Business Ethics and Corporate

Governance (BE&CG)
As per the Syllabus of
MBA Semester 01
Gujarat Technological University
 Module 01
Introduction to Business Ethics:

Nature of Ethics

Ethical Concepts and Theories

Morals and Values

Importance and need of ethics in business

The Word Ethics is Derived

Greek
word Ethics
ethikos

Latin word
ethicus
 What Does
The Term
Ethics Actually
Mean ....?
 Definition of Ethics
For Example: We should
Moral principles that govern
always speak truth, Respect
a person's behaviour or the
our Elders, Honesty is the
conducting of an activity
best policy.
Ethics are moral guidelines which govern
good behaviour

Behaving
Ethically

Doing what is
MORALLY
RIGHT
 What is Business Ethics?

Business ethics are moral principles that guide the

way a business behaves. The same principles that
determine an individual”s actions also apply to
business.
 Continue...
Acting in an ethical way involves
distinguishing between “right” and “wrong”
and then making the “right” choice. It is
relatively easy to identify unethical business
practices.

For example, companies should not use child

labour. They should not unlawfully use
copyrighted materials and processes. They
should not engage in bribery.
 Ethics Deals
with the
Humans

Nature of
Ethics is a Ethics is a
Science of Business Normative
Values Science
Ethics

Ethics is
Different
from
Morality
 Ethics Deals With Humans
Ethics deals with humans and is concerned with a
particular sphere of nature that deals with certain
judgments that we make about human conduct. It
also talks about systematic explanation of
rightness or wrongness in a man’s life.
 Ethics is a normative science

A natural science or descriptive science is concerned

with “what is the case”. It deals with facts and explains
them by their causes. However, Normative science is
concerned with what ought to be done. Ethics is a
normative science as it deals with norms by which we
can judge human actions. Ethics does not deal with
facts. Rather, it deals with values and principles.
Therefore, it is clear that ethics is concerned with
judgments of value, while natural science deals with
judgments of facts. That is why ethics is not a natural
science but a normative science.
 Ethics is different from morality

Ethics and morality {term moral comes from the Latin moralis, meaning
customs or manners} are often used interchangeably. In earlier times, the
scholars used to call ethics a ‘science of morals’. However, this was fallen to
disuse. Ethics does not teach how to lead a moral life. Ethics merely help us to
justify the right and good which leads us to achieve our goals. Morality deals
with purpose, motive, intention and choice which are considered right or
wrong in the light of customs and manners.

Another difference between the two is that – the term ‘ethics’ is usually applied
to persons while ‘morality’ to acts and behaviour..
 Ethics is a science of values

Ethics is a science of values as it discovers the

forms of conduct or behaviour, which have
the character of moral obligation. Ethics deals
with a phenomena and it observes, classifies
and explains them by moral values. It
distinguishes moral judgments from logical
judgments and aesthetic judgments and
reduces them to a system.
 Ethical Concepts
Subjectivism

Whistle Blowing Relativism

Ethical Dilemma Consequentialism

Deontological
Ethics of virtue
ethics
 Subjectivism
This concept emphasizes that the ethical choice
of the individual decides the rightness or
wrongness of his behaviour.
 Relativism
According to this concept, no principle is universally applicable and so it
would be inaccurate to measure the behaviour of one society with another’s
principles or standards. Relativism overlooks the fact that there may be
enough evidence to believe that an ethical practice is based on false belief,
illogical reasoning, and so on.
 Consequentialism
Consequentialism is based on two ideas: the concept of value and the
maximization of value. If, for example, honesty is considered a value,
an act is considered ethical only if it maximizes this value. An act,
which does not maximize the said value, is not ethically permissible.
 Deontological ethics
This concept stresses that ethical values can be developed from the concepts of
reason as all rational individuals possess the ability to reason. We may, for
example, end up causing pain unknowingly while trying to create happiness.
Therefore, the ethical value of an action cannot be determined by its
consequences. Instead, it is in the motive that lies behind the particular action..
 Ethics by Virtue
This concept emphasizes those traits that give the individual a
sense of satisfaction from ethical point of view. Virtuous acts
like courage, honesty, tolerance and generosity are done as a
way of living and not by chance.
 Whistle Blowing
Whistle blowing refers to the attempt of an employee to disclose what he or she
believes to be illegal behaviour in or by the organization. From one point of view,
this seems to deceive the principle of honesty in business ethics, as it is taken for
granted that the employees of an organization need to be loyal to its workings.
However, when loyalty to one’s organization in particular is perceived to be harming
one’s general loyalty to mankind, the act of whistle blowing is justified. Failure on
the part of the management of the organization to fulfil its social obligations calls
for whistle blowing. It is the responsibility of the whistle blower to be careful about
revealing the organization’s secrets and to consider the harm it may cause to his
colleagues and shareholders.
 Ethical dilemmas in business
An organization’s ethical problems indicate a conflict
between its economic and social performance. This
results in a dilemma for managers. Since people
handle business, it is a crucial requirement to check
and ascertain ethical behaviour at a personal level.
This will confirm ethically correct responses from the
organization to the mutual actions of individuals.
Need of Ethics
Importance of Ethics in Business

Trust of
Image
Employees

Pride of
Costs Best
Company

Part of
Society
 1. Image

An ethical organization commands trust and respect

of all its stakeholders. The organization bulls and
ethical image for itself.
 2. Pride of Best Companies

The ethically managed company's command respect from

public as well as government organizations. The company
policies with regards to profit sharing bonuses, social
responsibility, balance of work and social life are quoted.
 3. Part of Society

Business is a part of society. Whatever ethical principles

apply in society applied to business. Example if a
company in deliberately evades tax payments the
company is treated unethical.
 4. Costs

Deterioration of relationships, and damage to reputation and

reduction of employee productivity, loyalty that come out of
unethical practices cost companies. An uncaring employer will
find it difficult to employ good professions for his business.
 5. Trust of Employees
High level of morale and productivity can be easily obtained in
companies that treat their all Employees with equality,
encourage good team and work culture, and with tickle
practices. Employees get satisfaction in ethically and socially
responsible companies.
What is Morals From
your point of
view????
 Morals
Morals are the rules that govern which actions are right and which
are wrong. Morals can be for all of society or an individual’s
beliefs. Sometimes a moral can be gleaned from a story or
experience.
 Characteristics of Morals

A Central feature of morality is the moral

principle. We have already noted that
moral principles are practical guides to
action that differ from legal statutes,
rules of etiquette, and even religious
rules. We must say a word about the
features of moral principles.
 Although there is no universal agreement on which traits
a moral principle must process, the following traits have
received widespread attention:

(1) Prescriptivity

(5) Practicability (2) Universalizability

(4) Publicity (3)Over ridingness

 1. Prescriptivity
It refers to the practical or action-guiding nature of
morality. Moral principles are generally put forth as
injunction or imperatives (for example, ‘Do not kill,’ ‘Do no
unnecessary harm,’ and ‘Love your neighbor’). They are
intended for use, to advise and to influence to action. It
shares this trait with all normative discourse. Retroactively,
this feature is used to appraise behavior, to assign praise
and blame, and to produce feelings of satisfaction of guilt
 2. Univeralizabilty
Moral principles must apply to all who are in the relevantly similar
situation. If one judges that act X is right for a certain person P, then it is
right for anyone relevantly similar to P. This trait is exemplified in the Gold
Rule, “Do unto others what you would them do unto you (if you were in
their shoes)” and in the formal Principle of Justice, “It cannot be right for A
to treat B in a manner in which it would be wrong for B to treat A, merely
on the ground that they are two different individuals, and without there
being any difference between the natures or circumstances of the two
which can be stated as a reasonable ground for difference of treatment.”
Univeralizabilty applies to all evaluative judgments. If I say that X is a good
Y, then I am logically committed to judge that anything relevantly similar to
X is a good Y. This feature is an extension of the principle of consistency:
One ought to be consistent about one’s value judgements, including one’s
moral judgements
 3. Overridingness
Moral principles have hegemonic authority. They are not the only
principles, but they take precedence over other considerations, including
aesthetic, prudential, and legal ones. Paul Gauguin may have been
aesthetically justified in abandoning his family in order to devote his life to
painting beautiful Pacific island pictures, but morally, or all things
considered, he probably was not justified. It may be prudent to lie to save
my reputation, but it probably is morally wrong to do so, in which case I
should tell the truth. When the law becomes egregiously immoral, it may
be my moral duty to exercise civil disobedience. There is a general moral
duty to obey the law, because the law serves an overall moral purpose,
and this overall purpose may give us moral reason to obey laws that may
not be moral or ideal; however, there may come a time when the injustice
of a bad law is intolerable and hence calls for illegal but moral defiance
(such as the antebellum laws in the South requiring citizens to return
slaves to their owners).
 Continue....
Religion is a special case, and the religious person may be morally justified in
following a perceived command from God to break a normal moral life. The
Quakers’ pacifist religious beliefs may cause them to renege on an obligation
to fight for their country. Religious morality is morality, and ethics recognizes
its legitimacy.
 4. Publicity
Moral principles must be made public in order to ply an action-guiding role
in our lives. Because we use principles to prescribe behavior, to give advice,
and to assign praise and blame, it would be self-defeating to keep them a
secret. Occasionally, a utilitarian will argue that it would be better if some
people did not know or try to follow the correct principles, but even they
would have a higher-order principle – or some reason for this exception –
subsuming this special case.
 5. Practicability
A moral system must be workable; its rules must not lay a heavy burden on
agents. The philosopher John Rawls speaks of the “strains of commitment”
that overly idealistic principles may cause in average moral agents. It might
be desirable to have a morality enjoining more altruism, but the result of
such principles could be moral despair, too much guilt, and ineffective
action. Practicability may be the cause of the differences between ethical
standards over time and place.
 Values

Values are the rules by which we make decisions about right

and wrong, should and shouldn't, good and bad.

They also tell us which are more or less important, which is

useful when we have to trade off meeting one value over
another.

Values are global beliefs that guide actions and judgements

across a variety of situations.
 Characteristics of Values

Part of culture: Learned Adaptive

Every society responses: process:
has its own Behave in a Values are to
culture particular way be adopted
from the
family
 Characteristics of Values

Social Gratifying Inculcated:

phenomenon: responses: Passed
Group Values exist to through
behaviour are meet needs of generation to
values individual in generation
society
Distinction Between Values and Ethics
 Theories of Ethics

Consequentiality Egoism Utilitarianism Altruism

Normative
Ethical Theories
Duty Right
Theories Descriptive Based Based
Theories Non- Ethics Ethics
Consequentiality
 Consequentiality Theory

An action is morally
correct if the consequence
Teleological ethical
of the action are more
theories –thinking
favorable. It is also called
rationally about ends.
as Consequentialist
theories.
 2.
Utilitarianism 1. Egoism -
–good for good for self
everyone

3. Altruism -
good for
everyone
except self

Three Theories Based on the Meaning of Good

 1. Egoism
if the consequence is good for self

Consequentiality
 Criticism of Egoism Theory
Ethical theory • Only thinks about own self interest
but not really a • every situation is viewed from the
Moral Theory perception of one’s own self interest

• Avoids human tendency to help others

It is not a sound
• Person never sacrifices for the sake of
theory others

Ignores • Only looks to self interest and does not

take a clear stand for corruption, bribery,
Wrongdoings pollution etc.
 2. Utilitarianism

The choice that yields the

To predict the
if the consequence is greatest benefits to most
consequences of an
good for everyone of the people is ethically
action.
right.

Benthams principle –
Jeremy Bentham is the
“Happiness is the only
person who was the
right and universally
founder of traditional
desirable end of human
utilitarianism theory.
action”
 Types of Utilitarianism

Act Utilitarianism:
• Concerned with achieving the maximum good
• Work done for the benefit of greater population
• Does not always looks for individual, individuals sacrifice
that benefits majority of people.

Rule Utilitarianism:
• Possibility of conflicting rules
• If a person running late for the meeting coz he was helping
some group of people... There may be conflicts.
 Egoism V/S Utilitarianism

Devtas
Rakhas (Demons)

Ladus (Dish of Sweet)

 3. Altruism
if the consequence is good for everyone except
self
 3. Altruism Continue...
It follows many
It is selfless
virtues and
concern for the
cultures,
welfare of others.
traditions,.

Humans should be
It is opposite of morally correct, in
selfishness. this sense it is
opposite of egoism
 Non – Consequentialist Theory

Deontology refers to This theory mainly focuses

moral philosophies that on behaviours of person
focus on the rights and Equal respect should be towards a particular
intensions of individuals given to all persons. situation or person
rather than on its avoiding what could be its
consequences. consequences.
 Duty Based Ethics

This theory is called Kantianism.

It was developed by Immanuel Kant.

This theory says that principle and

duty matters a lot.

What matters is that the act itself is

right and one does one’s duty.
 Tell truth

Right the
Avoid injury wrong that

Some
to others one has done
to others

Basic
Give thanks
Duties Act justly

Help others
 Right Based Ethics

Rights are
divided in two
This theory is parts

It is based on based on • Positive Rights

maintaining • Negative Rights
2 social
human or legal
theorists
rights like right
Locke and to privacy and
Hobbes. ownership of
property.
Negative rights refer to
freedom to interfere in
any one’s matter
without looking upon
the consequences that
might occur.

Positive rights are one

that give freedom to an
individual to pursue his
or her own interest like
right to health,
education etc.
 Kohlberg’s six stages of Moral
Development

After presenting people with various moral dilemmas, Kohlberg reviewed people’s
responses and placed them in different stages of moral reasoning.

According to Kohlberg, an individual progresses from the capacity for pre-conventional

morality (before age 9) to the capacity for conventional morality (early adolescence), and
toward attaining post-conventional morality (once Piaget’s idea of formal operational
thought is attained), which only a few fully achieve.

Each level of morality contains two stages, which provide the basis for moral development
in various contexts.
 Level 1: Preconventional
Throughout the preconvention level, a child’s sense of morality
is externally controlled. Children accept and believe the rules
of authority figures, such as parents and teachers. A child with
pre-conventional morality has not yet adopted or internalized
society’s conventions regarding what is right or wrong, but
instead focuses largely on external consequences that certain
actions may bring.
 Stage 1: Obedience-and-
Punishment Orientation

Stage 1 focuses on the child’s desire to obey rules and avoid

being punished. For example, an action is perceived as morally
wrong because the perpetrator is punished; the worse the
punishment for the act is, the more “bad” the act is perceived
to be..
 Stage 2: Instrumental Orientation
Stage 2 expresses the “what’s in it for me?” position, in which right
behavior is defined by whatever the individual believes to be in their best
interest. Stage two reasoning shows a limited interest in the needs of
others, only to the point where it might further the individual’s own
interests. As a result, concern for others is not based on loyalty
or intrinsic respect, but rather a “you scratch my back, and I’ll scratch
yours” mentality. An example would be when a child is asked by his parents
to do some work. The child asks “what’s in it for me?” and the parents offer
the child an incentive by giving him an allowance.
 Level 2: Conventional
Throughout the conventional level, a child’s sense of morality
is tied to personal and societal relationships. Children continue
to accept the rules of authority figures, but this is now due to
their belief that this is necessary to ensure positive
relationships and societal order. Adherence to rules and
conventions is somewhat rigid during these stages, and a rule’s
appropriateness or fairness is seldom questioned.
 Stage 3: Good Boy, Nice
Girl Orientation
In stage 3, children want the approval of others and act in ways
to avoid disapproval. Emphasis is placed on good behavior and
people being “nice” to others.

Good Girl. Obidient

Girl
 Stage 4: Law-and-Order
Orientation
In stage 4, the child blindly accepts rules and convention
because of their importance in maintaining a functioning
society. Rules are seen as being the same for everyone, and
obeying rules by doing what one is “supposed” to do is seen
as valuable and important. Moral reasoning in stage four is
beyond the need for individual approval exhibited in stage
three. If one person violates a law, perhaps everyone would—
thus there is an obligation and a duty to uphold laws and
rules. Most active members of society remain at stage four,
where morality is still predominantly dictated by an outside
force..
 Level 3:Post-Conventional
Throughout the post conventional level, a person’s sense of morality is defined
in terms of more abstract principles and values.
People now believe that some laws are unjust and should be changed or
eliminated.
This level is marked by a growing realization that individuals are separate
entities from society and that individuals may disobey rules inconsistent with
their own principles.
Post-conventional moralists live by their own ethical principles—principles that
typically include such basic human rights as life, liberty, and justice—and view
rules as useful but changeable mechanisms, rather than absolute dictates that
must be obeyed without question. Because post-conventional individuals
elevate their own moral evaluation of a situation over social conventions, their
behavior, especially at stage six, can sometimes be confused with that of those
at the pre-conventional level. Some theorists have speculated that many
people may never reach this level of abstract moral reasoning.
 Stage 5: Social-Contract
Orientation
In stage 5, the world is viewed as holding different opinions,
rights, and values. Such perspectives should be mutually
respected as unique to each person or community. Laws are
regarded as social contracts rather than rigid edicts. Those that
do not promote the general welfare should be changed when
necessary to meet the greatest good for the greatest number of
people. This is achieved through majority decision and inevitable
compromise. Democratic government is theoretically based on
stage five reasoning.
 Stage 6: Universal-Ethical-
Principal Orientation
In stage 6, moral reasoning is based on abstract reasoning using
universal ethical principles. Generally, the chosen principles are
abstract rather than concrete and focus on ideas such as
equality, dignity, or respect. Laws are valid only insofar as they
are grounded in justice, and a commitment to justice carries
with it an obligation to disobey unjust laws. People choose the
ethical principles they want to follow, and if they violate those
principles, they feel guilty. In this way, the individual acts
because it is morally right to do so (and not because he or she
wants to avoid punishment), it is in their best interest, it is
expected, it is legal, or it is previously agreed upon. Although
Kohlberg insisted that stage six exists, he found it difficult to
identify individuals who consistently operated at that level.
 Critiques of Kohlberg’s
Theory

Kohlberg has been criticized for his assertion that women seem
to be deficient in their moral reasoning abilities when compared
to men. Carol Gilligan (1982), a research assistant of Kohlberg,
criticized her former mentor’s theory because it was based so
narrowly on research using white, upper-class men and boys. She
argued that women are not deficient in their moral reasoning
and instead proposed that males and females reason differently:
girls and women focus more on staying connected and
maintaining interpersonal relationships.
 Critiques of Kohlberg’s
Theory

Kohlberg’s theory has been criticized for emphasizing justice to

the exclusion of other values, with the result that it may not
adequately address the arguments of those who value other
moral aspects of actions. Similarly, critics argue that Kohlberg’s
stages are culturally biased—that the highest stages in particular
reflect a westernized ideal of justice based on individualistic
thought. This is biased against those that live in non-Western
societies that place less emphasis on individualism.
 Critiques of Kohlberg’s
Theory

Another criticism of Kohlberg’s theory is that people frequently

demonstrate significant inconsistency in their moral judgements.
This often occurs in moral dilemmas involving drinking and
driving or business situations where participants have been
shown to reason at a lower developmental stage, typically using
more self-interest driven reasoning (i.e., stage two) than
authority and social order obedience driven reasoning (i.e., stage
four). Critics argue that Kohlberg’s theory cannot account for
such inconsistencies.
 THANK YOU
For Your Attention

MR. JIGNESH VIDANI

Author, Researcher and Blogger
Email: jigneshvidani@live.com
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