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    Unit 2 BUSINESS ETHICS

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    SaravananSrvn
    This document discusses business ethics, including its nature, sources, types, factors influencing it, approaches, importance, and managing ethics in the workplace. It covers normative theories of ethics like utilitarianism, egoism, altruism, duty-based ethics, and rights-based ethics. It also discusses stakeholders, corporate governance, theories of corporate governance, issues in corporate governance, boards of directors, leadership styles, habits of strong ethical leaders, and more.

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    Unit 2 BUSINESS ETHICS

    Uploaded by

    SaravananSrvn
    111 views49 pages
    This document discusses business ethics, including its nature, sources, types, factors influencing it, approaches, importance, and managing ethics in the workplace. It covers normative theories of ethics like utilitarianism, egoism, altruism, duty-based ethics, and rights-based ethics. It also discusses stakeholders, corporate governance, theories of corporate governance, issues in corporate governance, boards of directors, leadership styles, habits of strong ethical leaders, and more.

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    BUSINESS ENVIRONMENT

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    unit 2 BUSINESS ETHICS

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    This document discusses business ethics, including its nature, sources, types, factors influencing it, approaches, importance, and managing ethics in the workplace. It covers normative theories of ethics like utilitarianism, egoism, altruism, duty-based ethics, and rights-based ethics. It also discusses stakeholders, corporate governance, theories of corporate governance, issues in corporate governance, boards of directors, leadership styles, habits of strong ethical leaders, and more.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    111 views49 pages

    Unit 2 BUSINESS ETHICS

    Uploaded by

    SaravananSrvn
    This document discusses business ethics, including its nature, sources, types, factors influencing it, approaches, importance, and managing ethics in the workplace. It covers normative theories of ethics like utilitarianism, egoism, altruism, duty-based ethics, and rights-based ethics. It also discusses stakeholders, corporate governance, theories of corporate governance, issues in corporate governance, boards of directors, leadership styles, habits of strong ethical leaders, and more.

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    of 49

    Ethics

    Unit 2
    Business ethics
    Business ethics is the study of complex business
    practices and behaviors that gives rise to
    ethical issues in organization
    Nature of BE
    1. Ethical value
    2. Interest of society
    3. Business society relationship
    4. Provide framework
    Sources of BE
    1. Religion
    2. Cultural experience
    3. Legal system
    Types of BE
    1. General business ethics
    Shareholder of business, CSR
    2. Functional BE
    Marketing, HR , Production , IP, skill
    3. Internal BE
    Factor influencing BE
    1. Value forming-family, religion, school & govt
    (carrot & stick)
    2. Organisational goal
    3. Work & career
    4. Superiors
    5. Peer & colleagues
    6. Professional code
    Approaches to BE
    Profit motive
    Legal
    Moral obligation:-harm principle, fairness,
    human rights, veracity(deceptive)
    Social
    Importance of BE
    Maintain high moral course
    Cultivates strong team work and productivity
    Support employee growth and meaning
    Ensure policy are legal
    Avoid criminal act
    Promote public image
    Manage values
    Managing ethics in workplace
    1. Commitment from top management
    2. Code of ethics
    3. Communicating ethics
    4. Ethics training
    5. Ethics officer(BOD)
    6. Enforcement
    7. Audit, revision, refinements
    Ethics & profit
    Bribery
    Exploitation of MNC
    Production of harmful products
    Theories of BE
    Normative theories
    a) Consequentialist Theroy:- utilitarianism
    theory, egoism, altruism
    b) Non Consequentialist theory: - duty based,
    right based
    1.a) utilitarianism theory
    Is founded on the ability to predict the
    consequences of an action
    1. Greatest good of the greatest number
    2. Max of pleasure
    3. Min of pains
    4. Max happiness
    5. Satisfaction of desire
    Cost benefit analysis
    1. b) Egoism
    Decision that maximize their own self interest
    Physical well being, power, pleasure, fame,
    satisfying career, good family life, wealth
    Types
    1. Enlightened egoism long term
    perspective(IBM)
    2. Psychological egoism-selfishly
    1.c) Altruism
    Welfare of others(religion)
    Individuals are morally obliged to benefit others
    Reasons
    1. Biological : blood relation success
    2. Neurological :reward center in brain(giving
    happiness)
    3. Cognitive: doing for other without
    reward(empathy)
    2 a) duty based ethics
    Commitment to principle and duty
    Upholding individual human & legal rights
    Tell the truth, correct the wrong, respect
    others, avoid injury to others
    2.b) rights based ehtics
    Rights are positive & negative rights
    Negative rights: freedom from outside
    interference- speech, autonomy, privacy
    Positive rights : freely pursue his or her interest-
    health care, education others
    Stockholder theory
    Friedman : arrangement between stockholder
    & managers for specific interest
    Manager act as agent for stockholders
    Stakeholders theory
    Input output model
    All interest group- employees, customer,
    dealers, government , society
    Primary (survival): stockholders, employees,
    suppliers, creditors, customers
    Secondary (affect) : media, consumers,
    government, judiciary, competitors, society,
    political group, trade unions, trade
    association, financial system, enviornment
    Ethical decision making
    Framework for ethical decision making
    1. Individual factor :- personal moral, stage of
    moral development(own needs, group
    values, rule of society)
    2. Organization factors: org culture, co-
    workers& superior, opportunity

    All factor leads to ethical / unethical decision


    Process of ethical decision making
    Moral awareness
    Moral judgment
    Moral motivation
    Moral behavior
    Ethics across cultures
    1. Areas of cross-culture influences
    a) Language
    b) Communication
    c) Body language
    d) Perceptual problem
    e) Religion
    f) Values & attitudes
    g) Customs and manners
    h) norms
    Ethics across cultures
    2. Ethics issues in cross culture business
    a) Sexual and racial discrimination
    b) Human rights
    c) Price discrimination
    d) Bribery
    e) Harmful products
    f) IP protection
    Stakeholders
    Are those individuals or group, inside or outside
    the organization, who have the capacity to
    influence directly or indirectly the activities of
    the organization
    Types:
    Internal stakeholders-shareholders, workers&
    employees, management
    External stakeholders- customers, suppliers,
    creditors, government, society
    Corporate governance
    Is set of processes, customs, policies, laws and
    institutions affecting the way a company is
    directed, administered or controlled

    CG is concerned with ethics, values, morals of


    company & its directors
    Scope of CG
    Auditors
    Stock market
    Shareholders
    Institutional investors
    Government
    Regulatory authority
    Need of CG
    Impact of globalisation
    Economic changes
    Change in the structure of shareholding
    Financial reporting and transparency
    Shareholders net worth and net wealth
    Objective of CG
    Eliminate conflicts of interest
    Ensure assets are used efficiently
    To create trust in company
    Effective control on corporate affairs
    Promote business development
    Improve efficiency of capital market
    Promote healthy environment
    Principles of CG
    Fairness
    Transparency
    Responsibility
    Trusteeship
    Empowerment
    control
    System of CG
    Internal CG
    a) Monitoring by the BOD
    b) Remuneration
    c) Audit committees
    External CG
    a) Debt agreement
    b) Government regulation
    c) Competition
    d) external auditor
    e) External labor market
    Theories of CG
    1. Agency theory
    2. Stewardship theory
    3. Stake holder theory
    4. Sociological theory
    5. Resource dependency theory
    6. Transaction cost theory
    1. Agency theory
    Relationship between shareholder(capital
    provided) and management(agent running)
    Main focus financial returns

    Agent is employed by principal to carry out the


    task
    Agency refers to relationship between principal
    and agent
    Agent become accountable
    2. Stewardship theory
    Managers merge their ego and sense of worth
    with the reputation of the firm other than
    financial returns
    Model effect:
    1. On business
    2. On employees
    3. On clients
    3. Stakeholder theory
    Stake in firm are made-up of large and diverse
    group
    They seek some benefit from running of the
    firm
    Workers seek job security, government want
    tax, investor wants dividends
    4. Sociological theory
    Power & wealth distribution in society
    Company part of society and perform for
    society wellbeing
    Board composition, financial reporting
    disclosure, auditing
    5. Resource dependency theory
    Role director play in secure resource for
    organization with link external environment,
    legal advise, enhance organizational
    functioning
    6. Transaction cost theory:
    Firm determine the price & production when its
    is large
    Issues of CG
    Different role for BOD & Management
    Composition of the board & related issues
    Separation role of CEO & chairperson
    Committees
    Appointment of BOD & re-election
    Director & executive remuneration
    Disclosure & audit
    Protection of shareholder rights
    Board of Directors
    All directors elected by shareholder to
    represent their interest vested with powers of
    management
    Make decision objectively
    Transparency
    Structure of board
    1. All executive board: no separation between
    ownership & management
    2. Majority executive board: non-executive
    directors in small (2or3)
    3. Majority outside board: non executive
    directors form the majority on the board
    4. Two-tier supervisory board: supervisory
    board has no common membership with
    executive board
    Size of board
    Board style
    1. Rubber stamp board:
    2. Country club board: family run business
    3. Representative board : stakeholder appoint
    directors
    4. Professional board:
    Reforms in board
    Appoint of independent directors
    Imposing stricter reporting systems
    Audit committees
    Standards of disclosures
    Quality of financial statement
    Structural reforms
    Stakeholder representation
    Ethics officer & ombudsmen
    Ethics code
    Job tenure
    Compensation issues of BOD
    1. CEO compensation: tied to firm performance,
    overall level of CEO pay
    2. Outside director compensation:
    Role & responsibilities of BOD
    1. To establish an orgnaisational vision & mission
    2. Give strategic direction and advice
    3. Oversee strategy implementation and
    performance
    4. Develop and evaluate CEO
    5. Appropriate HR
    6. Effective stakeholder relations
    7. Mitigate risk
    8. To procure resoruces
    Issues & challenge of BOD
    Knowledge gap
    Lack of self assessment
    Self delusion
    Committee inexperience
    Leadership issues
    No plan for rotation
    Failure to remove unproductive members
    Too small in size
    Lack of information
    Lack of skills
    Corporate ethical leadership
    Leading in a manner that respects the rights
    and dignity of others

    Motivating
    Leadership style
    ABCDLPST3
    1. Autocratic(absolute power)
    2. Bureaucratic(by the book)
    3. Charismatic (energetic)
    4. Democratic (involving members)
    5. Laissez faire (leave it be- members decision)
    6. People oriented (people development)
    7. Servant (no formally recognised)
    8. Task oriented (getting job done)
    9. Transactional (paying team for job done)
    10.Transformational (detail people)
    Habits of strong ethical leaders
    Strong personal character
    Passion to do right
    Proactive
    Stakeholder interest
    Role model for org values
    Transparent in decision making
    Holistic view
    Ethical leadership for improved CG
    Positive impact on culture
    Higher employee satisfaction and
    commitment
    Strong relationship with external stakeholders
    Long term market evaluation of the firm

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