Define Ethics

Ethics. Its not an easy word to define. Almost everyone wants to live an ethical life, but knowing what that means is not as simple as it sounds! That's where the phrase ethical dilemma! comes from. In some situations, there are two contrasting ideas that may seem ethical, but it is hard to determine which is actually the right course of action. "ome common ethical dilemmas have little conse#uence$ for e%ample, is it right to tell a fib when someone asks you if they look fat or if their bad tasting dinner is delicious& The ethical dilemma there$ which is more ethical, lying or being unkind& 'ther ethical dilemmas become a big more comple%$ for e%ample, is it right to steal from the rich to give to the poor& Is it right to fight wars in the name of a good cause, even if innocent people are in(ured& The answers to these ethical #uestions depend on your definition of ethics!

Dictionary Definition of Ethics

The dictionary defines ethics as$

1.

the study of standards of conduct and moral (udgment) moral philosophy

*. a treatise on this study +. the system or code of morals of a particular person, religion, group, profession, etc. According to this definition, ethics can be one of two things$ it can be something that you study and think about, or it can be a code that you follow and live by. 'f course, in the real world, ethics is often both. ,hilosophers who think about ethics usually try to live by an ethical code, while the people who set up a code of ethics often study and think while they are doing so. 'f course, knowing that the definition of ethics is a code of morals doesn't really help to define what is ethical, does it& The moral code itself has to provide that definition. "o, the #uestion -define ethical- becomes synonymous with the #uestion -define moral.-

The 9 Theories of Ethics

.ecause of the difficulty in defining ethics, which we've already begun to see, philosophers have given a lot of thought to this #uestion. "ince they haven't been able to come up with a clear answer either, they've provided / theories of ethics that can be used to determine the ethical course of action in a given situation$ 0. 1onse#uentionalism$ An action is ethical, or not, depending on the conse#uences of the action *. 2alues 1larification$ 3our ethics should be determined based on your internal values, and not what anyone else thinks +. 4tilitarianism$ The action that has the best result for the most people is the ethical action 5. 6oral Absolutism$ An action is always moral or immoral, regardless of the circumstances 7. "ituation Ethics$ The ethical nature of an action is dependent on the situation, and decisions must be made out of love and helpfulness in the particular moment. 8. Ethical 9ealism$ The ethical choice is the choice that is the lesser of two evils

7.

Ethical :ierarcicalism$ There are many possible choices on the continuum of ethical choices, and we must choose the choice that benefits the greater good

;. ,rinciple Ethics$ The ethical decision should be based on an underlying set of logical principles /. 1ognitive 6oral <evelopment$ Ethical dilemmas should be solved using critical thinking

Organizational Ethics is the ethics of an organization, and it is how an organization ethically responds to an internal or external stimulus. Organizational ethics is interdependent with the organizational culture. Although, it is akin to both organizational behavior O!" and business ethics on the micro and macro levels, organizational ethics is neither O!, nor is it solely business ethics which includes corporate governance and corporate ethics". Organizational ethics express the values of an organization to its employees and#or other entities irrespective of governmental and#or regulatory laws.

Basic elements of an ethical organization

$here are at least four elements which exist in organizations that make ethical behavior conducive within an organization. $he four elements necessary to %uantify an organization&s ethics are' 1" written code of ethics and standards( )" ethics training to executives, managers, and employees( *" availability for advice on ethical situations i.e, advice lines or offices"( and +" systems for confidential reporting. ,ood leaders strive to create a better and more ethical organization. -estoring an ethical climate in organization is critical, as it is a key component in solving the many other organizational development and ethical behavior issues facing the organization. Importance of Ethics in Organisation .rom debates over drug/testing to analyses of scandals on 0all 1treet, attention to ethics in business organizations has never been greater. 2et, much of the attention given to ethics in the workplace overlooks some critical aspects of organizational ethics. 0hen talking about ethics in organizations, one has to be aware that there are two ways of approaching the sub3ect//the 4individualistic approach4 and what might be called the 4communal approach.4 5ach approach incorporates a different view of moral responsibility and a different view of the kinds of ethical principles that should be used to resolve ethical problems. 6ore often than not, discussions about ethics in organizations reflect only the 4individualistic approach4 to moral responsibility. According to this approach, every person in an organization is morally responsible for his or her own behavior, and any efforts to change that behavior should focus on the individual. !ut there is another way of understanding responsibility, which is reflected in the 4communal approach.4 7ere individuals are viewed not in isolation, but as members of communities that are partially responsible for the behavior of their members. 1o, to understand and change an individual&s behavior we need to understand and try to change the communities to which they belong. Any ade%uate understanding of, and effective solutions to, ethical problems arising in organizations re%uires that we take both approaches into account. -ecent changes in the way we approach the 4problem of the alcoholic4 serve as a good example of the interdependence of individual and communal approaches to problems. 8ot so long ago, many people viewed an alcoholic as an individual with problems. $reatment focused on helping the individual deal with his or her problem. $oday, however, the alcoholic is often seen as part of a dysfunctional family system that reinforces alcoholic behavior. 9n many cases, the behavior of the alcoholic re%uires that we change the entire family situation.

$hese two approaches also lead to different ways of evaluating moral behavior. Once again, most discussions of ethical issues in the workplace take an individualistic approach. $hey focus on promoting the good of the individual' individual rights, such as the right to freedom of expression or the right to privacy, are held paramount. $he communal approach, on the other hand, would have us focus on the common good, en3oining us to consider ways in which actions or policies promote or prohibit social 3ustice or ways in which they bring harm or benefits to the entire community. 0hen we draw upon the insights of both approaches we increase our understanding of the ethical values at stake in moral issues and increase the options available to us for resolving these issues. $he debate over drug/testing, for example, is often confined to an approach that focuses on individual rights. Advocates of drug/testing argue that every employer has a right to run the workplace as he or she so chooses, while opponents of drug/testing argue that drug/testing violates the employee&s right to privacy and due process. !y ignoring the communal aspects of drug abuse, both sides neglect some possible solutions to the problem of drug use in the workplace. $he communal approach would ask us to consider %uestions which look beyond the interests of the individual to the interests of the community' 0hat kinds of drug policies will promote the good of the community, the good of both the employer and the employee: ;sing the two approaches to dealing with ethical problems in organizations will often result in a greater understanding of these problems. $here are times, however, when our willingness to consider both the good of the individual and the good of the community leaves us in a dilemma, and we are forced to choose between competing moral claims. Affirmative Action <rograms, for example, bring concerns over individual 3ustice into conflict with concerns over social 3ustice. 0hen women and minorities are given preferential treatment over white males, individuals are not treated e%ually, which is un3ust. On the other hand, when we consider what these programs are trying to accomplish, a more 3ust society, and also acknowledge that minorities and women continue to be shut out of positions, especially in top management", then these programs are, in fact, indispensable for achieving social 3ustice. =ropping preferential treatment programs might put an end to the in3ustice of treating individuals une%ually, but to do so would maintain an un3ust society. 9n this case, many argue that a communal approach, which stresses the common good, should take moral priority over the good of the individual. 0hen facing such dilemmas, the weights we assign to certain values will sometimes lead us to choose those organizational policies or actions that will promote the common good. At other times, our values will lead us to choose those policies or actions that will protect the interests and rights of the individual. !ut perhaps the greatest challenge in discussions of ethics in organizations is to find ways in which organizations can be designed to promote the interests of both The Importance of Ethics In Any Business Organization
It is an important aspect of any organization, regardless of how large or small, to have proper ethics. With the problems of the economy and the extremely high market competition, many businesses have started ignoring their ethics in order to stay on top with the competition.This is sad, and needs to be addressed. This article will explain the importance of business ethics and the best advice on how a business can maintain the use of their current ethical standards, while still remaining competitive. It is important to the success of a business that those who are in a leadership position set the pace for the others. Management personnel should be taught that their ethical behavior determines the ethical

behavior of the other employees in the company. Most importantly, if the owner of the business uses the utmost applications of business ethics, those that he employs will follow the same ethical behavior. very person should be made aware of the company!s specific ethics that are used, not only in the very beginning, but also on a regular basis. They should also be made aware of the wrong ethical behaviors. These are the ones that should be avoided at all costs. "ou should make all your employees, at every level, #$%T&" what your business! ethical code is. "ou should remind all employees of these sets of ethical rules, as well as how crucial it is that they be followed. There are three main factors that you need to consider when creating an ethical code for your business. 'irst, you should have open communication with members of management and also the employees. In order to promote confidence in each other and the company, and also to have a level of comfort and trust, communication must be open so that employees at all levels can discuss any issues that make come up regarding the code of ethics. (econd, there should be a team designed strictly for the purpose of watching the ethical actions of all the employees within the company. They should have specific procedures to identify incidences of unethical behaviors. They should also have specific procedures that are designed to deal with the issues of ethical misconduct. 'inally, when creating your business! ethical code, you should have a vision that is clearly explained. $ll aspects of the ethical rules should be detailed. This is the foundation for the entire ethical code that you design for your business. It is vital to the ultimate success and implementation of the entire set of ethical principles for your business. $lthough you may have an ethical enforcement team, it is still vital for you, as the business! owner, to be the final determinative force. )ltimately, your employees will mimic what you do and how you behave. If you act unethical, your employees will follow suit, merely out of loyalty to you, even if they know it is not right

APPROACHES TO ETHICAL DECISION-MAKING

Philosophers have studied and written about ethics for thousands of years. The moral philosophies or ethical "theories" that have been developed form the foundation for ethics in business. Table 1 shows some of the major ethical philosophies that are applied to business ethics. Each of the ethical philosophies is briefly considered in this section. Table 1 Approaches to Ethics i !"si ess Adapted from: Ferrell Fraedrich and Ferrell !""! p. #$. Teleolo#ical E#ois' Actio s are $"%#e% as ethical or " ethical base% o their res"lts& Actio s are $"%#e% as ethical or " ethical base% o the co se("e ces to o e)s sel*& Actio s that 'a+i'i,e sel*-i terest are pre*erre%& Actio s are $"%#e% as ethical or " ethical base% o the co se("e ces to -tilitaria is' .others&. Actio s that 'a+i'i,e the .#oo%. /create the #reatest #oo% *or the #reatest "'ber0 are pre*erre%& Deo tolo#ical Actio s are $"%#e% as ethical or " ethical base% o the i here t ri#hts o*

i %i1i%"al a % the i te tio s o* the actor& I %i1i%"als are to be treate% as 'ea s a % ot e %s& It is the actio itsel* that '"st be $"%#e% a % ot its co se("e ces& Actio s are $"%#e% as ethical or " ethical base% o the *air ess sho3 to 2"stice those a**ecte%& 4air ess 'a5 be %eter'i e% b5 %istrib"ti1e6 proce%"ral6 a %7or i teractio al 'ea s& Actio s are $"%#e% as ethical or " ethical base% o s"b$ecti1e *actors that Relati1is' 'a5 1ar5 *ro' i %i1i%"al to i %i1i%"al6 #ro"p to #ro"p6 a % c"lt"re to c"lt"re&

.ig. 1, A behavioral model Of ethical#unethical decision making.

4ACTORS A44ECTING ETHICAL DECISION-MAKING

%n &eneral there are three types of influences on ethical decision'ma(in& in business: )1* individual difference factors )!* situational )or&ani+ational* factors and ),* issue'related factors.

INDI8ID-AL DI44ERENCE 4ACTORS& %ndividual difference factors are personal factors about an individual that may influence their sensitivity to ethical issues their jud&ment about such issues and their related behavior. -esearch has identified many personal characteristics that impact ethical decision'ma(in&. The individual difference factor that has received the most research support is "co&nitive moral development." This framewor( developed by .awrence /ohlber& in the 101"s and e2tended by /ohlber& and other researchers in the subse3uent years helps to e2plain why different people ma(e different evaluations when confronted with the same ethical issue. %t posits that an individual4s level of "moral development" affects their ethical issue reco&nition jud&ment behavioral intentions and behavior. Accordin& to the theory individuals4 level of moral development passes throu&h sta&es as they mature. Theoretically there are three major levels of development. The lowest level of moral development is termed the "pre'conventional" level. At the two sta&es of this level the individual typically will evaluate ethical issues in li&ht of a desire to avoid punishment and5or see( personal reward. The pre'conventional level of moral development is usually associated with small children or adolescents. The middle level of development is called the "conventional" level. At the sta&es of the conventional level the individual assesses ethical issues on the basis of the fairness to others and a desire to conform to societal rules and e2pectations. Thus the individual loo(s outside him or herself to determine ri&ht and wron&. Accordin& to /ohlber& most adults operate at the conventional level of moral reasonin&. The hi&hest sta&e of moral development is the "principled" level. The principled level the individual is li(ely to apply principles )which may be utilitarian deontolo&ical or justice* to ethical issues in an attempt to resolve them. Accordin& to /ohlber& a principled person loo(s inside him or herself and is less li(ely to be influenced by situational )or&ani+ational* e2pectations. The co&nitive moral development framewor( is relevant to business ethics because it offers a powerful e2planation of individual differences in ethical reasonin&. %ndividuals at different levels of moral development are li(ely to thin( differently about ethical issues and resolve them differently. SIT-ATIONAL /ORGANI9ATIONAL0 4ACTORS& %ndividuals4 ethical issue reco&nition jud&ment and behavior are affected by conte2tual factors. %n the business ethics conte2t the or&ani+ational factors that affect ethical decision'ma(in& include the wor( &roup the supervisor or&ani+ational policies and procedures or&ani+ational codes of conduct and the overall or&ani+ational culture. Each of these factors individually and collectively can cause individuals to reach different conclusions about ethical issues than they would have on their own. This section loo(s at one of these or&ani+ational factors codes of conduct in more detail.

6odes of conduct are formal policies procedures and enforcement mechanisms that spell out the moral and ethical e2pectations of the or&ani+ation. A (ey part of or&ani+ational codes of conduct are written ethics codes. Ethics codes are statements of the norms and beliefs of an or&ani+ation. These norms and beliefs are &enerally proposed discussed and defined by the senior e2ecutives in the firm. 7hatever process is used for their determination the norms and beliefs are then disseminated throu&hout the firm. An e2ample of a code item would be "Employees of this company will not accept personal &ifts with a monetary value over 8!# in total from any business friend or associate and they are e2pected to pay their full share of the costs for meals or other entertainment )concerts the theater sportin& events etc.* that have a value above 8!# per person." 9osmer points out that the norms in an ethical code are &enerally e2pressed as a series of ne&ative statements for it is easier to list the thin&s a person should not do than to be precise about the thin&s a person should. Almost all lar&e companies and many small companies have ethics codes. 9owever in and of themselves ethics codes are unli(ely to influence individuals to be more ethical in the conduct of business. To be effective ethics codes must be part of a value system that permeates the culture of the or&ani+ation. E2ecutives must display &enuine commitment to the ideals e2pressed in the written code:if their behavior is inconsistent with the formal code the code4s effectiveness will be reduced considerably. At a minimum the code of conduct must be specific to the ethical issues confronted in the particular industry or company. %t should be the subject of ethics trainin& that focuses on actual dilemmas li(ely to be faced by employees in the or&ani+ation. The conduct code must contain communication mechanisms for the dissemination of the or&ani+ational ethical standards and for the reportin& of perceived wron&doin& within the or&ani+ation by employees. ;r&ani+ations must also ensure that perceived ethical violations are ade3uately investi&ated and that wron&doin& is punished. -esearch su&&ests that unless ethical behavior is rewarded and unethical behavior punished that written codes of conduct are unli(ely to be effective. ISS-E-RELATED 4ACTORS& 6onceptual research by Thomas <ones in the 100"s and subse3uent empirical studies su&&est that ethical issues in business must have a certain level of "moral intensity" before they will tri&&er ethical decision' ma(in& processes. Thus individual and situational factors are unli(ely to influence decision'ma(in& for issues considered by the individual to be minor. 6ertain characteristics of issues determine their moral intensity. %n &eneral the research su&&ests that issues with more serious conse3uences are more li(ely to reach the threshold level of intensity. .i(ewise issues that are deemed by a societal consensus to be ethical or unethical are more li(ely to tri&&er ethical decision'ma(in& processes.

%n summary business ethics is an e2ceedin&ly complicated area one that has contemporary si&nificance for all business practitioners. There are however &uidelines in place for effective ethical decision ma(in&. These all have their positive and ne&ative sides but ta(en to&ether they may assist the businessperson to steer toward the most ethical decision possible under a particular set of circumstances.

Q-1 What are the ethical issues faced by organizations in todays environment? What will be your suggestion for Eliminating the evil of corruption in an organization? Introduction: Ethics, social responsibility of business and corporate governance have become hot issues in the wake of a series scandal reported from all over the world. This subject needs special attention because multinationals operate in a large number of countries with varying standards of moral behavior and multicultural perceptions about what is right and what is wrong. Their workface also consists of high diversity with individuals having different values and beliefs. The is important also as economic programs of developed and developing countries cannot only be faster but also will be long lasting if built on strong moral foundation. What is ethics? Ethics is the discipline that examines the moral standards practiced by an individual or a corporate or a society. It is a function of ones consciousness. It is therefore beyond the boundaries of law. Some activities may be legal but may not be ethical, although law represents the moral code or standards

practices by a society or country to resolve conflicts and allow freedom to achieve their uniqueness, pursue their goals and live in peace. It represents the practiced value system. While ethics, in general, is concerned with concepts of right and wrong for societal purposes .its practical essential is best expressed by the seven sins of Mahatma Gandhi, which are as under: Politics without Principles Wealth without work Pleasure without Conscience Knowledge without Character Commerce without Morality Science without humanity

Worship without sacrifice Ethical issues faced by Organizations: Some of the common unethical practices business resort to include: Manipulation of stock markets: In India manipulation of stock market is not uncommon. There are several investigations and a few brokerage firms and individuals have been prosecuted. MNCs generally avoid manipulation of capital markets. Lobbying: This is a tool of public relations !apanese more

than other countries spend millions of dollars in the US every year to bend rules in award of contracts or to get sensitive information or restricted equipment. Fudging of Accounts and Balance Sheet: It is very common in developing countries like India and Indonesia to manipulate accounts to avoid taxes or manipulate share price before public issue. Eg: Enron, world.com, water cooper and Satyam. Product Piracy: "a# enforcement of intellectual property rights has resulted in large-scale piracy of music and picture videos, software, fake drugs and other intellectual property capital in China, India, Latin America and Eastern Europe. It is estimated that 30,000 shops in Shangai alone sell pirated videos. Surrogate and Deceptive Advertising: There are many ethical issues in advertising, including violation of cultural norms and nudity, apart from false information to customers. Eg: cake and Pepsi. Discrimination in selection, competition and promotion:In spite of equality laws in different countries companions still practice same bias in selection and other management process on the basis of gender, colour, and race and show ethnocentrism. Sexual harassment at workplace is a growing trend. Suggestions to eradicate corruption: 1. Institution of strong ethical structure based on social values and professional requirements. 2. Institution and execution of sound process of business. 3. Promote a clear understanding of ethical behavior and its advantages in individual and business growth. 4. Strong action against unethical behavior. 5. Speedy disposal of unethical behavior cases. 6. Sound appraisal system. 7. Planning and execution of a clearly defined award and reward system based on professional ethics. 8. Transparency in working.
Ethical issues arising from the nature of markets - The 18th Century economist Adam Smith demonstrated how in a free market the self interest of producers and consumers will produce an outcome desirable to all concerned - But the market can also lead to inequality of income, wealth and market power !onopoly suppliers can e"ploit consumers !onopsony buyers can e"ploit supply firms #orld wide inequality of income can result in unethical practices such as the child labour

Ethical issues and society - examples $n%ol%ement in the community &onesty, truthfulness and fairness in marketin' (se of animals in product testin' A'ricultural practices e)') intensi%e famin' The de'ree of safety built into product desi'n *onation to 'ood causes

The e"tent to which a business accepts its alle'ed responsibilities for mishaps, spilla'es and leaks The sellin' of addicti%e products e)') tobacco $n%ol%ement in the arms trade Tradin' with repressi%e re'imes

Ethical issues arising from internal and industry practices - examples Treatment of customers - e)') honourin' the spirit as well as the letter of the law in respect to warranties and after sales ser%ice The number and proportion of women and ethnic minority people in senior positions The or'anisation+s loyalty to employees when it is in difficult economic conditions ,mployment of disabled people #orkin' conditions and treatment of workers Bribes to secure contracts Child labour in the de%elopin' world Business practices of supply firms

Unethical practices in marketing - examples -ricin' lack of clarity in pricin' *umpin' . sellin' at a loss to increase market share and destroy competition in order to subsequently raise prices -rice fi"in' cartels ,ncoura'in' people to claim pri/es when they phonin' premium rate numbers 0Bait and switch1 sellin' - attractin' customers and then sub2ectin' them to hi'h pressure sellin' techniques to switch to an more e"pensi%e alternati%e &i'h pressure sellin' - especially in relation to 'roups such as the elderly Counterfeit 'oods and brand piracy Copyin' the style of packa'in' in an attempt to mislead consumers *ecepti%e ad%ertisin' $rresponsible issue of credit cards and the irresponsible raisin' of credit limits (nethical practices in market research and competitor intelli'ence

Unethical practices relating to products - examples Sellin' 'oods abroad which are banned at home 3mittin' to pro%ide information on side effects (nsafe products Built in obsolescence #asteful and unnecessary packa'in' *eception on si/e and content $naccurate and incomplete testin' of products Treatment of animals in product testin'

Ethics and the supply chain - $t would be hypocritical to claim to be a ethical firm if it turned a blind to unethical practices by suppliers in the supply chain) $n particular The use of child labour and forced labour -roduction in sweatshops 4iolation of the basic ri'hts of workers $'norin' of health, safety and en%ironmental standards

An ethical producer has to be concerned with what is practiced by all firms 5upstream and downstream6 in the supply chain) Bribery This is a key ethical issue in business $t first needs to be stated that bribery to secure a contract 5especially a contract with a public sector body6 is a'ainst the law and se%ere penalties can result &owe%er, it is sometimes seem 5wron'ly6 as a %ictimless crime and is often rationalised in terms of 0if we don+t offer a bribery, others will1 7rom a moral or ethical perspecti%e it should be approached not in terms of 0can we 'et away1 with it but is it ri'ht to offer a bribe to secure a contract

Institute of Business Ethics Suggestions for Good Practice The $nstitute recommends that or'anisations issue statements of ethical practice in respect of 8elations with customers 8elations with shareholders and other in%estors 8elations with employees 8elations with suppliers 8elations with the 'o%ernment and the local community The en%ironment 8elations with competitors $ssues relatin' to international business Beha%iour in relations to mer'ers and takeo%ers ,thical issues concernin' directors and mana'ers Compliance and %erification

What is an Ethical code This is a $t is likely to co%er set of principles 'o%ernin' morality and acceptable beha%iour

-ersonal beha%iour e)') when dealin' with customers and suppliers Corporate beha%iour e)') when ne'otiatin' deals Beha%iour towards society e)') when recruitin' Beha%iour towards the en%ironment e)') when decidin' on process

Ethical audit - This is an audit of all the firms acti%ities -urpose To check that ethical principles are bein' pursued To check the e"tent to which actions are consistent with the or'anisation+s stated ethical intentions And to establish action plans if they are not

>?. @haracteristics of an ethical leader

Here are my weekly tips to help you and your colleagues become more effective and respected leaders.

.! High "alues #wareness Aalues are regularly communicated and discussed to ensure awareness and understanding throughout the organization. $.! High "alues #ccountability <eople are evaluated on values/driven practices as well as resultsBwith zero tolerance for conscious values violations. %.! &eadership By E'ample Ceaders earn the right to expect others to do things by doing those things themselves. (.! "alues)Driven Decision *aking =ecisions are checked to ensure they are in accord with organizational values !5.O-5 they are implemented. +.! In ,ync -olicies and -rocedures -ules, policies, and practices are evaluated to ensure they reflect and support organizational values. ..! "alues)Driven Education $raining and other developmental activities teach people how to demonstrate ethics and apply organizational values. /.! #ttention 0o -erceptions @limate surveys and other perception/collecting activities are important components of organizational assessment and change strategies. 1.! ,teady2 Incremental 3hange 5mphasis is placed on many small improvements rather than %uick/fix fads and Dprograms of the year.E 4.! "alues)Based ,election $he degree to which people subscribe to and practice organizational values is a key criterion in hiring and promotion decisions. 5.! Encouraged Initiative <eople are rewarded for 0alking $he $alk rather than complaining, pointing fingers, or waiting for others to take the first step.

0ransactional &eadership "s. 0ransformational &eadership

8umber of Ceadership theories evolved on the basis of $rait, !ehavioral, $ransformational, 1ituational, @harisma. -esearchers and thinkers made efforts linking some of the theories across these leadership islands. !ut each model has its own pros, cons, assumptions F limitations. Catest researches are conducted on 1ituational F $ransformational leadership styles. Ceadership gurus presented new models as variations to the already existing models. 6ax 0eber,

6ac,regor !urns, !ernard 6.!ass, 0arren !ennis F 8anus are few important researchers in the area of transformational leadership. ;nderstanding the difference between transactional and transformational leadership is vital in getting the whole concept of transformational leadership theory. As a starting point, let us review our everyday life. 9n general, a relationship between two people is based on the level of exchange they have. 5xchange need not be money or material( it can be anything. $he more exchange they have the more stronger the relation. 2our manager expects more productivity from you in order to give good rewards. 9n this way, if something is done to anyone based on the return then that relation is called as G$ransactionalH type. 9n politics, leaders announces benefits in their agenda in exchange to the vote from the citizens. 9n business, leaders announces rewards in turn to the productivity. $hese relation is all about re%uirements, conditions and rewards or punishment". Ceaders who show these kind of relationship are called Transactional Leaders. 9n life, at one point of time, things happen without expectation from other side. 1ay, momHs dedicated service to her kid. 6om doesnHt expect anything from the child and the service she provides in raising the child is unconditional, dedicated, committed. 6om plays a ma3or role in shaping up the kidHs future life. $his type of relation is called as G$ransformationalH. Ceaders do exist in this world with these behaviors. $ransformational Ceaders work toward a common goal with followers( put followers in front and develop them( take followersH to next level( inspire followers to transcend their own self/interests in achieving superior results. 0ransactional &eader6 approaches followers with an eye to exchanging one thing for another Burns pursues a cost benefit, economic exchange to met subordinates current material and psychic needs in return for contracted ser ices rendered by the subordinate ! Bass 0ransformational &eader6 recogni"es and exploits an existing need or demand of a potential follower #and$ loo%s for potential moti es in followers, see%s to satisfy higher needs, and engages the full person of the follower Burns The leader who recogni"es the transactional needs in potential followers but tends to go further, see%ing to arouse and satisfy higher needs, to engage the full person of the follower to a higher le el of need according to &aslows hierarchy of needs Bass As exactly said by !ass I Dthe transactional leaders work within the organizational culture as it exists( the transformational leader changes the organizational cultureE. .ollowing table shows difference of transactional and transformation leadershipJ1K. 0ransactional &eadership 0ransformational &eadership L Ceaders are aware of the link between the effort L Ceaders arouse emotions in their followers which and reward motivates them to act beyond the framework of what may be described as exchange relations L Ceadership is responsive and its basic orientation is dealing with present issues L Ceadership is proactive and forms new expectations L Ceaders rely on standard forms of inducement, in followers reward, punishment and sanction to control L Ceaders are distinguished by their capacity to followers inspire and provide individualized consideration, L Ceaders motivate followers by setting goals and intellectual stimulation and idealized influence to

promising rewards for desired performance L Ceadership depends on the leaderHs power to reinforce subordinates for their successful completion of the bargain.

their followers L Ceaders create learning opportunities for their followers and stimulate followers to solve problems L Ceaders possess good visioning, rhetorical and management skills, to develop strong emotional bonds with followers L Ceaders motivate followers to work for goals that go beyond self/interest.

#re business ethics or profits more important7

-esults so far' 5thics <rofits 7?M NO? votes 0otal6 1 5 votes )?M )O? votes

Ethics vs Profits Ethics

0atching the bottom line is very important when one is in business but even more important is keeping a vigilant eye on oneHs business ethics. $o have business ethics means treating all stakeholders fairly and to treating people and other businesses fairly is showing them respect. <utting business ethics first means that employees will be loyal not out of fear but out of respect. 9t means a less stressed work environment which in turn means less employee sick days. @ustomers are willing to spend a little more if they feel certain that they will be treated fairly and wonHt have to worry about being cheated. Aendors will be more inclined to extend credit to a company that has a reputation for being above board in its dealings. !usinessesH that always behave in an ethical manner will spend less on lawyers and wonHt need to spend as much on advertising as their less trustworthy competitors do. .or a business to put profit ahead of ethics is the same as being Gpenny wise but pound foolishH. 1ure there is gain today but at what cost: @ustomers can be mislead, vendors can be strong armed, and accounting corners can be cut to fool the investors but like a house built upon the sand it falls apart eventually. $he general person may seem stupid to some top executives but eventually that customer smartens up and notices the bait and switch or the inferior merchandise or the out of date product and begins to shop somewhere else. Oh, the customers may continue to shop at a store that they feel has been less then honest with them but only for the really good sales, everything else they will buy somewhere else. 8o store can exist selling only their Gcome on or loss leaderE items. Aendors that are left hanging or who are threatened with a boycott of their products if price demands arenHt met may have no choice but to play along but you can be sure they tell other vendors how they were treated. @ompanies know that if they gear up production to supply 0al/ 6art then they must sell to 0al/6art at the price 0al/6art demands or they will be dropped and

left with a glut of product and no place to sell it. $his has caused several companies to have to move their production out of the ;.1. in order to cut their product costs and stay in business. @ertainly profits must not be ignored after all that is why businesses are in business but trying to realize a profit while ignoring or only paying lip service to the ethics of oneHs business will not work in the long run, even 0al/6art will eventually succumb to this fact of life. 9tHs Parma, it got 5nron and one day it will get to 0al/6art because what does around comes around.

Profits
9n a strictly business topic, profit is the driving force of success and growth. One cannot deny that high revenues signal a strong business, and one @A8 deny that without ethics a business will fail. .or instance, pyramid schemes, which are 3ust a plot to make money from others by giving the service of making money, serves no purpose and is unethical. 7owever, we can definitely assume that the inventors of the pyramid schemes are sitting on top of their 4business4 making thousands, if not millions, of dollars laughing at the ethical man who cannot keep his own business afloat selling something with actual worth. 0e hope for ethics in this world and that one day our leaders, whether in business, government, or science, will keep us on the track of good consciousness for a better world, but for this moment in time in a business field, profit is key. All of our parents, teachers, and elders told us that working hard and doing good in the world is the key to success and wealth. $hey say that with a pure heart, one will one day reap the rewards they have given out as good deeds, and live a happy life. $his is a speculation because one, we cannot tell the future, and two, it only works in a utopia. 6ostly everyone in this world works for a profit, even people here, on helium, work for a profit do to the fact the ma3ority do not donate their revenues". !ecause everyone works for a profit, the idea that one will go out of his or her own way to enrich someones else&s wealthiness without a clear return in value is considered 4crazy.4 And its true, because humans find most other humans insignificant and even though another may show graciousness and generosity, most people will see the generosity with greedy eyes, not the person behind it. $herefore by starting and maintaining a business, an enterprise that exchanges goods or services for wealth, is exactly as its meaning, exchanging goods and services for wealth. 0hy is it that fast food chains in America, whose method of manufacturing food and marketing is considered very unethical due to the fact the food is considered 4unhealthy4 and it markets to children, are making billions of dollars. $his contrasts the agencies that try to prevent obesity and promote good living, whose %uarterly revenues cannot even match 1OM that the big boys are making, even though they are ethical. $his does not mean that banning ethics is the answer, no, it means that the primary focus of a growing business is profits and hopefully when one&s business is large enough, it can be coupled with ethics that can change society for the better. A good analogy would be to portray a growing tree from a seedling. 1hould the tree try to grow apples for the inhabitants of the forest when it is young and fragile, or focus on growing big and tall to the point where it can make thousands of apples for the entire horizon. $herefore 9 say, profits should be the primary focus, whereas ethics should be the coupled together later on.

Business ethics can be profitable

!usiness and ethics almost sounds like an oxymoron. 9f you read the headlines they often sound something like 4@5O bilks millions4, 45xecutives involved in illegal activity4 or 4@orporation harms the environment4. @orporations have the reputation of being ruthless and being all about the profit. $o an extent this is perhaps true because a for/profit company&s mission is to return a profit to its stakeholders. Although to another degree this is a stereotype because it doesn&t mean that profits and ethics can&t peacefully co/exist. $here are many companies which are successful, profitable and ethical. 0hile some companies do engage in these kind of unethical activities in the pursuit of profit, in the long run you&ll often hear of their demise rather than their success. 1ure they might attain some %uick short term profits, but this isn&t going to sustain them in the long term once those negative headlines emerge. 0hat some profit/intense management members fail to consider is that establishing a good ethical foundation in an organization can actually give the company a competitive advantage and increase profits. <rofits and ethics can live in harmony and one can even enhance the other. $here are many significant advantages to integrating a philosophy of ethics into your business. 0hile profits are obviously an important consideration there is no good reason ethics can&t play a part in it. 0hen you set an example of integrity and establish a sound moral compass across your business this will directly impact success and growth. 7ere are a few other advantages a strong moral compass will lead your business to receive, all of which impact profitability. L1olid -eputation !usinesses that regularly practice good ethics attract consumers. 0hen your business acts in an ethical fashion it gives your business a positive impression and as a result you&ll achieve a good reputation. 0ord of mouth and good press are positive referrals and if your business can receive the stamp of approval from customers, news and even reviews on the 9nternet this will increase your chances to be more profitable. 7ow often do you search for information online to find out about a product or business: @hances are if you regularly engage in looking up information you&ve seen how vocal people are when it comes to companies they&ve done business with. All it takes is a few bad reviews on the 9nternet outlining unethical practices and this will live on forever in every search engine. 9f your company acts ethical, this is the face you&ll be showing the world when people look for information which also will remain visible in search engines for customers to see. L,ood 5thics Cead to a Coyal .ollowing @ustomers tend to shy away from businesses that are known to be unethical or recognized for being less than stellar in their behavior. One bad experience, negative treatment or shady business deal is all it takes for a customer to be willing drop their loyalty. 9n today&s competitive environment the companies which act unethical will lose in the long run. 1ure they might make a %uick profit through their unscrupulous acts, but this kind of profit isn&t the sustaining kind. Over the long term their dishonesty is going to catch up with them because they won&t be able to retain loyal customers.

9f you can establish a loyal customer base you&ll be guaranteed ongoing profitability, but if you can&t sustain your customers it is going to cost you in the long run. 9t is a lot less expensive to keep returning customers than it is to attract new ones. $hose short term profits won&t add up to much if your budget is spent trying to continually attract new customers because your unethical practices drive existing ones away. @ustomer loyalty is definitely more profitable and good ethics is a good way to keep people returning. L@ompetitive Advantage Acting ethically when conducting business gives you a strong competitive advantage. 0hen you can attract customers based on your good name, reputation and %uality product or service this is very profitable. 9f people do a search for your kind of product or service they are going to comparison shop and if it comes down to a business known to be ethical and one that is not as reliable due to shoddy ethics, chances are your company will be the one selected. 5ven if your prices are a bit higher, people want to pay for %uality and honesty because they know they&ll be getting exactly what they have been promised. A business who is known to be unethical isn&t going to have this competitive advantage. LAttract 6ore !usiness 9t goes without saying that ethical companies attract customers for many of the same reasons mentioned above. Once you&re established as a company which conducts business honestly, takes a level of corporate social responsibility and forgoes ruthless and cut/throat practices this is of immediate value to your business. L,ood -eputation for !uilding <artnerships @reating strong partnerships with other ethical companies is another advantage to running an ethical workplace. 9n today&s global economy businesses are often dependent on one another for sustainability and growth. 0hen you do business with other ethical companies and forge solid partnerships, this further increases visibility and establishes yourself as having a solid reputation. 9f you are associated with companies who are known for their immoral activities, there is a chance this reputation will transition to you. On the other hand if ethical companies recognize you as one who is comprised of good moral standing and only works with companies who hold similar business philosophies they&ll do business with you. 9n the long run this further increases your profit margin. <rofits and ethics are not exclusive, in fact with today&s competition it is probably now more important than ever to engage in ethical business practices. @onsumers run the market and if they don&t like the way you do business they&ll simply turn to one of your competitors. 9t is in your best interests to run a morally strong organization

LLLLLLLL

3an Ethics and a Healthy Bottom &ine 8or 3ompanies 3o)E'ist7 $here&s a view that soaring profits and ethics are mutually exclusive concepts, however, the two can co/exist. $he world of business is generally perceived as 3ungle where the bottom line takes precedence over all other matters. 0hile it is certainly true that profits are the true measure of success, commercial ruthlessness doesn&t necessarily lead to unethical practices. $here sometimes arises an inevitable conflict in the company between their moral obligations and improving the bottom lines. !ut ultimately companies following the path of ethical value system succeed in long run as sooner or later consumers learn to separate fact from fiction. 7ence in situations such as these referring to morality to help decide what needs to be done should take precedence. 8owadays 6oney and 5thics are seen to be diametrically opposed to each other but it turns out money and ethics do have much in common. Any corporation large or small ultimately lives by its reputation. 5thics must sit at the top of the mountain for any successful company that wants the trust of the consumers and investors. $here are very few second acts once the public perceives the organization flawed by dishonesty or inferior %uality. As is very rightly said by 7enry .ord / A business that makes nothing but money is a poor kind of business. 5thical decision/making gets especially interesting when organizations must reconcile their core values and show a healthy bottom line which end up in conflict with one another. $he company and its management might get diversified to malpractices. 5nron, 0orld@om, 1atyam, Qerox and other scandals shook public confidence in ethical value system of organizations. !ut it must understood very clearly -elativity applies to physics, not ethics Albert 5instein" <rofits and ethics are in reality part of the same e%uation. A corporation that wishes to grow and increase its financial return to its owners must balance ethics and operations. $his is a complex 3ourney especially during tremendous economic pressures. $he drive for success in the marketplace and to maximize return of capital can lead a company astray with disastrous results. 1uccessful businesses fail, profitably running businesses suffer from a downfall and some seemingly effective corporate receive a great fall in their profits and popularity all due to the lack of business ethics. $here are companies that have crossed ethical lines in the pursuit of profit, and momentarily gained fame and fortune but what was the end result:: 6any companies strive for and achieve ethical behavior. Cooking at names like $ata group, .ord 9ndia, -ockwell Automation, 9nfosys $echnologies, 7industan ;nilever, 9$@, O8,@ it is inferred that 5thics remain being important in business and strong ethical values takes the business a long way. 5thics are important not only in business but in all aspects of life because it is an essential part of the foundation on which civilized society is build. A business that lacks ethical principles is bound to fail sooner or later. 49f you have integrity, nothing else matters. 9f you don&t have integrity, nothing else matters.4 // Alan P. 1impson