Business Ethics

Dr Safdar A. Butt

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 What is ethics?
 Doing the right thing.
 Doing it the right way.
 Doing it for the right reason.

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 Business Ethics
 Planning & Leadership
 Aim at doing the right thing
 Organizing
 Do it the right way
 Control
 Do it for the right reason

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 Evolution of Business Ethics
 Business
 Historically not known to be ethical
 Profit before any thing else

 Ethics
 Religious influence
 Social influence

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Why Business is being ethical now?
 Stricter laws and regulations
 Watch dogs
 Realization that ethics is profitable

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 How to enforce Ethics
 Law
 Industrial and professional codes
 Internal codes
 Wanting to be ethical

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 Law
 Words of law and spirit of law
 Law cannot create honesty
 Law cannot cover every thing.

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 Professional Codes
 Lesser force than law.
 Professional associations e.g. ICAP force their
members to follow ethics, or face expulsion.
 Professionals work for companies and force
companies to follow ethics.
 Industrial associations also exhort their
members to be ethical.

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 Internal Code
 The most compelling reason for a company to
be ethical is its own board.
 A company can become ethical only if its board
is willing to face the consequences and pay the
price of honesty.
 Setting up a formal policy on ethics is essential.
 Ethics should be part of every thing that a
company does. Doing certain things in name of
ethics is not enough.

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 Advantages of BE
 Improve in image
 Higher productivity
 Access to more and cheaper capital
 Helps society; society helps company
 Every one is a winner

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 Impact on Employees
 If the company is honest, employees tend to be
honest as well. This means better work
environment, better productivity, higher
efficiency.
 Honest companies have lesser frauds and thefts.
 Ethical companies attract better quality of staff.
 Ethical companies are able to retain good staff.

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 Characteristics of
an ethical organization
 Formal code of ethics
 Regular interaction with stakeholders
 Obsessively fair to all
 Managers responsible individually; do not hide
behind collective responsibility charade
 Employee see a purpose in their work
 Non-bureaucratic procedures

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 Roots of individual
unethical behavior
 Pressure of work and family life
 Poor communication between company and
employees
 Poor leadership of the company
 Heavy work load; long working hours
 Undue pressure / targets
 Politics, favoritism
 Personal traits & circumstances

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 Handling these causes
 All these causes can be handled by a good
management team by:
 Fairness and equal treatment of all employees
 Reasonable load of work

 Reasonable targets

 Good HR practices

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 Aspects of corporate
unethical behavior
 Bribery
 Coercion
 Conflict of interest: company & others
 Tax evasion
 Insider trading
 Lack of regard for the society

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 How to enforce ethics
in a company?
 Decide to be ethical
 Ethical decision making as norm for all
operations.
 Draw up a formal Ethics Policy and let it be part
of normal operational manuals.

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 Ethics Policy
 Avoidance of conflict of interest at all levels
 Honesty and integrity
 Fairness in dealing with every one
 Acting in good faith
 Compliance with law
 Encouraging ethical reporting: whistleblowing

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 Pakistani Scene
 Companies are not willing to be ethical
 Those that are willing cannot afford to be
ethical.
 Those that can afford, are not allowed by the
situation.
 One has to bribe even to get one’s rights

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 Rectifying the situation
 Principal causes:
 Company policies
 Unethical industrial climate
 Rampant corruption in government

 Solution:
 Bigger companies should start; others will follow
 Gradually the business climate will change
 Once business is honest; government will have to
get honest.

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Thank you
Dr S A Butt

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