Introduction to managerial ethics

Jayashree Sadri and Sorab Sadri
INTRODUCTION TO
MANAGERIAL ETHICS
PROFESSOR JAYASHREE SADRI
and
DR SORAB SADRI

MANAGERIAL ETHICS
WE WILL EDAL WITH ISSUES
CONCERNING
Characteristics of Ethical Problems .
Morality and ethics.
Analysis
Normative Philosophy.

Managerial and Business Ethics
 Whereas Business Ethics deals with how a
business entity behaves in relation to the civil
society in general and its stakeholders in
particular, Managerial Ethics deals with how a
manager will react in the face of an ethical
dilemma.

ETHICAL DILEMMA
 Any action / decision which affects others in
ways which are beyond their control.
 Any action wherein there can be more than
one correct interpretation.
 Any action where values may be at risk.

Response to Dilemma
THE MANAGERIAL RESPONSE COULD BE:
 Consequential: what is in it for me or
 will it do good to all.
 Non consequential: some things are right or
 wrong irrespective of
 the personae involved or the
 conditions under which action
 was taken or when a moral issue is at
 stake the minority of one is enough.

Characteristics of Ethical Problems
 Extended Consequences.
 Within the organization
 Extends to sections of society.
Eg. Bribes that change the govt processes.
Pollution that affects environmental and public health.
Unsafe products that destroy lives.
When the judiciary is up for sale.
When politics has been criminalized.

The Gray Area
 In Managerial Economics there is no clear cut
black and white segregation as in right or wrong
but a vast gray area with various shades in
between that depicts reality and is open to
interpretation.
 Multiple Alternatives present themselves.
 Not generally dichotomous answers – yes or no.
 Alternatives need to be considered all the time.
 No single correct answer or no single best
solution.

Some Contradictions
 Mixed Outcomes.
 Assumed to be antithetical, directly opposed
to financial results and social costs .
For example:
 Pay a bribe and maintain sales volume
 Make a slightly unsafe product but save on material
and design cost.
 Social benefits as well financial revenues are always
associated.

Social Reality
 Uncertain Consequences.
 Not free of risk / doubt.
 Out comes not known / predictable.
 Behavior not always predictable.
 Everything is mutable (in a state of flux)

Irrational Man
 Personal Implications.
 Issues are never impersonal but integral to
lives and careers of managers.
 Performance evaluation related to financial
results.
 E.g., Delay the installation of pollution control
equipment and Registration of the Company will be
also delayed as planned.
 Redesign product to reduce material cost even at the
price of lower quality.

CONTROL SYSTEMS
 Manager as a part of Control System.
 Comparison between actual results and
planned objectives.
 How are the objectives set ?
 Extrapolation of past results.
 Correction for present environment.
 Government regulation.
 Internationally accepted norms.

ANALYSIS
 Why do we need analysis ?
 To achieve a balance between economic and
social performance.
 ECONOMIC ANALYSIS.
 LEGAL ANALYSIS.
 ETHICAL / PHILOSOPHICAL ANALYSIS.

Economic Analysis
 Relying on impersonal market forces for decision
making between economic and social performance.
 Work force reductions.
 Plant closure.
 M &A.
Market economy has limited number of resources .
Consumers being supplied with highest quality and
lowest prices, resources are being most effectively
and efficiently used.

Legal Analysis
 Take a impersonal stand as per the law.
 Eg. Retrenchment.
 Plant closure , Wholesaler replacement
 Underlying belief – In a democracy society
forms its own rules and all its members are
treated justly as possible.

Philosophical Analysis
 Problems have a moral content.
 Moral standards differ amongst individuals .
 Because systems of belief – values / priorities,
convictions .
 Beliefs depend upon family background, cultural
heritage, religious associations, education etc.
 Basis is on Normative philosophy.
 Analyse based on “ Greatest good for greatest nos’

EHICS AND NORMATIVE
THEORY
 Relates to philosophical analysis.
 Philosophy – Study of thought and conduct
 Analysis based on single principle / belief that defines
what is right , proper or just.
 Moral reasoning requires understanding of
Normative philosophy. .
 Normative Philosophy – Study of proper thought and
conduct. HOW SHOULD ONE BEHAVE.

Normative Philosophy
 Philosophical analysis based on thought
processes. States that a manager should act
in accordance with either a single principle of
behaviour or a single statement of belief .
 Morality and ETHICS.
 Morality – Standards of behaviour by which
people are judged in relationships to others.
 Eg. A person in midst of a dessert.

Philosophical Positivism
 Normative philosophers tried to establish a logical
thought process which could decide between right or
wrong , good or evil, fair or unfair. But not relevant to
managerial ethics.
 All ethical problems are compromises between
economic and social performance, wants and duties
of an individual. This philosophy helps to some extent
to make that compromise.
 This is what we mean by positivism.

A General Perception
 ETHICS. Encompasses a system of beliefs that
supports a particular view of morality (not necessarily
shared by all).
For Example:
 Smoking in public place.
 Morality in standards of public behavior.
 Inter-racial marriages
 Child labour
Ethics is thus a system of beliefs. Generally
expressed in plural. Since people have set of
interrelated beliefs.

ETHICAL RELATIVISM
 Are there universal principles for constructing an
ethical system of belief that is applicable to all the
groups in all cultures at all times ?
 What we know that moral standards of behavior differ
between groups within a single culture, between
cultures, and between times. Eg. product safety
standards – Mineral water issue.
 Differences in moral standards and ethical beliefs
exist.
 Perceptions of morally acceptable behaviour from
generation to generation.

ETHICAL RELATIVISM
 Is there any commonality that overrides the
differences? OR
 All ethical systems are valid and that a person’s
choice is equally valid relative to his upbringing,
education, position , culture or country .
 COMMON THREAD OF ALL ETHICAL SYSTEMS –
Members of a group bear some form of resp for the
well being of others in the group.

Commonality
 Common Principle that exists across all
groups, cultures and times –
 Members of groups bear some form of
responsibility for well being of others . This
cooperation is necessary for the survival and
perpetuation of civil society.

The Civil Society Perspective
 QUESTION OF MORAL RELATIVISM IS NOT
WHETHER YOUR MORAL STANDARDS ARE AS
GOOD AS MINE ?
 IT IS WHETHER YOUR MORAL STANDARDS
WHICH BENEFIT THE SOCIETY ARE AS GOOD AS
MINE THAT DO THE SAME BUT ARE DIFFERENT?
 E.g – Bribe payments to customs and police.
American Vs Indian manager.

ETHICAL SYSTEMS
Mankind over its intellectual history of
over 2400 yrs has attempted to
establish ethical systems , major ones
are.
 Eternal Law.
 Utilitarian Theory.
 Universalistic Theory.
 Distributive justice.
 Personal Liberty.

ETERNAL LAW
 Ethical Belief .
 Moral std are given in
an eternal law, which is
revealed in Scripture or
apparent in nature.
Interpreted by religious
leaders, philosophers.
 Every one to act in
accordance with intre.
 Problems.
 Multiple inter.of law.
 No method to choose
amongst them except
rationality.
 Rationality needs
absolute principle or
value to choose.

UTILITARIAN THEORY
 Ethical Belief.
 Moral std applied to
outcome .
 Principle is that every
one to act to generate
greatest benefit for
largest number.
 Problems.
 Immoral acts can be
justified.
 Benefit – cost
justification requires
additional principle /
value.

UNIVERSALIST THEORY
 ETHICAL BELIEF
 Moral std applied to the
intent.
 Principle is that similar
decisions are reached
by others in similar
circumstances.
 Intentions – Duties –
Universality .
 PROBLEMS
 Immoral acts can be
justified by self
deceptive / self imp
persons.
 No scale to judge the
intent.
 Interpretation is
situation based.

Values and Principles
 Universalism and Utilitarianism are based on
principles . This means that there is a
theoretical construct supporting them.
 Distributive Justice and Personal Liberty
systems based on values. This means that
there is a certain belief determining them.

DISTRIBUTIVE JUSTICE
 John Rawls proposes that society is an
association of individuals who cooperate to
advance the good of all.
 THERE IS COLLABERATION AND
CONFLICTS.
 WHY COLLABERATION AND WHY
CONFLICTS ?

Rawls Cont’d.
 Distributive system basis.
 To each person equally.
 To each as per need.
 To each as per contribution.
 To each as per effort.
 To each as per competence.

Distributive Justice
 Ethical Belief.
 Moral std based on
single value – justice
 Everyone should ensure
more equitable dist of
benefits, - promote self
respects-leads to social
co –op.
 Problems.
 Interpretation of justice.
 Equitable dist. Of
benefits promotes
social co- op ?

Three Concepts
 Concepts of absolute equality , absolute
inequality and conditional inequality are
imbedded within the larger social reality and it
is for the political philosopher to unearth
these.

PERSONAL LIBERTY
 Proposed by Prof Nozick of Harvard Business
School.
 Ethical system based on value of liberty.
 Institution or law that violates individual liberty ,
though it may result in increased benefits to others
needs to be rejected.
 Society as association of individuals and cooperation
between individuals necessary for economic gains.
 Economic gains comes about through exchanges.
 EXCHANGES MUST BE VOLUNTARY.

CONT’D.
 PERSONAL LIBERTY FROM SYSTEM OF
EXCHANGES TO ETHICAL SYSTEM.
 Individuals must be allowed to make informed
choices and these choices are ethical if
extended equally to others.

PERSONAL LIBERTY
 Ethical Belief.
 Moral std based on
single value – liberty.
 Act to ensure freedom
of choice.
 Promote market
exchange – leading to
social productivity.
 PROBLEM.
 Can liberty lead to
market system to
exchange and thereon
to Social productivity.

THE ULTIMATE DILEMMA
 What should one do ?
 Balanced use of all ethical systems.
 Does my decision result in greater benefits than
damages for society not just for the org ?
 Is the decision self serving or others also would take
similar decision under similar circumstance.
 Will our decision increase or decrease willingness of
others to contribute.
 Will our decision increase or decrease personal
freedom of others.

LIBERTY?
 Liberty is the freedom to do what one wants
as long as it does not impede with what the
other does what the other wants.
 Liberty if unrestrained or ungoverned
degenerates into license.
 Every Liberty is activated fairly when duties
and obligations are conjoined with freedom
and rights.

HENCE
 When we deal with issues concerning
Managerial Ethics we need to have a multi-
disciplinary view based on positive social
science.
 Theories of Sociology, Psychology, Political
Science and Economics are often used to
explain positions taken.
 Bounded Rationality plays a major role in
ascertaining the preferred option.

Conclusion
 No single system of belief exists to guide
mangers.
 Are we free to take decisions as we like,
especially those that affect others?
 We have obligations towards others.
 Difficulty comes in identifying obligations and
evaluating alternatives with no single set of
moral standard.
 Every manager like every country must make
his/her own history but do so under definite
conditions.

SOME HOME TRUTHS
 Theorists who use spirituality extensively to
explain managerial behavior are invariably
soul based thinkers.
 Theorists who use bounded rationality and
positive philosophy, instead, are invariably
mind based thinkers.
 Those, however, who try to use both
spirituality and rationality tend to be merely
tautological and descriptive.

Introduction to managerial ethics

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