Introduction To Business Ethics

INTRODUCTION TO BUSINESS ETHICS By Rafia Ayub

Merck & Company case: River blindness A disease faced by 18 million people living in tropical regions of Africa & Latin America One of the research scientist discovered that a best-selling animal drug with some changes might help in curing the disease. Company knew even if they succeed in developing the medicine victims were not be able to afford it. TC would be $ 100million

Head of Merck once said, “when I went to Japan 15 years ago, I was told by Japanese business people that it was Merck that brought medicine after world war 2 to eliminate TB which was eating up their society. We did that. We didn’t make any money. But it’s no accident that Merck is the largest American pharmaceutical company in Japan”

A basic problem Ethical course of action is not always clear to a company’s manager. Than???? Managers are answerable toward investors & shareholders. If company spend all money on charitable projects that lost money they’ll claim that company is not justified in investing their money and hence act unethically

Purpose of course To provide a deeper knowledge of nature of ethical principles & concepts, and understanding of implication of these concepts in ethical problems encountered in business. In short “To provide enough knowledge and understanding that can make their ethical course of action clear. “

Nature of Business Ethics What does ethical means to you? “The principles of right and wrong that are accepted by an individual or a social group” “Study of morality” Ethics is a kind of investigation that includes activity of investigating + result of investigation and morality is the subject matter of that investigation.

Ethics: define as, “A conception of right & wrong conduct, serving as a guide to moral behavior” OR “The discipline that examines one’s moral standards or moral standards of society” Business Ethics can be defined as, “An application of general ethical ideas to business behavior is Business Ethics”

Morality Standards that an individual or a group has about what is right & wrong, or good & evil Sources include family, society etc. Moral Norms: general rules or statements • “Always tell the truth”

Moral Values: Statements describing objects or features of objects that have worth. • “Honesty is good”

Role of Ethics in Business Thompson & Strickland (1995): “A strong corporate culture founded on ethical principles and sound values is a vital driving force behind continued strategic success.”

Distinguishable characteristics of Moral Standards from Immoral Standards 5 Characteristics: Involved with serious injuries or benefits. Not established by law or legislature. Should be preferred to other values including selfinterest. Based on impartial considerations. Moral standards are associated with special emotions and a special vocabulary.

Arguments For & Against Business Ethics

Objections to Bringing Ethics into Business Perfectly Competitive Free Markets Interest of firm Ethics means obey the law

PRISONER’S DILEMMA

ASSUMPTIONS Police commissioner tells each prisoner separately; If neither admits that the two of them robbed the store, they will both be kept in jail for 1 year. If both prisoners confess to robbing the store, each will get 2 years in jail. If one keeps quiet while the other confesses, one who keeps quiet will get 3 years in jail while the other one will go free.

Prisoner’s Dilemma Prisoner B cooperates with Prisoner A

Prisoner B does not cooperates with Prisoner A

Prisoner A cooperates with Prisoner B

A gets 1 Year B gets 1 Year

A gets 3 Year B goes free

Prisoner A does not cooperates with Prisoner B

A goes free B gets 3 years

A gets 2 years B gets 2 years

Prisoner’s Dilemma: Summary A situation that gives 2 choices to both parties. i.e. cooperate or do not cooperate. If both parties cooperate  both gain If both parties do not cooperate neither will gain Any 1 cooperate  1 who does not will gain

Business relationships are repetitive and ongoing: Employees Customers Suppliers Creditors Stockholders

Unethical behavior results in retaliation

Why Ethical Problems Occur in Business

Reasons Personal Gain & Selfish interest Competitive Pressure on Profits Business Goals Vs Personal Values Cross-Cultural Contradictions

Reason

Nature of Typical Ethical Problem Approach

Attitude

Personal Gain & Selfish interest

Selfish Interest Vs Others’ Interest

Egoistic Mentality

I want it

Competitive Pressure on Profits

Firm’s Interest Vs Others’ Interest

Bottom-line Mentality

We have to beat others at all cost

Business Goals Vs Personal Values

Boss’s Interest Vs Subordinates’ Interest

Authoritarian Mentality

Do as I say or else!!!

Cross-Cultural Contradictions

Company’s Interest Ethnocentric Vs Diverse Cultural Mentality Traditions & Values

Foreigner’s have funny notion of what is right & wrong

5 VIEWS OF BUSINESS ETHICS

5 Views of Business Ethics Business is business Act consistently with the law Good ethics means good business Conventional morality Universal morality

MORAL DEVELOPMENT

Stages of Moral Development Given by Lawrence Kohlberg Concluded that there is a sequence of 6 identifiable stages that are grouped in 3 levels. Each level contains 2 stages.

Kohlberg’s 3 Levels of Moral Development Level 1: Pre-conventional Stages Stage 1: Punishment & Obedience Orientation Stage 2: Instrumental & Relative Orientation

Level 2: Conventional Stages Stage 3: Interpersonal Concordance Orientation Stage 4: Law & Order Orientation

Level 3: Post-conventional, autonomous or principled Stages. Stage 5: Social Contract Orientation Stage 6: Universal Ethical Principles Orientation

Stages of Moral Development Level 1: Pre-conventional Stages 2 stages Common element: Self-focused Motivation is self-interest: “What’s in it for me?”

Level 1: Pre-conventional Stages Stage 1: Punishment & Obedience Stage Physical consequences of an act determine goodness or badness of that act Person acts to avoid punishment “The only crime is getting caught.”

Level 1: Pre-Conventional Stages Stage 2: Instrument & Relativity Stage Right actions  those that can serve as instrument to satisfy needs of you own / persons you care Person uses others as a tool to self-satisfaction Example: children sharing toys “You scratch my back and I’ll scratch yours.”

Moral Development Level 2: Conventional Stages 2 stages Common element: Group-focused Group  family, peer group, or nation Group norms are important: what does the group expect of me?

Level 2: Conventional Stages Stage 3: Interpersonal Concordance Orientation Relevant groups: family, friends, co-workers Group norms and expectations affect behavior Person is motivated by a desire to be seen as a good son or daughter, a good brother or sister, a good friend, a good co-worker Example: a friend is moving, do you help?

Level 2: Conventional Stages Stage 4: Law & Order Stage Relevant group: society at large Norms, expectations, and laws of society affects behavior Person is motivated by a desire to be seen as a good citizen “It’s my duty as a citizen.”

Moral Development Level 3: Post-conventional, autonomous or principled Stages. 2 stages Common element: Universal-focused Person takes a impartial viewpoint • Not just what’s best for me • Not just what groups expect of me

Level 3: Autonomous Morality Stage 5: Social Contract Orientation Social Contract: The rules members of a society agree to follow to govern relationships within the society • How are the rules of society decided? • Example: the King makes up the rules • Example: Democracy—majority rules

Person is motivated by a desire to maintain the social contract “I’m satisfied even though I lost the vote.”

Level 3: Autonomous Morality Stage 6: Universal Ethical Principles Orientation Person develops a set of comprehensive, coherent, and consistent moral principles Right action  moral principles chosen Person follows the moral principles even if it means self-sacrifice

Moral Development Individuals go through stages of moral development Different individuals may develop at different rates Can’t skip stages Can go backwards Different individuals may end up in different stages

Moral Development Implications for managers: May have employees at different stages What motivates ethical behavior for one employee may not motivate ethical behavior for another employee

ASSIGNMENT 1 How do you motivate an employee to act ethically if the employee is in: Stage 1 (Punishment & Obedience)? Stage 2 (Instrument & Relativity)? Stage 3 (Interpersonal Concordance)? Stage 4 (Law & Order)? Stage 5 (Social Contract)? Stage 6 (Universal Ethical Principles)?