Business Ethics & Corporate Governance

Dr. Mousumi Sengupta

What is Ethics??
The word ethics is derived from Latin word ethicus and Greek word ethikos. Ethics are moral guidelines which govern good behaviour So behaving ethically is doing what is morally right A system of moral principles Our Ethical compass

Concepts of Ethics
Ethical subjectivism the morally correct decision often depends on the circumstances of a person making it.
Ethical relativism there is no universal set of principles by which to judge morality. Consequentialism it consists of two ideas:
the concept of value maximization of value.

Ethics of virtue it emphasizes the role of individual traits.

Business ethics
Ethical problems in business:
Overt problems transparent Covert problems - complex

An ideal ethical decision comprises of the following virtues: Right morally correct Equitable- just and equal Good- highest good for all concerned Proper appropriate and acceptable Fair honesty Just action

Stages of ethical consciousness in business

1. 2. 3. 4. 5. Law of jungle Anything for profit Profit maximizing Stakeholder analysis Corporate citizenship

Importance of ethics in business

The Corruption Perceptions Index "on a scale from 10 (very clean) to 0 (highly corrupt) New Zealand is the least corrupt

India stands at 95th place, among 178 countries

Ethical theories
Metaethics Normative ethics
Teleological ethical theory Deontological ethical theory Virtue ethics

Applied ethics

Ethical theories
Metaethics
it deals with the gamut of ethical issues. It is defined as the study of the origin and meaning of ethical concepts. It questions whether the moral values exist independently of humans or they are simply human conventions Psychological issues that deal with psychological basis of the moral action Linguistic issue that deal with the meaning of key moral terms we use. Axe even angels will fall !!!

Ethical theories
Normative ethics
It implies something that guides or controls It guides human conduct. We should treat others the same way we want others to treat us.
Prescriptive Universal Overriding Public Practical

Livon Hair Gain

Three normative theories

Teleological ethical theories thinking rationally about ends. An action is morally correct if the consequence of the action are more favorable. It is also called as Consequentialist theories. They offer 3 theories, based on 3 meaning of good: Egoism if the consequence is good for self Utilitarianism if the consequence is good for everyone Altruism if the consequence is good for everyone except self Deontological ethical theory focuses on certain fundamental duties that we have as human being Virtue ethics focuses on character development

Theory of corporate moral excellence

Culture is based on values
Espoused values Values in practice Espoused values refer to a companys statements, credos and code of ethics. They describe the organizations purpose and ethical perspective. Espoused values may differ from values in practice, depending on situations.

 Hoffman classified corporate culture into three types:

Basic values attitudes and beliefs of the organization Organizational goals, policies, structure, strategies that are shaped by the values and beliefs prevalent in the organization Organizational procedures and processes

Common format for Corporate Code

Compliance code corporate credos Management philosophy statements Special documents Circulated letters Compliance certificate Purchase orders

Johnson and Johnson credo says, "We believe our primary responsibility is to the doctors, nurses and patients, mothers and all others who use our products and services
Tata credo says 'give back to the people what you have earned from them'. Wal-Mart, established the Three Basic Beliefs as the company's credo: - Respect for the Individual - Service to our Customers - Strive for Excellence