Business Ethics


By

Rajeev Kumar Ranjan
MBA (IIT Roorkee)
Lecturer
University of Petroleum and Energy Studies
Dehradun
 


Corporate success being a dependent variable has become an increasingly controversial and the growing number of research and studies around the world has focused more attention on the basic assumption of corporate ethics and its effects. The purpose of this Literature is to broaden the boundaries of the debate on corporate success in an era of societal globalization and increase an understanding of its influence beyond the economic sphere. The winners and losers resulting are identified along with evidence of the impact of key Variables or factors which determines corporate success. Ethics and Etiquettes emerging as major determinants of individual/corporate success.

The article indicates the role, importance, uses and effect of ethics and etiquettes to result in success. Ethics matters because it makes good business sense to 'do the right thing'. Additionally good corporate Ethics result in:

  • Attracting better talent
  • Retaining Employees.
  • Retaining customers
  • Attracting new Customers
  • A positive effect on Return on Investment.
  • A positive effect on corporate reputation.

CONCEPT: To understand the concept of Ethics we require management perspective. Attention is focused on the attitudes, Experiences, Expectations, Problems and changes in individual and Groups as they interact at work. Answers are sought to such questions as:

  • Why do people do the things they do while at work?
  • Why do people work Anyway?
  • What effects do groups have on individual behavior?
  • Are managers and Non managers alike or different in their work motivation and responsibilities?
  • To who do, these managers have responsibilities and obligations?
  • What changes and Trends are occurring today with organizations that have a bearing on people at work? And
  • Why do people frequently resist change and ethical behavior?

"Ethical Behavior" means getting the right kind of behavior from people as individuals and groups. Ethical Behavior is activity that results in the right thing being done. But what is the right thing? Sometimes it is dictated by our culture. Most of the times though employees of an organization must determine for themselves what is right or wrong. In our rapidly changing world there are many situations in which no absolutely clear, indisputable course of ethical action exists.

Some authors think that laws are dependent upon too heavily as behavioral guidelines. In business field they propounded 4 codes of ethics like:

  • A description of organizational values and principles.
  • Standards of relationships among Directors, shareholders, stakeholders Managers, Employees, Regulators and Customers.
  • Standards of behavior which includes provision as compliance on conflicts of interest and corporate opportunities on competition interplay and on discourse.
  • And the implementation or enforcement framework it means tightening upon Ethics.

INTRODUCTION:

In this era of globalization and multinational competition, Ethical practices in business are assuming importance as relationships with various suppliers and customers are shaped by ethical practices and mutual trust, so ethical decision taking assumes importance in today's corporate world. There are various issues relating to ethics and corporate ethics in the corporate world. This article discusses those issues and also takes into consideration in brief the two models, which are termed as models of ethical decision making. They are as follows:

    1) Joseph son institute Ethical decision making model : This model is widely used in taking ethical decisions. It consists of 3 Steps:

  • All decisions must take into account and reflect a concern for the interest and wellbeing of all stakeholders.
  • Ethical values and principles always take predence over non ethical ones.
  • It's proper to violate an ethical principle only when it's clearly necessary to advance another true ethical principle, which according to the decision maker's conscience will produce the greatest balance of good in the long run.
  • 2) The Plus Decision –Making Model : To make it easy to understand and apply these ethics filters, the researchers have adapted to mnemonic word "PLUS"

  • P = Policies (It is consistent with my organizations Policies, Procedures and Guidelines?)
  • L = Legal (Is it Acceptable under the applicable laws and Regulations?)
  • U = Universal (Does it conform to the universal principles values my organizations has adopted?)
  • S = Self (Does it satisfy my personal definition of Right, Good and Fair?)

What is unethical Behavior?

The former Prime Minister A.B. Vajpayee call for "Zero tolerance" for corruption in order to restore ethics cannot become a reality unless we work with the foundation of human values:

The main forms of unethical behavior by individuals can be:

  • Lying
  • Greed
  • Free Riding
  • Employee crime
  • White collar Crime
  • Embezzlement and Fraud
  • Bribery

If these unethical behaviors can be overcome then the path towards enlightment can be achieved. And this was the essence of enlightment of Lord Buddha, Tagore, Nehru, and Gandhi to name a few. Lord Buddha gave 4 noble truths which constitute the essence of Buddha's enlightment that he was eager to share with all fellow beings. These have come to be known as 4 noble truths. They are:

  • Life is full of suffering
  • There is a cause of this suffering
  • It's possible to stop this suffering
  • There is a path which lead's to the cessation of these suffering.

The path recommended by Buddha consists of 8 steps and is called the 8 fold noble path. This gives the essentials of Buddhist ethics. The noble path consists of the Acquisition of the following 8 good things:

  • Right Views
  • Right Resolve
  • Right Speech
  • Right Conduct
  • Right Livelihood
  • Right Effort
  • Right mindfulness
  • Right Concentration

It's been rightly said:

"In sin we lust after pleasures, not because they are truly desirable, but because the red light of passion makes them appear desirable, We long for things not because they are great in themselves, because our greed exaggerates them. These exaggerations break the harmony of our life at every step,  and we lose the true standards of Values".
                                          (Tag ore)

CORPORATE ETHICS

Gone are the days of Milton Friedman, Noble Laureate in Economics and Patron Saint of laissez-Faire, who asserted that the sole objective of a business is and should be the maximization of shareholder's value. Social missions according to him are the responsibilities of individuals, social Agencies and the government. Business today far from being a profit making institution is largely looked upon as a social institution pursuing a social mission and having a far reaching influence on the way people live and work together. Modern corporate do not operate in isolation. The resource they make use of are not limited to those of the proprietors and the impact of their operation is felt also by many a people who are in no way connected with the business. The shareholders, the suppliers of resources, the consumers, the employees, the local community and the society at large are affected by the way an enterprise functions.

The successful functioning of a firm requires social sanction. No business can exist without the acceptance and sanction of the society in which it carries out its activities. The organization is so dependent on its social environment that it's very existence, survival and growth depends on its acceptance and approval by the society. Way back in 1963 Peter.F.Drucker the renowned management guru in his book entitled "The practices of Management" stated that the relationship between business and society is "like the relationship between a ship and the sea which engirds it and carries it, which threatens it with storm and shipwreck, which has to be crossed but which is yet alien and distant, the environment rather than the home of the ship. But the society is not just the environment of the enterprise. Even the most private to private enterprise is an organ of the society and serves a social function. Given the mutual relationship between the business and the society, Business cannot and should not be allowed to conduct itself in a manner that may be detrimental to the interest of the society. How the business should conduct its multidimensional activities in order to pursue its social obligations in a transparent manner forms the subject matter of corporate ethics.

CORPORATE ETHICS CONCEPTUALISED:

The words "ethics" which in Latin is called "ethic us" and in Greek is called "ethikos" has come from the word ethos meaning characters or manners."Ethics is thus said to be the science of morals, a treatise on this moral principles recognized rules of conduct. As applied to business firms, ethics is the study of good and evil, Right and wrong and just and unjust actions of businessmen. If protecting others from any harm is considered to be ethical, then a company which recalls a defective or harmful products from the market is an ethical company. To be considered ethical, business must draw their ideas about "What is desirable Behavior "from the same source as any body else would draw. People who are in business are bound by the same ethical principles that apply to others. In common parlance the term "corporate ethics" refers to the systems of principles rules of conduct applied to business. In practice, the term has been used to describe the do's and don'ts for the business the various things that business should or should not do viz not violating any law, avoiding unethical practices, making donations to charitable causes, taking up development projects in backwards areas, paternalism towards employees, good public relations etc.

A GLOBAL PHENOMENON

The concept of corporate ethics is no longer confined to academic discussions. Leading corporate the world over have started practicing them in their various facets and dimensions. Levi Strauss, a leader in socially responsible behavior in US refused to open factories in Alabama, which practiced segregation. It also refused to operate in south Africa where apartheid existed. On the other hand,  the company deliberately decided to operate in South Africa and assit the non white population there to enter business. All these decisions were taken in disregard to profit or growth consideration. Again globalization is reported to have resulted in an increase in the use of child labour. when Levi Strauss was accused of using child labour in Bangladesh, it's top executives immediately went there, stopped their contractors from using child labour, put the children in school and promised to employ them in future.

MBB the biggest German aerospace company has donated expensive equipments to a New Delhi hospital for bloodless surgery. Brown Boveri and Migros two large Swiss companies have involved themselves in a massive programme of consumer education.

Maruti Udyog Limited is another name associated with social responsibility. In the year 1997, of the entire car's sold between January and April this responsible company recalled about 50000 of their most popular products, Maruti 800 from the Market Because they suspected them to be made of inferior steel. This made newspaper headlines as it was the biggest ever recall of cars from the Indian Marketplace.

Critical as the present post globalization phase is Indian corporate with such a questionable track record cannot afford to take on the global giants, many of whom have established them as "the leader of the socially responsible behavior". Concerted efforts therefore will have to be made by the Indian corporate to measure up to his broader expectations of the society at large. How to do it? Gandhiji furnishes a convincing reply to this billion dollar question. His doctrine of trusteeship contains practically everything that may enable Indian Corporates to come out of the present Morass.

DISCORDANT NOTES

It will not be out of place to mention here that fingers have been raised on the trusteeship principle like many others principles propounded by leaders like M.K.Ganhdhi,J.L.Nehru Swami Vivekananda etc. During the very life time of these leaders people starting questioning their theory that it will pay the way for a large no. persons to emerge as the \ trustees of a business enterprise "After all how many persons Gandhiji is prepared to accommodate as the real trustees of an enterprise" Cryptically asked the opponents of this theory. However such criticisms don't appear to have shaken the confidence of the leaders like M.K. gandhiji, Nehru etc. Let us see how these leaders reacted to these criticisms:

"We adhere to my doctrine of trusteeship in spite of the ridicule that has been poured upon it. It's true that it's difficult to reach. But we made up our minds in 1920 to negotiate that steep ascent. We have found it worth the effort. The question how many can be real Trustees according to this definition is beside the point. If the theory is true it's immaterial whether many live up to it or only one lives up to it. The question is of conviction there's nothing in this theory which can be said to be beyond the grasp of intellect, though you may say it's difficult to practice. 

CONCLUSION:

Even a cursory glance at the modern corporate practices will amply demonstrate the doctrine of trusteeship has proved to be beacon light for the practitioners of modern management in discharging their responsibility towards the society. It's not a fact that a business today confesses that it has ruthlessly pursued brute profit long enough unmindful of it's obligation and impact on the society.can there be any denying the fact that business owes a debt to the society and hence it has to repay it in a transparent and easily perceivable manner. In fact it is in response to such a realization that the business has started taking care of the cross sections of the society:

The consumers, the workers, the equity holders, the national economy and also the ecology and the environment.

The vision of great leaders and their vision of a socio Economic order have tremendous potential for shaping the policies and programmes of modern corporate All the leaders it must be remembered here were not a utopia builder but a men of action practicing the art of possible. They were not interested in filling in details in their picture of the ideal society. It's is largely in the specific Indian context that they worked out a few concrete programmes and which then they related to their larger concept of an Ideal socio economic order. So, while considering how they further elaborated their idea and filled in some details in their model. We must remember the specific context with in which they worked and separated specific remedy from the universal principle.
 


Rajeev Kumar Ranjan
MBA (IIT Roorkee)
Lecturer
University of Petroleum and Energy Studies
Dehradun
 

Source: E-mail April 15, 2006

    

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