brief about management of ethics in business

1. BGS-Module4
Management of Ethics

2. 2
Topicsto becovered
• Ethics analysis [ Hosmer model ]
• Steps/ considerations in resolving ethical dilemma
• Ethics in practice - professional ethics for functionalmanagers
• Comparative ethical behaviour of managers
• Codeof ethics
• Competitiveness, organizational size,profitability and ethics
• Costof ethics in Corporate ethics evaluation

3. Manager's Decision Checklist (HosmerModel)
1. What are the best economicalternatives?
2. What are the legalalternatives?
3. Doesagiven decision result in greater benefits than damagesfor society asawhole,
not just for our organization aspart of that society?
4. Isthe decision self-serving, or would we be willing tohave everyone else take the
sameaction when faced with the samecircumstances?
5. We understand the need for social cooperation; will our decision increase or decrease
the willingness of others tocontribute?
6. Werecognize the importance of personal freedom; will our decisionincrease or
decreasethe liberty of others toact?
7. Lastly, we know that the universe is large and infinite, while we are small and our lives
are short; is our personal improvement that important, measured against the
immensity of that otherscale?
LaRueT
.Hosmer
3

4. Steps/ considerations in resolving ethical dilemma
5 BasicSTEPSin resolving dilemmas
• STEP1: WHATARETHEOPTIONS?
• STEP2: ANAL
YZETHECONSEQUENCES
• STEP3: ANAL
YZETHEACTIONS
• STEP4:MAKEYOURDECISIONANDACTWITHCOMMITMENT
• Step 5: EV
ALUA
TETHESYSTEM
4

5. STEP1: WHATARETHEOPTIONS?
• List the full range
of alternative
courses of action
available to you.
5

6. 6
STEP2: ANALYZETHECONSEQUENCES
Assume you have a variety of options. Consider the
range of both positive and negative consequences
connected with eachone.
- Whowillbe helped by what you do?
- Who willbehurt?
- What kind of benefits and harms are we talking about?
-How does all of this look over the long run as wellas
the short run.
• After looking at all of your options, which of your
options produces the best combination of benefits-
maximization and harm-minimization?

7. 7
STEP3: ANALYZETHEACTIONS
Concentrate instead strictly on theactions.
- How do they measure up against moral principles like
honesty, fairness, equality, respecting the dignity of others,
respecting people's rights, and recognizing thevulnerability
of individuals weaker or less fortunate thanothers?
-Do any of the actions that you're considering "cross the
line," in terms of anything from simple decency to an
important ethicalprinciple?
-Is there a way to see one principle as more important than
the others?
What you're looking for is the option whose actions
are least problematic.

8. STEP4:MAKEYOURDECISIONANDACT
WITHCOMMITMENT
8
•T
akeboth parts of your analysis into account and make adecision.
Thisstrategy should give you at least some basic steps you can follow.

9. Step5: EVALUATETHESYSTEM
• Think about the
circumstances
which led to the
dilemma with the
intention of
identifying and
removing the
conditions that
allowed it toarise.
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10. 10
Professional ethics for functional managers
Principles of ProfessionalEthics
• Impartiality
• Trustworthiness andhonesty
• Openness
• Confidentiality
• Trust
• DueDiligence(Duty of care)
• Loyalty to professional
responsibilities
• Avoiding conflict of interest.
Principles of PersonalEthics
• Concern for the well being ofothers
• Respectfor the autonomy ofothers
• Trustworthiness and honesty
• Willing compliance to law
• Basicjustice
• Refusing to take unfairadvantage
• Benevolence( doing good)
• Preventing harm to anycreature.

11. 11
Comparative ethical behaviour of managers
• Issueconnected with business ethics have recently acquired
prominence in the global scenario ingeneral.
• Thesituational approach in ethics places heavy emphasis on the
role of external environment/culture of an organization in ethical
behaviour of the individuals.

12. Sourcesof EthicalNorms
Performance/Re
sults
Family/Friends
Loyalty
Respect for
Authority
Country
Culture/Society/
Religion/Philosophy
Profession
Employer/Comp
any
Laws and
Regulations
The Individual
Conscience
ExternalSources
12
InternalSources

13. 13
Analysisof Indian VsAmerican Ethics &
Culture
• This study of the codes of conduct of the top fifty public companies in the U.S.and India shows how cultural
differences are manifested in the definition ofethical business practices in corporations.
• Thehierarchical and collectivist nature of the Indian cultureversus the all- encompassing and
individualisticnature of the U.S. cultureare reflected in four main findings from the comparative analysis
performed.
• First, U.S.companies apply their codesof conduct to all employees, whereas Indian companies generally
apply their codes of conduct only tosenior management.
• Second, U.S.companies require their employees to report on their colleagues if they see them violating the
code. Theyoften provide mechanisms for anonymous reporting in order to encourage this behavior. Very
few of the Indian companies had this requirement or provided for anonymous reporting.
• Third, India is more specific about defining what arelative is, when discussingitems suchasconflict of
interest or undue influence throughgifts.
• Finally, in both the U.S.and Indian cultures, there is a strong expectation to protect the interests of the
company and not achieve personal gainsat the company’sexpense.

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Overview of ChineseVSAmericans ethical
behavior
• Americans more individualistic – the self is the basic unit ofmoral
concern
• Think more for and of themselves
• More aggressive and more likely to “showoff”
• Hong KongChinesemore collectivistic – the group is the basic unit of
moral concern
• Individual value based on how he canserve the group
• More willing to have things like ethical codes dictatedby law

15. 15
Overview of ChineseVSAmericansethical
behavior
• TheEffects of Culture on Ethical Decision-making: AnApplication of Hofstede's Typology
• Influence of Hofstede's cultural dimensions on businessethics decisionmaking
• A high individualism society: Business people are more likely to behave unethically for personal
gain
• A high power distance culture: Superiors have more influence on ethical decision making

16. Casestudy Application: HotelIndustry
A very wealthy man arrived for a two-week stay in a luxury
hotel in New York City. With him was his entourage of nine
people who would be occupying seven other rooms. Upon his
arrival, he requested that he did not want to be served by any
African-Americans.
He explained that the wait staffs, housekeepers, bartenders
and any other service personnel who would have direct
contact with him could not be black or African-American.
The manager was shocked and stymied. He had been looking
forward to the man’s visit as well, the man had promised a
lucrative pay. Yet the customer was insisting on a racial
discrimination practice.
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17. 17
Questions
What should the managerdo?
What if our neighbor hotels accepted theirrequest?Are we
advantaged/disadvantaged?
How would he feel about granting/not granting thisrequest?
Could he face his employees the next morning?

18. Most CommonEthicalIssues in theHotelIndustry
• Employee thefts
• Useof recreational drugs
• Guest abuses
• Racial conflicts
• Asymmetricprice
competition
• PersonalRelationships
• Disclosure of confidential
information
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Codeof ethics
• Acode of ethics document may outline the mission and values of the
businessor organization, how professionals are supposed to approach
problems, the ethical principles basedon theorganization's core values
and the standards to which the professional is held.
• Ethical codes are adopted by organizations to assistmembers in
understanding the difference between 'right' and 'wrong' and in applying
that understanding to theirdecisions.
• An ethical code generally implies documents at threelevels:
1. codesof businessethics,
2. codesof conduct for employees,and
3. codesof professionalpractice.

20. Eg:Codeof Conduct for EmployeesinIndia-
SaintGobain
• TheCodeof Conduct is an elaboration of the Saint-GobainPrinciples of Conduct andAction and sets out what is expected of the
Group’semployees in India. Theobjective of this Codeis to ensure that every employee of the Group in India is aware of
acceptable conduct and behaviour, in consonancewith Saint-Gobain’s Principlesof ConductandAction. TheCodeof Conducthas
the following sections:
• General Standards of Conduct
• EqualOpportunities forAll
• Enabling WorkEnvironment
• Conflict of Interest
• Payments, Gifts & Entertainment
• Usageof Group’s/Company’sAssets
• Compliance
• Electronic ResourcesUsage
• Handling ConfidentialInformation
• Media Policy
• Procurement Practices
• Relations with Customers
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21. Competitiveness and Ethics
• There is no doubt that the Corporate world (even World for that matter) is getting
more and more competitive. Competitiveness is the “key”, since everyone knows
that it’s a World where only the fittest survive. Well, is there anything wrong in
being competitive? I would say,“No”, but then there is another question – “at what
cost?”. If the answer to this question is “Ethics”, then the competitiveness is Hollow.
• Definitely you can find many examples of people who do not give any important to
Ethics but they still rise to higher levels. But there is no guarantee that you will
stay at Topif you have compromised withEthics.
• Ethics and Competitiveness go hand in hand. There is no doubt about it. All
individuals are faced with situations where one has to choose growth or ethics and
even though it’s astraight forward choice, there are people who would choose
growth over ethics.
• Mis-selling is an approach very commonly taken by salespeople to sell their
products or services by hiding facts and giving false promises to the customer.
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22. Competitiveness and Ethics-
contd..
• Salesteam is abackbone of every organization asit is the salesteamthat
brings in revenuesby selling products or services. But recently there has
been increased emphasis in large organizations on Salesethics.Mis-selling
is taken very seriously and strictdisciplinary action taken against those who
do not comply. Reputation of an organization primarily depends
on the salesforce representing it.
• Organizations havestarted becoming more and more transparent intheir
salesprocesses.Most of the times the details of product/ service being
sold is documented by way of an agreement, brochure, offer letter
which clearly mention all the terms and conditions, product features,
pricing etc.
Mutual fund companies and Insurance companies also clearly tell
their clients to read the terms and conditions before buying the
product.
• Thisis done to ensure that the client is not cheated and to save
the reputation of theorganization. 22

23. Competitiveness and Ethics-contd..
• There are ethical waysof growing and being competitive. Very easily you
can find examples of top managers/CEOswho havegrown to that level
just becauseof the level of ethics that they maintained during their
professional careers. Compromising with ethics may seemto be a
shortcut, but it’s definitely not going to take you to the right destination.
• Being professional is very much equal to being Ethical.And an
Ethical person earns alot of respect and even if you lose the sales
opportunity or promotion becauseof representing thefacts
• A customer always respects afair salesperson, abossalways
respects a true employee, stakeholders always respect an honest
colleague, anethical organization will always respect an ethical
employee.
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24. organizational size,profitability andethics
How importantare business ethics in running a profitable business?
• Anumber of factors play apart in making abusiness profitable, including expert management teams,
dedicated and productive employees, consistent consumer demand and careful watch over the bottomline.
In addition to these well-known business practices, companies that implement amanagement philosophy
that relies heavily on business ethics are proven to be more successful than those that operate in an
unethical manner.Although it may not be the first variable considered in analyzing the profits of a company,
business ethics is an equally important catalyst to the successofacompany.
Business Ethics inManagement
• Theleadership of an organization holds the keyto its long-term successand remaining consistent with a
management philosophy built on afoundation of ethics creates apositive example for all workers.. Ethical
accounting practices, treatment of employees, interactions withthe public and information disseminated to
shareholders are all responsibilities of the leadership team and can haveadirect impact on the overall
profitability of the company When these integral aspects of business are not performed with aresounding
theme of business ethics from the top down, each facet of the business beneath the management team has
agreater potential to falter in the short or long term.
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organizational size,profitability and ethics–contd..
Business Ethics and EmployeeMorale
• It hasbeen proven time and againthat employees who are satisfied with the environment in which they work are more
productive than workers who are unhappy. Unethical practices in the workplace cancausewidespread unrest with
employees, leading to agreater senseof dissatisfaction with the work they are doing and their employers. However, when
businessethics are encouraged from management and companyexecutives lead by example, the ability of employees to
focus on the work they need to complete to make themselves and the organization successfulincreases exponentially.
Productivity increases when fewer distractions are present and morale is high, and this leadsto greater profit levels for the
company.
• Employee happiness can also have an impact on turnover and retention, as unsatisfied workers are more prone to seek
out other opportunities regardless of higher pay or benefits offered by their current employer. Continuous recruitment
and training of new employees can reduce the capital a company can spend on revenue-producing activities, ultimately
shrinking its long-termprofits.
Business Ethics and PublicImage
• Companies would be nothing without shareholders and investors, and assuch, operating with business ethics in mind is
most important when interacting with these crucial players. It is common for the profitability of publicly traded companies
to decline rapidly when they encounter situations where information regarding unethical behavior is discovered. When
investor confidence islost, it can be a struggle for acompany to regain the trust of the public, its investors and its valuable
shareholders; profitability may take years to build up again. Companies that lay the framework for businessethics in all
facets of operations are more likely to become and remain profitable than those that conduct businessin an unethical
manner.

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Costof ethics in Corporate ethics evaluation
Costsof working in an ethical wayinclude:
1. Theemployment of the global Ethical Tradeteam
2. Training its buyers on all ethical tradeissues
3. Managing and paying for externalaudits
4. Helping suppliers put right issuesraised by audits, through training
and support from the Primary Ethical Tradeteam.
However, rather than seeing these activities ascosts, they enable the
business to operate in asustainable and well-managedway.

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Costof Corruption
• Corruption in India is an issuethat adversely affects itseconomy.Astudy conducted by
the TransparencyInternational in 2005 showsthat more than 62%of Indians had afirst hand
experience of paying bribes or influence peddling to get jobs done in public offices successfully. In
astudy conducted in 2008, TransparencyInternational reports that about 40%of Indians
had first hand experience of paying bribes or using contacts to get jobs done in public
offices.
• In 2015, India wasranked 76th out of 168 countries in TransparencyInternational's Corruption
Perceptions Index, compared to its neighbours Bhutan (27th), Bangladesh(139th), Myanmar
(156th), China(83rd), Nepal (130th), Pakistan(117th) and SriLanka(83rd). Thelargest
contributors to the corruption are entitlementprogrammes and social spending schemesenacted
by the Indian government. Examplesinclude Mahatma Gandhi National Rural Employment
GuaranteeAct and National Rural Health Mission. Other sourcesof corruption include India's
trucking industry which is forced to pay billions of rupees in bribes annually to numerous
regulatory and police stops on its interstatehighway.
• DevKar,aformer International Monetary Fundeconomist said that the illegal money thatconsists
of India’s underground economy drains out in foreign lands.Accordingto him, India’s
underground economyis believed to be 50percentof the country’s GDP - US$640bnat the end
of 2008.
• Corruption costs companies $200 billion ayear.

28. Question Bank
• Explain Hosmer model of Ethicsanalysis
• Explain the Steps/ considerations in resolving ethicaldilemma
• Explain the professional ethics for functional managers
• Compare ethical behaviour of managers in variouscultures/countries
• Explain the meaning of Codeof ethics
• Explain the relation of Competitiveness andEthics
• Explain the relation between profitability andethics
• Explain Costof ethics
• Explain Costof Corruption

29. Endof Module 4