesses operate on the principle that profit is not linked to ethical consideration.
  8. 8. Eg: Johnson & Johnson  Johnson & Johnson is often recognized as a company whose ethical behavior is exemplary.  The company clearly prioritizes its responsibilities in its corporate credo:  first to its customer,  second to its employees,  third to its management  fourth to the communities in which it operates,  fifth to its stockholders, “Business must make a sound profit,” states the credo in describing fifth responsibility, but at Johnson & Johnson that concern comes after the rest.
  9. 9.  A firm that is not performing well is considered as liability and burden to the society as it cannot discharge its responsibility to the community welfare of its employees, revenue to shareholders, and meet customer demands.  Thus profit today is recognized as a characteristic of the success of a business and justification for its existence.
  10. 10. Stages of Ethical Consciousness in Business Stage 1 Law of Jungle Stage 2 Anything for profit Stage 5 Stakeholder concept Stage 6 Corporate Citizenship Stage 3 Profit maximization in the short-term Stage 4 Profit maximization in the long-term
  11. 11. GENERAL BUSINESS ETHICS  This part of business ethics overlaps with the Philosophy of business, one of the aims of which is to determine the fundamental purposes of a company.  If a company's main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else.  Corporate Social Responsibility
  12. 12.  Issues regarding the moral rights and duties between a company and its shareholders:  Fiduciary responsibility, Stakeholder concept Vs. Shareholder concept.  Ethical issues concerning relations between different companies:  Hostile takeovers  Political contributions made by corporations.  The misuse of corporate ethics policies as marketing instruments.
  13. 13. Ethics of Accounting Information Management of Earnings Misleading financial analysis Insider trading Securities fraud Forex Scams Excessive payments made to corporate CEOs Bribery
  14. 14. Ethics of Human Resource Management The ethics of Human Resource Management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee. Discrimination •Ageism •Race •Religion •Sex Union Busting Strike Breaking
  15. 15. Issues affecting the privacy of the employee: •Workplace surveillance Issues affecting the privacy of the employer Issues relating to the fairness of the employment contract and the balance of power between employer and employee: • Slavery System • Occupational Safety and health
  16. 16. Ethics of sales and marketing  Marketing, which goes beyond the mere provision of information about a product, may seek to manipulate our values and behaviour. To some extent society regards this as acceptable, but where is the ethical line to be drawn?  Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media.  Pricing:  Price Fixation, Price Discrimination, Price Skimming
  17. 17.  Anti-competitive practices.  Specific marketing strategies:  Green wash, Spams (electronic), Planned obsolescence.  Content of advertisements:  Attack ads, concealed messages, products regarded as immoral or harmful  Children and marketing:  Marketing in schools.  Black markets, Grey Markets
  18. 18.  Healthy Competition
  19. 19. Ethics of Production  This area of business ethics usually deals with the duties of a company to ensure that products and production processes do not cause harm.  Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility.  Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles)
  20. 20.  Ethical relations between the company and the environment:  (Pollution, Carbon emissions trading, Environmental ethics).  Ethical problems arising out of new technologies:  Genetically modified food, Mobile phone radiation and its effects on health.  Product testing ethics:  Animal testing, use of economically disadvantaged groups (such as students) as test objects.
  21. 21. The Bhopal Disaster
  22. 22. Green initiatives Environment friendly bike Green initiatives in business range from environmentally friendly technological innovation, green tourism, green community, environmental campaigning and environmental counseling
  23. 23. Ethics of intellectual property, knowledge and skills  Knowledge and skills are valuable but not easily "ownable" as objects. Nor is it obvious who has the greater rights to an idea: the company who trained the employee, or the employee themselves?  The country in which the plant grew, or the company which discovered and developed the plant's medicinal potential?  As a result, attempts to assert ownership and ethical disputes over ownership arise.
  24. 24. Patent Infringement, Copyright Infringement, Trademark Infringement. Misuse of the intellectual property systems to stifle competition: Patent Misuse, Copyright misuse. Employee Raiding: The practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess. The practice of employing all the most talented people in a specific field, regardless of need, in order to prevent any competitors employing them.
  25. 25. Infringement
  26. 26. Ethics and Technology  The computer and the WWW are two of the most significant inventions of the twentieth century. There are many ethical issues that arise from this technology.  It is easy to gain access to information. This leads to data mining, workplace monitoring, and privacy invasion.  Medical technology has improved as well. Pharmaceutical companies have the technology to produce life saving drugs.  These drugs are protected by patents and there are no generic drugs available. This raises many ethical questions.
  27. 27. International business ethics  Comparison of business ethical traditions in different countries. They may be on the basis of their respective GDP and [Corruption rankings].  Ethical issues arising out of international business transactions  Biopiracy in the pharmaceutical industry.  Issues such as Globalization and Cultural Imperialism.  Varying global standards  The use of Child Labour.  The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centers) to low-wage countries.
  28. 28.  Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets.  In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.
  29. 29. Religious Views on Business Ethics  The historical and global importance of religious views on business ethics is sometimes underestimated in standard introductions to business ethics.  In Asia and the Middle East, religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values.  Examples  Islamic banking, associated with the avoidance of charging interest on loans.  Traditional Confucian disapproval of the profit-seeking motive.
  30. 30. Benefits of Managing Ethics Attention to business ethics has substantially improved society. Helps maintain a moral course in turbulent times. Ethics programs cultivate strong teamwork and productivity. Supports employee growth and meaning.
  31. 31. Is an insurance policy -- they help ensure that policies are legal. Helps avoid criminal acts “of omission” and can lower fines. Promotes a strong public image. Last and most formal attention to ethics in the workplace is the right thing to do.