Business Ethics &Corporate GovernanceDr. Mousumi Sengupta
What is Ethics??• The word ethics is derived from Latin word ethicus and Greek word ethikos.• Ethics are moral guidelines which govern good behaviour So behaving ethically is doing what is morally right• A system of moral principles• Our Ethical compass
Concepts of Ethics• Ethical subjectivism – the morally correct decision often depends on the circumstances of a person making it.• Ethical relativism – there is no universal set of principles by which to judge morality.• Consequentialism – it consists of two ideas: • the concept of value • maximization of value.• Ethics of virtue – it emphasizes the role of individual traits.
Business ethicsEthical problems in business: – Overt problems – transparent – Covert problems - complex An ideal ethical decision comprises of the following virtues:• Right – morally correct• Equitable- just and equal• Good- highest good for all concerned• Proper – appropriate and acceptable• Fair – honesty• Just – action
Stages of ethical consciousness in business1. Law of jungle2. Anything for profit3. Profit maximizing4. Stakeholder analysis5. Corporate citizenship
Importance of ethics in business• The Corruption Perceptions Index "on a scale from 10 (very clean) to 0 (highly corrupt)• New Zealand is the least corrupt• India stands at 95th place, among 178 countries
Ethical theories• Metaethics• Normative ethics – Teleological ethical theory – Deontological ethical theory – Virtue ethics• Applied ethics
Ethical theories• Metaethics – – it deals with the gamut of ethical issues. – It is defined as the study of the origin and meaning of ethical concepts. It questions whether the moral values exist independently of humans or they are simply human conventions – Psychological issues that deal with psychological basis of the moral action – Linguistic issue that deal with the meaning of key moral terms we use. – ‘Axe’ – even angels will fall !!!
Ethical theories• Normative ethics –• It implies something that ‘guides’ or ‘controls’• It guides human conduct.• We should treat others the same way we want others to treat us. – Prescriptive – Universal – Overriding – Public – Practical• Livon Hair Gain
Three normative theories• Teleological ethical theories –thinking rationally about ends. An action is morally correct if the consequence of the action are more favorable. It is also called as Consequentialist theories. They offer 3 theories, based on 3 meaning of ‘good’: • Egoism – if the consequence is good for self • Utilitarianism – if the consequence is good for everyone • Altruism – if the consequence is good for everyone except self• Deontological ethical theory – focuses on certain fundamental duties that we have as human being• Virtue ethics – focuses on character development
Theory of corporate moral excellence• Culture is based on values • Espoused values • Values in practice• Espoused values refer to a company’s statements, credos and code of ethics.• They describe the organizations purpose and ethical perspective.• Espoused values may differ from values in practice, depending on situations.
• Hoffman classified corporate culture into three types:• Basic values attitudes and beliefs of the organization• Organizational goals, policies, structure, strategies that are shaped by the values and beliefs prevalent in the organization• Organizational procedures and processes
Common format for Corporate Code• Compliance code• corporate credos• Management philosophy statements• Special documents• Circulated letters• Compliance certificate• Purchase orders• Johnson and Johnson credo says, "We believe our primary responsibility is to the doctors, nurses and patients, mothers and all others who use our products and services“• Tata credo says give back to the people what you have earned from them.• Wal-Mart, established the “Three Basic Beliefs” as the companys credo: - Respect for the Individual - Service to our Customers - Strive for Excellence