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BUsiness Ethics and Corporate Governance

  2. Introduction To Business Ethics: 1. Nature Of Ethics 2. Ethical Concepts And Theories 3. Morals And Values 4. Importance And Need of Ethics In Business 5. Distinction Between Values And Ethics 6. Kohlberg’s Six Stages of Moral Development
  3. What is Ethics? Ethics: Ethics reflects a society’s notion of rightness and wrongness of an act. Ethics involves the evaluation and application of certain moral values that a society or culture has come to accept as its norms. • is a branch of philosophy. • is a normative science because it is concerned with the norms of human conduct. • as a science, it must follow the same rigor of logical reasoning as other sciences. • as a science, involves systemizing, defending and recommending concepts of right and wrong behavior. Ethics defined as.. Ethics as a moral and normative science refers to principles that define human behavior as right, good and proper.
  4. The Word Ethics is Derived Ethics Greek word ethikos Latin word ethicus
  5. What is Business Ethics? Business ethics is the application of general ethical ideas to business behavior. It is based on the principle of integrity and fairness and concentrates on the benefits to the stakeholders, both internal and external. Stakeholder includes those individuals and groups without which the organization does not have an existence. It includes shareholders, creditors, employees, customers, dealers, vendors, government and the society.
  6. Nature of Business Ethics Ethics Deals with the Humans Ethics is a Normative Science Ethics is a Science of Values Ethics is Different from Morality
  7. Ethical Concepts Subjectivism RelativismWhistle Blowing Consequentialism Deontological ethicsEthics of virtue Ethical Dilemma
  8. 1. Subjectivism This concept emphasizes that the ethical choice of the individual decides the rightness or wrongness of his behavior. This concept emphasizes that the ethical choice of the individual decides the rightness or wrongness of his behavior. 2. Relativism According to this concept, no principle is universally applicable and so it would be inaccurate to measure the behavior 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. 3. 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. 4. 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..
  9. 5. Ethics of 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. 6.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. 7. Ethical dilemma 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 behavior at a personal level. This will confirm ethically correct responses from the organization to the mutual actions of individuals.
  10. Importance and Need for Business Ethics • A business organization competes in the global market on its own internal strength, in particular, on the strength of its human resource and on the goodwill of its stakeholders. • The value-based management and ethics that an organization uses in its governance enables it to establish productive relationship with its internal customers, and lasting business relationship with its external customers. • Real life situations (Tata Steel and Infosys) show that use of ethical practices in business creates high returns for companies.
  11. Values are beliefs of a person or social group in which they have an emotional investment (either for or against something); "he has very conservative values" Moral is motivation based on ideas of right and wrong Ethics defined as: A theory or a system of moral values: “An ethic of service is at war with a craving for gain" The rules or standards governing the conduct of a person or the members of a profession. Values, Morals & Ethics
  12. Ethics and Morals Ethics and morals relate to “right” and “wrong” conduct.The basis for ethics must be morals, not the other way around. While they are sometimes used interchangeably, they are different. Morality is concerned with the norms, values and beliefs embedded in social process which define right and wrong for an individual or a community Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a given situation. ORIGIN Morals: It is derived from the Latin word moralis which implies customs i.e. it refers to a behavior that is accepted or rejected due to an accepted social customs. Ethics: It is derived from the Greek work ethike, which attributes to a social environment, referred to as ethos and social environment
  13. Ethics and Morals • WHERE DOTHEY COME FROM? • Moral values are internal to individuals. People develop moral values as an outcome of bringing up.We follow moral values because we believe in something being right or wrong. • Ethical value are external, emerging from social system. People follow ethical values because society says it is the right thing to do ACCEPTEBILITY • Morality transcends cultural norms • Ethics are governed by professional and legal guidelines within a particular time and place.There is a possibility of regulating ethical behaviour.
  14. Value and ethics Values are the rules by which we make decisions about right and wrong, should and shouldn't, good and bad. Values define by: • Part of culture: Every society has its own culture • Learned responses: Behave in a particular way • Adaptive process:Values are to be adopted from the family • Social phenomenon: Group behavior are values • Gratifying responses:Values exist to meet needs of individual in society • Inculcated: Passed through generation to generation
  15. Distinction Between Values and Ethics Values Ethics Personal in nature (e.g. a belief in providing customer satisfaction and being a good paymaster) Generalized value system (e.g. avoiding discrimination in recruitment and adopting fair business practices). Offer alternatives to choose from. Provides general guidelines within which the management can operate.
  16. Kohlberg's Theory of Moral Development
  17. Lawrence Kohlberg
  18. 3 Levels of Moral Reasoning
  19. 1 Preconventional 2 Conventional 3 Post-Conventional Stage 1 Obedience andPunishment Stage 2 Individualism andExchange Stage 3 InterpersonalRelationships Stage 4 Maintaining SocialOrder Stage 5 Social Contract &Individual Rights Stage 6 Universal Principles
  20. (age 4 -10) a person is motivated by obedience to authority. commonly associatedwith young children involves little thought aboutmorality. moral code is shaped by the standards of adults and the consequences of following or breaking their rules.
  21. A. Stage 1- Obedience &Punishment • Earlieststage ofmoral development • Common inyoungchildren • Childrenseerulesasfixedandabsolute. • Obeying the rules is important to avoid punishment. • Moralityismotivated solelybypunishment
  22. B. Stage 2- Individualism&Exchange children account individual points of view judge actions based on how they serve individual needs. Reciprocity ispossible but only if it serves one's own interests.
  23. B. Stage 2- Individualism&Exchange children recognize that there is not just one right view and that different individuals have differentviewpoints. differentfocuses on individualism and perspectives, the goal is to avoid punishment.
  24. E XA MPLE S : Stage 1: “Iwillkeep quiet so that teacher won’t punish me.” Stage 2: “Iwilllet you copy mine if you do my homework.”
  25. (age 10 -13) people focus on following social normsand customs. begin to internalize the moral standards of valued adult rolemodels. Reasoning is based on the norms of the group to which the person belongs.
  26. C. Stage 3- InterpersonalRelationships Also known as "good boy-good girl" orientation focused on living up to social expectations and roles emphasis on conformity, being"nice," consider how choices influence relationships.
  27. C. Stage 3- InterpersonalRelationships emphasizes the maintenance happy interpersonal relationships and pleasing others. a need to avoid rejection, disaffection, or disapproval fromothers.
  28. D. Stage 4- Maintaining SocialOrder consider society as a whole when making judgments focus is on maintaining law and order by following the rules, doing one’s duty and respecting authority.
  29. D. Stage 4- Maintaining SocialOrder please individualsto maintaining social order by following social norms,customs, andlaws. becomes aware of the wider rulesof society to avoidguilt. a need to not be criticized by a true authorityfigure
  30. E XA MPLE S : Stage 3: “Iwillbuy that dress so that my friends willlike me.” Stage 4: “You should not cut the class because it’s against school rules.”
  31. (adolescence -adulthood) people look beyond convention to determine moral norms and appropriate social interactions. judgment is based onself-chosen principles moral reasoning is based on individual rights and justice
  32. E.Stage 5- Social Contract &Individual Rights begin to account the differing values, opinions and beliefs of other people. Laws are important but members of the society should agree upon these standards.
  33. E.Stage 5- Social Contract &Individual Rights becomes aware there are times when they will work against rules or the interest of particular individuals emphasis on the social contract and the maintenance of individualrights
  34. F. Stage 6- UniversalPrinciples Reasoning is based on universal ethicalprinciples and abstract reasoning Follow these internalized principles of justice,evenifits against the law Moral judgment ismotivated by one'sown conscience
  35. F. Stage 6- UniversalPrinciples People have developed their own set of moral guidelines which may or may not fit the law. search for universalprinciples.
  36. E XA MPLE S : Stage 5: “It is her own decision, we should just respect that.” Stage 6: “If abortion became legal in our country, I willbe one of the people who willbe against it because it’s against God’s Law.”