2 Ethics

Management Science I

Prof. M.Thenmozhi

ETHICS

Dr. M. Thenmozhi Professor Department of Management Studies Indian Institute of Technology Madras Chennai 600 036 E-mail: [email protected]

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

INTRODUCTION: Ethics in business are nothing but the do’s and don’ts by the business users in the business. In other words it could be referred as set of principles a business man ought to follow. ”There should be business ethics” means that the business should be conducted according to certain self recognized moral standards. Few unethical elements in the present day business are cheating, stealing, lying, bribing, corrupting etc. A business man should be aware of the ethics in the business and should follow them in order to maintain ecological balance in the society. OBJECTIVES: The main objective of this study is to identify the vital few concerns of business which influence the ethical status of a business and to identify the necessary measures. DESCRIPTION DEFINITION: The study and examination of moral and social responsibility in relation to business practice and decision making in business is known as “Business Ethics”. The term “business” is commonly referred to the commercial activities achieved at making profit. But gradually there is a substantial change in the way in which people viewed the business.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

In the past primary objective of a business was profit maximization but the present perspectives on business objectives is not maximization. It is profit maximization in long run besides fulfilling the ethics in the business. A business is regarded as social institution forming integral part of social systems .The business is viewed as subsystem to the social system. This is because any type of social system is influenced by 1. The way the business functions 2. The organization of the business 3. Innovations 4. Transmission and diffusion of information. 5. New ideas etc. They have either direct or indirect effect on the society. SOCIAL RESPONSIBILITIES OF BUSINESS A firm expresses its responsibility to the society by reacting in either or both of the following two ways. 1. The manner in which it carries out its own business activities 2. The welfare activities it takes upon itself as an additional function

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

RESPONSIBILITY TO SHARE HOLDERS 1. To make the shareholders feel secured by protecting their investments 2. To be transparent 3. To allow them to participate in decision making 4. To ensure them good dividends RESPONSIBILITY TO EMPLOYEES 1. To offer employees fair wages 2. To establish better working conditions 3. To provide them fair work standards and norms. 4. To provide labor welfare activities 5. To educate the employees by adopting proper training methods. 6. To recognize and appreciate the work of the employees and reward them or to promote them. 7. To install grievance handling cell. 8. To enable them to involve in decision making.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

RESPONSIBILITY TO CONSUMERS To improve the efficiency of the business by a) Increasing productivity. b) Improving quality. c) Suroothening distribution system. 1. To offer the products at reasonable prices. 2. To provide pre-purchase and post purchase service to the consumers. 3. To facilitate research and development to meet the customer requirements. 4. To maximize imperfections in distribution systems 5. To provide sufficient and unnecessary information about the product. RESPONSIBILITY TO COMMUNITY

1. To be pollution free and maintain ecological balance. 2. To invest more in research and development so as to improve the standard of living of the society. 3. To develop alternative recourses thereby preventing current resources being used from exhaustion. 4. To improve the efficiency of business operations.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

5. To include in social welfare activities 6. To contribute to national effort to build up a better society If a firm fulfills all the above mentioned responsibilities then it is said to be following the business ethics. But in practice such an ideal business doesn’t exist. FEW ENVIRONMENTAL CONCERNS One important factor a business man must not neglect is his responsibility to environment. The abundant natural resources are getting exhausted after 19th century due to rapid industrialization. EXAMPLES: LAND: The worst effected are as their cattle starve and they travel even increasing distance for grazing due to industrialization and urbanization. WATER: Through people are keen in this issue by constructing dams and reservoirs the bi products and industry waste couldn’t find a better discharge channel than this. Hence sure measure must be take in this context to keep the water free from pollution. DEFORESTATION: The results of deforestation for industrialization and urbanization are vulnerable. It is resulting in destruction of wild life, increase in price of wood, air production etc.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

HABITAT: The people who are living in forests and remote areas love their shelter and livelihood in the vent of industrialization. HEALTH: The business users must be conscious about the health of the society and behave responsibility for their health. IMPORTANT ETHICAL PRICIPLES THAT A BUSINESS SHOULD FOLLOW 1. Do not deceive or cheat the customers by selling substandard or defective products by under measurement or any other means. EXAMPLE: Textile merchants in general clear the defective stock under the guise of discounts. 2. Do not report to hoarding, black marketing or profiteering. EXAMPLE: Management of theaters sell the tickets for higher prices during the initial days of release of a film starred by a crazy hero and heroine. 3. Do not destroy or distort competition. 4. Treasure sincerity and accuracy in advertising, labeling and packaging. EXAMPLE: Ads of automobiles in general provide false details in every aspect.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

5. Do not furnish the image of competitors by unfair practices. EXAMPLE: Publishing false information about courpetitors, bribing the retailers etc. 6. Make accurate business records so that transperancy to the share holders can be achieved. 7. Pay taxes and discharge other obligation promptly. 8. Do not form castle agreements, even informal, to control production, prices etc to the common detriment. EXAMPLE: cellular network providers will be in informal castle agreements to control the traffic. 9. Refrain from secret kick backs or pay logs to customers, suppliers, administrators, politicians etc. 10. Ensure payment of fair wages and fair treatment to the internal customers as well as external customers and share holders.

Indian Institute of Technology Madras

Management Science I

Prof. M.Thenmozhi

CASES OBSERVED In some cases the managers come across the situation where they have to neglect sure ethics in order to fulfill source. In those cases the managers must be keen about the level of distortion caused to the society by neglecting such ethics. EXAMPLE: Kidney transplantation in India has become most popular because of easy availability at low cost. The doctors run into confusion when they come across the situation where a patient’s life can be saved by disturbing the health of others. EXAMPLE: Deforestation for industrialization around Jamshedpur contributes a lot to the Indian economy by providing opportunities to many unemployed. But this disturbs the ecological balance in the society. EXAMPLE: Construction of subarnarekha dam may result in growth in the economy yet mr.Tete four XLRTtrapped the chair person of Dalmundi iron ores and saved the dwellers HOW TO IMPLEMENT BUSINESS ETHICS •

Trade associations can be formed by the business users which should bloster the efforts of running any business with ethics.

Indian Institute of Technology Madras

Management Science I

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Prof. M.Thenmozhi

Trade association can promote business ethics in business user by –

Educating the members of the association and by consistent persuasion.

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Formulation a code of conduct for their members which should contain code of ethics.

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Praising and rewarding those firms and business users who keep up the ethics in business & by publishing.

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Another fact which the business user must realize is the management and ownership must be seperated because the owners always tend for profit maximization where as the managers case for ethics as they work for fixed salaries.

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A managers must be a professional who possesses systematic knowledge and skill to perform certain responsible functions with authority and who is bound by certain ethics in the use of his knowledge and skill.

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A professional has to have autonomy.

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He/she has enormous responsibilities and shall not use his/her knowledge skill and authority unscrupulously shall not knowingly do distribute to his/her customers.

CONCLUSION Business system as a subsystem to the social system should promote ethics for improving health and wealth of the society consistently.

Indian Institute of Technology Madras