ST.

JOSEPH'S DEGREE & PG COLLEGE

CORPORATE GOVERNANCE AND BUSINESS ETHICS

LECTURE NOTES

UNIT I: Concept-Meaning definition, Features, Need, parties to corporate governance, Case Study: Enron Scam of US – The
Darling of Wall Street Fall! UK Corporate Governance Code – Principles, importance of corporate governance, Government
Polices for Corporate Governance

Meaning and features of corporate Governance:

Corporate governance is the collection of mechanisms, processes and relations by which corporations are controlled and
operated. Governance structures and principles identify the distribution of rights and responsibilities among different participants
in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders)
and include the rules and procedures for making decisions in corporate affairs. Corporate governance is necessary because of the
possibility of conflicts of interests between stakeholders, primarily between shareholders and upper management or among
shareholders.

Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the
social, regulatory and market environment. These include monitoring the actions, policies, practices, and decisions of
corporations, their agents, and affected stakeholders. Corporate governance practices can be seen as attempts to align the interests
of stakeholders.
 [Link]'S DEGREE & PG COLLEGE

Definitions:

Corporate governance has also been more narrowly defined as "a system of law and sound approaches by which corporations are
directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of
management and directors and thereby, mitigating agency risks which may stem from the misdeeds of corporate officers".

Corporate governance has also been defined as "the act of externally directing, controlling and evaluating a corporation" and
related to the definition of Governance as "The act of externally directing, controlling and evaluating an entity, process or
resource". In this sense, governance and corporate governance are different from management because governance must be
EXTERNAL to the object being governed. Governing agents do not have personal control over, and are not part of the object that
they govern. For example, it is not possible for a CIO to govern the IT function. They are personally accountable for the strategy
and management of the function. As such, they "manage" the IT function; they do not "govern" it. At the same time, there may be
a number of policies, authorized by the board, that the CIO follows. When the CIO is following these policies, they are
performing "governance" activities because the primary intention of the policy is to serve a governance purpose. The board is
ultimately "governing" the IT function because they stand outside of the function and are only able to externally direct, control
and evaluate the IT function by virtue of established policies, procedures and indicators. Without these policies, procedures and
indicators, the board has no way of governing, let alone affecting the IT function in any way.

 Features of Corporate Governance: Discipline. Corporate discipline is a commitment by a company's senior management to
adhere to behavior that is universally recognized and accepted to be correct and proper. ...

 Transparency. ...
 [Link]'S DEGREE & PG COLLEGE

 Independence. ...

 Accountability. ...

 Responsibility. ...

 Fairness. ...

 Social responsibility.

Key parties involved in corporate governance: It include stakeholders such as the board of directors, management and
shareholders. External stakeholders such as creditors, auditors, customers, suppliers, government agencies, and the community
at large also exert influence.

UK Corporate Governance Code:

The UK Corporate Governance Code (formerly known as the Combined Code) sets out standards of good practice for listed
companies on board composition and development, remuneration, shareholder relations, accountability and audit. The code is
published by the Financial Reporting Council (FRC).

The UK Corporate Governance Code 2018 (PDF) (published in July 2018) applies to accounting periods beginning on or after
1 January 2019. It places greater emphasis on relationships between companies, shareholders and stakeholders. It also promotes
the importance of establishing a corporate culture that is aligned with the company purpose, business strategy, promotes integrity
and values diversity.
 [Link]'S DEGREE & PG COLLEGE

All companies with a Premium Listing of equity shares in the UK are required under the Listing Rules to report in their annual
report and accounts on how they have applied the Code. See the relevant section of the Listing Rules.

The Code focusses on the application of the Principles and reporting on outcomes achieved. For the Code's Provisions,
companies should disclose how they have complied with these or provide an explanation appropriate to their individual
circumstances.

Carefully considered corporate governance policies and practices along with high levels of transparency can lead to improved
levels of trust. This will allow investors to take a more considered view of the governance of the company, particularly where
explanations have been provided.

The review built on the Code's globally recognised strengths developed over the past 25 years. It also considered the appropriate
balance between the Principles and Provisions and the growing demands on the corporate governance framework.

Principles of Corporate Governance:

 Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders
to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating
information and by encouraging shareholders to participate in general meetings.
 [Link]'S DEGREE & PG COLLEGE

 Interests of other stakeholders: Organizations should recognize that they have legal, contractual, social, and market driven
obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities,
customers, and policy makers.
 Role and responsibilities of the board: The board needs sufficient relevant skills and understanding to review and challenge
management performance. It also needs adequate size and appropriate levels of independence and commitment.
 Integrity and ethical behavior: Integrity should be a fundamental requirement in choosing corporate officers and board
members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and
responsible decision making.
 Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board
and management to provide stakeholders with a level of accountability. They should also implement procedures to
independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters
concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual
information.

Importance of Corporate Governance:

1. Changing Ownership Structure : In recent years, the ownership structure of companies has changed a lot. Public financial
institutions, mutual funds, etc. are the single largest shareholder in most of the large companies. So, they have effective
 [Link]'S DEGREE & PG COLLEGE

control on the management of the companies. They force the management to use corporate governance. That is, they put
pressure on the management to become more efficient, transparent, accountable, etc. The also ask the management to
make consumer-friendly policies, to protect all social groups and to protect the environment. So, the changing ownership
structure has resulted in corporate governance.

2. Importance of Social Responsibility : Today, social responsibility is given a lot of importance. The Board of Directors
have to protect the rights of the customers, employees, shareholders, suppliers, local communities, etc. This is possible
only if they use corporate governance.

3. Growing Number of Scams : In recent years, many scams, frauds and corrupt practices have taken place. Misuse and
misappropriation of public money are happening everyday in India and worldwide. It is happening in the stock market,
banks, financial institutions, companies and government offices. In order to avoid these scams and financial irregularities,
many companies have started corporate governance.

4. Indifference on the part of Shareholders : In general, shareholders are inactive in the management of their companies.
They only attend the Annual general meeting. Postal ballot is still absent in India. Proxies are not allowed to speak in the
meetings. Shareholders associations are not strong. Therefore, directors misuse their power for their own benefits. So,
there is a need for corporate governance to protect all the stakeholders of the company.
 [Link]'S DEGREE & PG COLLEGE

5. Globalisation : Today most big companies are selling their goods in the global market. So, they have to attract foreign
investor and foreign customers. They also have to follow foreign rules and regulations. All this requires corporate
governance. Without Corporate governance, it is impossible to enter, survive and succeed the global market.

6. Takeovers and Mergers : Today, there are many takeovers and mergers in the business world. Corporate governance is
required to protect the interest of all the parties during takeovers and mergers.

7. SEBI : SEBI has made corporate governance compulsory for certain companies. This is done to protect the interest of the
investors and other stakeholders.

Corporate Governance Initiatives in India

Effective Corporate Governance Framework

• Globalization, spate of M&As, jurisdictions losing importance – need for common language - CG;

• For corporate sector – competition, capital, talent & technology – CG;

• Responsibility of Government & Regulators to provide effective legal structure – Indian scene – MCA, SEBI, RBI & IRDA
Redefining the legislative framework Initiatives

• New Companies Act – inducing good CG practices through self-regulation, responsive legal framework based on shareholders’
democracy; disclosure-based regime; rational penal provisions with built-in deterrence and effective protection
 [Link]'S DEGREE & PG COLLEGE

• Amendments to the Acts governing three professional institutes (ICAI/ICSI/ICWAI) (ICAI/ICSI/ICWAI) with a view to
strengthen the disciplinary mechanism and bring transparency in their working.

• Notification of Accounting Standards with a view to bring the disclosure norms in tune with the international reporting
standards;

• SEBI – Clause 49 – Appointment of IDs, Audit committee, Code of conduct, disclosures of related party transactions,
remunerations, compliance of accounting standards, certifications of CEO & CFO, Compliance Certification & Whistle-blower
policy (optional); Initiatives beyond CG…

• The Government has renamed the Ministry from “Company Affairs” to “Corporate Affairs” – with a new vision “We resolve
ourselves to be the leader and partner partner in initiative initiative for Corporate Corporate Reforms, Reforms, Good-
Governance and Enlightened Regulation, with a view to promote and facilitate effective corporate functioning and investor
protection.”

• Introduction of LLPs; transformation in the service delivery mechanism for transparency and certainty – low-cost, easy
compliance; Other initiatives • Setting up of Investor Education and Protection Fund • Empowering investors through the
medium of education education and information information with the help of investor associations, VOs, NGOs, etc.;

• Launching of websites – [Link] and www. Watch out investors. com ;

• Setting up of NFCG in partnership with stakeholders – CII, ICAI & ICSI; Major initiatives under NFCG
 [Link]'S DEGREE & PG COLLEGE

• Foundation has launched a website of NFCG for dissemination of policies for better corporate governance;

• Various orientation programmers for Directors through Centers of Excellence, seminars and conferences to propagate the need
for following good corporate governance practices are being organized;

• Constituted core groups on CG norms for IDs and for Institutional Investors (as a sequel to World Bank ROSC study) and their
reports have also been received;

• Constituted core groups on Corporate Social Responsibility and for SMEs.

UNIT-II THEORY AND PRACTICE OF CORPORATE GOVERNANCE /:The significance of good corporate governance,
corporate governance committee, Difference between Internal Auditor and External auditor, the role of internal audit & external
auditors in corporate governance, today’s frontiers of corporate governance, Issues in corporate governance.

Significance of a good Corporate Governance: Good CORPORATE GOVERNANCE can provide the proper incentives for
the board and management to pursue objectives that are in the interest of the company and shareholders, as well as facilitate
effective monitoring. Better CORPORATE GOVERNANCE can also provide Shareholders with greater security on their
investment.
 [Link]'S DEGREE & PG COLLEGE

Just like the name suggests, corporate governance refers to how a corporation governs itself. It incorporates the laws, policies and
customs that direct and control a corporation. Corporate governance allows people to understand what their roles and
responsibilities are, thus streamlining operations at corporations. However, to be effective, corporate governance must adhere to
the following principles:

 Shareholder recognition – Good corporate governance recognizes all stakeholders of the company. This includes people
like employees, suppliers, customers, creditors and investors
 Equal treatment of shareholders - Besides acknowledging shareholders, corporate governance should treat them equally.
This could mean involving them in major decisions which affect the company
 Clearly defined roles of the board – Each member of the board of governors has a specific role to fulfill. Corporate
governance should clearly define the composition and roles of the board of directors
 Ethical behavior – Good corporate governance should have integrity and ethics at its core. Everyone who is part of the
company must demonstrate ethical behavior and follow a clear code of conduct when carrying out their activities
 Transparency – Transparency is very important for winning the trust of shareholders. Corporate governance should allow
stakeholders to have free access to materials such as financial records
Here are some of the reasons why corporate governance is vital for every corporation:

Accountability
 [Link]'S DEGREE & PG COLLEGE

As mentioned earlier, corporate governance helps define roles and responsibilities in a corporation. This makes it easy to hold
people accountable for their actions. For instance, the role of the board of directors is to ensure the proper management of a
company. Therefore, in case there is poor management, the blame rests squarely on the board. Accountability allows companies
to make decisions about who should be recognized and rewarded for their good work, and who should be terminated due to
negligence.

Lowering risk
Every company needs to have a way of reducing or mitigating day to day risks. Corporate governance allows companies to avoid
or reduce incidences of criminal liability, fraud and scandals. Having accountability makes it easy for companies to identify
perpetrators quickly and deal with them. This protects the company from incurring any further damage. Corporate governance
can therefore be viewed as a kind of self-policing. It allows companies to handle their affairs quickly before involving external
parties.

Public acceptance
As mentioned earlier, corporate governance comes with the principle of transparency. When stakeholders and the general public
can readily access information about the company, it builds trust. Thus, companies that have corporate governance are likely to
enjoy more public acceptance than those that don’t. Having reduced incidence of criminal activity also plays a major role in
gaining public trust.

Increased donations
 [Link]'S DEGREE & PG COLLEGE

Most donors are concerned about the management of nonprofit organizations. Before releasing any funding, they would want to
first peruse all the essential documents of the organization. For instance, they would be interested to look at the financial records
to see how money is being spent. Good corporate governance allows you to make your organization’s information readily
available, thus enhancing your chances of securing funding.

Corporate Governance Committee

The purpose of the Corporate Governance Committee is to (a) identify and recommend to the Board appropriate candidates
who could serve as director nominees for the next annual meeting of shareholders; (b) advise the Board with respect to the Board
composition, procedures and committees; and (c) develop and recommend to .

COMMITTEES ON CORPORATE GOVERNANCE

ssion
1 Cadbury England 1992
2 King Committee South of Africa 1994 & 2002
3 CII India 1996
4 Hampel England 1998
5 Kumar Mangalam Birla India 2000
6 SEBI India 2000
7 Narayana Murty India 2003
 [Link]'S DEGREE & PG COLLEGE

S. No. Committee Country Date oubmission

1 Cadbury Committee England 1992- Published in December 1992
• In response to the occurrence of financial scandals in the 1980’s involving UK listed Companies, which led to a fall in investor
confidence.
• As in the Cadbury Code, the Greenbury Code recommended the establishment of a Remuneration Committee, comprising
entirely of non-executive directors, to determine the remuneration of the executive directors. However, in terms of service
contracts, Greenbury recommended a maximum notice period of 12 months rather than three years as suggested by Cadbury.

2 King Committee South of Africa 1994 & 2002

King Committee report
• The King Report on Corporate Governance is a ground-breaking code of corporate governance in South Africa issued by the
King Committee on Corporate Governance. Three reports were issued in 1994 (King I), 2002 (King II), and 2009 (King III).
Compliance with the King Reports is a requirement for companies listed on the Johannesburg Stock Exchange.
King Committee recommendations
• Board of directors makeup and mandate, including the role of non-executive directors and guidance on the categories of people
who should make up the non-executive directors
• Appointments to the board and guidance on the maximum term for executive directors
• Determination and disclosure of executive and nonexecutive director’s remuneration
• Board meeting frequency
 [Link]'S DEGREE & PG COLLEGE

• Balanced annual reporting

• The requirement for effective auditing
• Affirmative action programs
3. CII Confederation of Indian Industry Committee
• The thrust of this report, therefore, is to suggest certain voluntary recommendations for industry to adopt.
• Good corporate governance involves a commitment of a company to run its businesses in a legal, ethical and transparent
manner - a dedication that must come from the very top and permeate throughout the organization.
CII Recommendations
• No need for German style two-tiered board.
• For a listed company with turnover exceeding Rs 100 crores, if the chairman is also the MD, at least half of the board should be
independent directors, else at least 30%.
• No single person should hold directorships in more than 10 listed
companies.
• Non-executive directors should be competent and active and have clearly defined responsibilities like in the Audit committee.
• Directors should be paid a commission not exceeding 1% (3%) of net profits for a company with (out) an MD over and above
sitting fees. Stock options may be considered too.
• Attendance record of directors should be made explicit at the time of reappointment. Those with less than 50% attendance
shouldn’t be reappointed.
• Key information that must be presented to the board is listed in the code.
 [Link]'S DEGREE & PG COLLEGE

4. Report of Hampel Committee on Corporate Governance

• The Final report emphasised principles of good governance rather than explicit rules
• The Hampel Committee was established in 1996 to review and revise the earlier recommendations of the Cadbury and
Greenbury Committees.
• Hampel did not believe that directors’ remuneration should be a matter for shareholder approval in general meeting.
Hampel Recommendations
The recommendations of the following Committees have been outlined as under:
• Cadbury Committee
• King Committee (CEO & MD Responsible)
• CII Committee (Conf. of Indian Industry)
• Hampel Committee
• Naresh Chandra Committee
5. Kumara Managalam Birla Committee Report on Corporate Governance
• on 7 May 1999, with 18 members under the chairmanship of Kumar Mangalam Birla with a
view to promoting and raising the standards of corporate governance.
• continuous disclosure of material information
• draft a code of corporate best practices
• safeguards to deal with insider information and insider trading.
Birla Committee’s recommendations
 [Link]'S DEGREE & PG COLLEGE

Mandatory Recommendations:
• Applicability
• Board of Directors
• Audit Committee
• Remuneration Committee
• Board Procedures
• Management
• Shareholders
Non-mandatory Recommendations:
• Chairman of the Board
102
• Remuneration Committee
• Shareholders’ rights
• Postal ballot
6. SEBI CG Report
• This clause is a recent addition to the Listing Agreement and was inserted as late as 2000
consequent to the recommendations of the Kumarmangalam Birla Committee on Corporate Governance constituted by the
Securities Exchange Board of India (SEBI) in 1999.
SEBI Recommendations
 [Link]'S DEGREE & PG COLLEGE

• at least 50 per cent of the board should comprise independent directors

• In corporate hierarchy two types of managements are envisaged
• i) managed by Board of Directors ii) Managing Director.
• Clause 49 requires all companies to submit a quarterly compliance report to stock exchange in the prescribed form.
• directors is required to be "financially literate“
• Mandatory certificate either from auditors or practicing company secretaries
[Link] Murthy committee report
• NARAYAN MURTHY reports were submitted to SEBI, It praised him by saying, "The suggestion contained in the Narayana
Murthy Committee’s report is more elaborate and this would
encourage a meaningful discussion at the board level periodically and the company will have the
benefit of advice from board members.”
• SEBI issued a circular dated August 26, 2003 to all the stock exchanges in this regard.
Narayana Murthy committee recommendations
• Training of board members suggested.
• There shall be no nominee directors. All directors to be elected by shareholders with same responsibilities and accountabilities.
• Non-executive director compensation to be fixed by board and ratified by shareholders and reported. Stock options should be
vested at least a year after their retirement. Independent directors should be treated the same way as nonexecutive directors.
• The board should be informed every quarter of business risk and risk management strategies.
 [Link]'S DEGREE & PG COLLEGE

• Boards of subsidiaries should follow similar composition rules as that of parent and should have at least one independent
directors of the parent company.
• The Board report of a parent company should have access to minutes of board meeting in subsidiaries and should affirm
reviewing its affairs.
• Performance evaluation of non-executive directors by all his fellow Board members should inform a re-appointment decision.
• While independent and non-executive directors should enjoy some protection from civil and criminal litigation, they may be
held responsible of the legal compliance in the company’s affairs.

UNIT-III INTRODUCTION TO BUSINESS ETHICS: Concept-meaning, definition of ethics, Objectives of Ethics, Nature of
Ethics, Types of Ethics –Transactional ethics, Participatory Ethics, Recognitional Ethics, meaning and definition of morals,
values, beliefs, (concepts only) norms. Difference between morals and ethics, significance of ethics in business.

What i s Eth i cs ?

Ethics means norms for the conduct of people in social groupings.

Ethics is derived from Greek Word “Ethos” which means culture – the prevalent behaviour in the society. Thus, it is a code
of conduct which has social acceptance.

Ethics has often been misunderstood to be conforming to law. On the contrary, ethics is about voluntarily conforming to
 [Link]'S DEGREE & PG COLLEGE

what is good/acceptable/desirable behaviour without the

NATURE AND OBJECTIVES OF ETHICS

Ethics is mainly known as the principle of moral conduct that makes a distinction between good and bad/ evil, right and wrong,
virtue and non-virtue. The word ethics is derived from a Greek sword ‘ethos’ meaning character. It is a branch of knowledge that
governs right and wrong conducts and behaviours of an individual, profession, group or organization. It is a core of the
professional and personal lives of people. Different scholars have defined ethics differently. However different their definitions
might be, ethics is always concerned with morality and right vs wrong and good vs evil. It is applied universally. There is also
ethics in professions such as journalism, advertising, education, medicine, etc.

Karen L. Rich defines ethics as a systematic approach to understanding, analyzing, and distinguishing matters of right and wrong,
good and bad, and admirable and deplorable as they relate to the well-being of and the relationships among sentient beings.
As per paper published by Science Direct – “Ethics is the most important and functioning branch of philosophy in today. In
general, ethics is moral philosophy. The term ethics is derived from Greek term Ethos which means custom, character. It is
related to our values and virtues. Therefore, our actions and our experiences in everyday life are the subjects of ethics. We have
the capacity to think about our choices, so we are responsible for all our decisions and actions.”
There are 3 different scopes of ethics. They are:
1. Meta-Ethics
 [Link]'S DEGREE & PG COLLEGE

2. Normative Ethics
3. Applied Ethics
1. Meta-Ethics: Meta-ethics comprises the area of situational ethics and deals with logical questions like ‘What do we mean by
‘freedom’ and ‘determinism’ etc. It delves into the nature of ethical properties, attitudes and judgements. For example, a media
critic’s description of a TV series as ‘good drama’ does not necessarily denote that the program is morally sound. It is the
function of metaethics to define such vague concepts in ethical terms. Some of the theories of Meta-Ethics are Naturalism, Non-
Naturalism, Emotivism and Prescriptivism.
2. Normative Ethics: Normative ethics deals with standards or norms by which we can judge human actions to be right or
wrong. It deals with the criteria of what is morally right or wrong. For example, if someone murders a person, everyone will
agree that it is wrong. The question is: Why is it wrong to murder someone? There are a lot of different answers we could give,
but if we want to specify a principle that stated why its wrong, the answer might be: Murder is wrong because when we kill
someone, we violate their right to live. Another perspective might be – To inflict unnecessary suffering on the person being
murdered or their family is wrong, that’s why to kill a person is wrong. There are three elements emphasized by normative ethics:
 The person who performs the act (the agent)
 The act
 The consequences of the act
3. Applied Ethics: Applied ethics is the problem-solving branch of moral philosophy. It uses the insights derived from
metaethics and the general principles and rules of normative ethics in addressing specific ethical issues and cases in a
 [Link]'S DEGREE & PG COLLEGE

professional, disciplinary or practical field. Applied ethics is the vital link between theory and practice, the real test of ethical
decision-making. Applied ethics often requires not only theoretical analysis but also practical and feasible solutions.
Some of the key areas of applied ethics are:

 Decision Ethics
 Professional Ethics
 Clinical Ethics
 Business Ethics
 Organizational Ethics
 Social Ethics
Applied ethics takes into consideration issues such as abortion, euthanasia, capital punishment, drug decriminalization, gay
marriage, etc.

Nature of Ethics

Nature of Ethics refers to the normative standards of behaviour pertaining to the ideal code of conduct of human beings. This is
substantially different from that of our feeling.
 [Link]'S DEGREE & PG COLLEGE

The ethical choices get affected significantly by our feelings. Highly developed habits of some people make them feel guilty after
doing something wrong while others might seem unperturbed by any form of wrongdoing.

The nature of ethics also cannot be associated with the influence of religion. Ethics is like a common rule which is applicable to
everybody irrespective of his/her religion.

Scientific Nature: Ethics is a normative science which determines norms, moral values in a person and an individual’s character.
It is a systematic explanation of what is right and what is wrong.

 Not Art: Ethics is not art as art deals with the acquisition of skill to produce objects, while morality deals with motive,
intention, purpose and choice which are considered right or wrong in the light of goodness. (web)
 Variable Nature: Ethics is not static. It is not always the same. Human beings change and the morality and ethical
perspective in them also changes.
 Exclusively for Human Beings: Ethics can only be applied to human beings as we are the ones who have the capacity
for moral judgement. We cannot expect ethical behaviour from animals, as they are not as intelligent as human beings are
so ethics is exclusively for human beings.
Objectives of Ethics
Ethical objectives are based on the following factors:
 [Link]'S DEGREE & PG COLLEGE

 Objectivity
 Impartiality
 Accuracy
 Public Accountability
 Fairness
 Truthfulness
The objectives of ethics are to study and assess human behaviour. It is also to establish principles and moral standards of
behaviour. Ethics is not compulsory in a person’s life and it is not forced upon anyone but being ethical is one step forward
towards being a good person.

Types of Ethics

Transactional Ethics
 [Link]'S DEGREE & PG COLLEGE

The domain of ethics covering transactions that are performed on the basis of simultaneous or connected interests and that are
general by the
 principles of Equality,
 Honesty and,
 Reciprocity is indicated as the domain of transactional ethics.
Participatory Ethics It is about the shape of solidarity in an age of individualisation. It is the ethics of the civil society, recently
rediscovered as a solid ground for collective arrangements where both the marked and the state fail. By participating on a regular
basis, in common projects on behalf of general welfare, a corporation demonstrates that it can take seriously its corporate
citizenship.
Participation voluntary, guided by the social relations and on two particular moral principles.
 Principle of Decency-A real opportunity to contribute to the general welfare presents itself and no insurmontable
obstacles arise, one should have solid moral reasons not to go for it.
 Principle of Emancipation- Special attention is given to the least powerful in order to defend those, who,by themselves,
are defenceless.
Recognitional Ethics

The domain of recognitional ethics covers a large part of traditional ethical interventions. Ethics in fact is about
asymmetrical relations about the rights of interests of the one generating a duty for another.

 Principle of Recognition
 [Link]'S DEGREE & PG COLLEGE

 Principle of beneficence or nonmalificence.

Values, Norms and Beliefs

Culture includes values, beliefs, and norms that are understood and shared by members of the culture. A value, a belief, practice,
or idea that is considered important, worthy, and fundamental, can be held by an individual. However, cultural values tend to
inform individuals' values. Cultural values are moral beliefs that are widely held in a society. They encompass what most people
in a society consider to be right or wrong. When people value something, it becomes normative (common and seen as normal).
For instance, if cleanliness is a value, handwashing becomes normative. Even if some individuals do not personally hold this
value, the larger society encourages it. In the case of handwashing, there are laws about handwashing for food service workers
and signs in restaurants telling employees and patrons to wash their hands.

Across a society, cultural values underpin what the society deems to be good or bad, acceptable or unacceptable, normal or
strange. Cultural beliefs are ideas that members of the culture hold to be true and are rooted in the shared values of the culture.
Like individual values, individual beliefs are influenced by culture. Cultural beliefs can include religious beliefs but also extend
to beliefs about right and wrong, justice, health, family, money, and virtually all spheres of life. For example, most cultures hold
beliefs about children, including how adults should treat children and how children should be raised. These can vary widely.
Some cultures stress allowing children to express themselves and develop self-confidence, while others emphasize teaching
children to show respect and develop self-control.
 [Link]'S DEGREE & PG COLLEGE

A norm is a cultural expectation for behavior. Norms are essentially unwritten but widely accepted rules that guide the actions
and choices of members of a culture. Smiling and chatting to a cashier at the grocery store is a norm in some cultures but is
considered odd or even rude in others.

Values, beliefs, and norms vary widely across cultures. Sociologists attempt to understand cultural values, beliefs, and norms and
to use them in order to analyze society and social behavior. They also look at how and why values, beliefs, and norms change.

Cultural values and beliefs tend to be relatively stable and long-lasting. In contrast, norms change and evolve more frequently.

Values, beliefs, and norms shape the practices, symbols, traditions, and institutions of a culture. They influence social behavior,
social interactions, and social structure. Sociology stresses the need to understand and neutrally observe cultural values, beliefs,
and norms in order to study and understand societies and social behavior.

Morals refer to an individual's own principles regarding right and wrong. Business ethics, more specifically, deals with the
creation and application of moral standards in the business environment. Morals are judgments, standards and rules of good
conduct in the society. They guide people toward permissible behavior with regard to basic values.

Values
 [Link]'S DEGREE & PG COLLEGE

Values are the foundation of an individual person’s ability to judge between right and wrong. Values include a deep-rooted
system of beliefs that guide a person’s decisions. They form a personal, individual foundation that influences a particular
person’s behavior.

Examples of Values

There are examples of values everywhere in your daily life. For example, if your value system is founded upon honesty, you
would probably choose to study for a difficult test rather than cheating for a passing grade. However, if you
value achievement and success over honesty, you may decide to cheat on the exam instead. This relates to which value is “worth
more” to the individual.

Other examples of values include:

 a person who values integrity admits that they stole a piece of candy
 someone who values friendship drops everything to help a friend
 people who value a healthy lifestyle make sure they have time to work out in the morning
 a person who values success works late nights to achieve a promotion
 someone who values commitment may be more willing to go to marriage therapy than to file for divorce

These values form our personality types. They also help us make decisions that affect the course of our lives. When these values
are shared by others in our community, they are known as morals.
 [Link]'S DEGREE & PG COLLEGE

Code of Morals

Morals, also known as moral values, are the system of beliefs that emerge out of core values. Morals are specific and context-
driven rules that govern a person’s desire to be good. They can be shared by a larger population, but a person's moral code may
differ from others' depending on their personal values.

Examples of Morals

We make moral decisions based on personal values all the time. An example of a moral in the example above is determined by a
person's value of honesty: cheating is bad. Someone who values success more than honesty may behave by another
moral: cheating is fine.

Additional examples of morals include:

 It is bad to steal candy (based on a value of honesty).

 Helping a friend is a good thing to do (based on a value of friendship).
 It is bad to skip a workout (based on a value of a healthy lifestyle).
 Working late at night is a good thing to do (based on a value of success).
 Saving your marriage is a good way to move forward (based on a value of commitment).
 [Link]'S DEGREE & PG COLLEGE

Moral dilemmas occur when morals conflict with each other. For example, what if a daughter couldn’t afford the life-saving
medicine her dying mother needed, but she had access to the medicine storeroom?

Her core values might tell her stealing is wrong. However, her morality would tell her she needs to protect her mother. As such,
the daughter might end up doing the wrong thing (stealing, as judged by her values) for the right reasons (saving her mother, as
judged by her morals).

Morals vs. Ethics

Ethics and morals are very similar. In fact, many ethicists consider the terms to be interchangeable. However, there are slight
differences in how they affect our lives.

While morals are concerned with individuals feeling "good" or "bad," ethics determine what behaviors are "right" or "wrong."
Ethics dictate what practical behaviors are allowed, while morals reflect our intentions. Consider morals as the rulebook and
ethics as the motivator that leads to proper or improper action.

Examples of Ethics

You're most likely to see a code of ethics in the business or legal fields. These areas are much more black and white than personal
values or morals since they set rules for employees and citizens in a society. For example:
 [Link]'S DEGREE & PG COLLEGE

 Doctors are held to a strict code of ethics when they swear the Hippocratic Oath. They are bound to the rule "do no harm,"
and can be held accountable if they do cause harm to their patients.
 An organization like PETA, which stands for “People for the Ethical Treatment of Animals," pursues legal action against
those who do not treat animals in an ethical way.
 Employees often sign a code of ethics, which includes keeping important matters confidential and not stealing from the
workplace — both of which would be fireable offenses.
 Defense lawyers are ethically bound to defend their clients to the best of their ability, even if they are morally opposed to
their clients' crimes. Breaking this ethical code could result in a mistrial or disbarment.
 A student who helps another student cheat on a test is breaking their school's ethics. Even though they are doing it for a
moral reason (helping a friend), they are committing an ethical violation and can be punished.

Ethics are basically an institution's attempt to regulate behavior with rules based on a shared moral code. Violating ethics has the
same consequence as breaking a rule, while violating one's morals results in personal guilt and shame instead of a societal
consequence. Ethical dilemmas occur when an institutional set of ethics conflicts with one's personal moral code.

Sound Moral Judgment

Sound moral judgment is rooted in strong values and acted upon by our ethics. It seems like the three are the same, but they’re
different enough to warrant a closer study. Whether you're acting on your personal values, following your moral code or obeying
 [Link]'S DEGREE & PG COLLEGE

ethical rules, it's important to know what to do next. For more examples of morals in our lives, check out these examples of
morals in society and literature.

Importance of Business Ethics:

1. Corresponds to Basic Human Needs:
The basic need of every human being is that they want to be a part of the organisation which they can respect and be proud of,
because they perceive it to be ethical. Everybody likes to be associated with an organisation which the society respects as a
honest and socially responsible organisation. The HR managers have to fulfill this basic need of the employees as well as their
own basic need that they want to direct an ethical organisation. The basic needs of the employees as well as the managers compel
the organizations to be ethically oriented.

2. Credibility in the Public:

Ethical values of an organisation create credibility in the public eye. People will like to buy the product of a company if they
believe that the company is honest and is offering value for money. The public issues of such companies are bound to be a
success. Because of this reason only the cola companies are spending huge sums of money on the advertisements now-a-days to
convince the public that their products are safe and free from pesticides of any kind.

3. Credibility with the Employees:

When employees are convinced of the ethical values of the organisation they are working for, they hold the organisation in high
esteem. It creates common goals, values and language. The HR manager will have credibility with the employees just because the
 [Link]'S DEGREE & PG COLLEGE

organisation has creditability in the eyes of the public. Perceived social uprightness and moral values can win the employees
more than any other incentive plans.

4. Better Decision Making:

Respect for ethics will force a management to take various economic, social and ethical aspects into consideration while taking
the decisions. Decision making will be better if the decisions are in the interest of the public, employees and company’s own long
term good.

5. Profitability:
Being ethical does not mean not making any profits. Every organisation has a responsibility towards itself also i.e., to earn
profits. Ethical companies are bound to be successful and more profitable in the long run though in the short run they can lose
money.

6. Protection of Society:
Ethics can protect the society in a better way than even the legal system of the country. Where law fails, ethics always succeed.
The government cannot regulate all the activities that are harmful to the society. A HR manager, who is ethically sound, can
reach out to agitated employees, more effectively than the police.

UNIT-IV: THEORIES OF ETHICS

 [Link]'S DEGREE & PG COLLEGE

Business Ethics – Objectives, Factors Influencing Business ethics, need for Business Ethics, Theories -Teleological theory
(utilitarianism) concept, meaning, definition & criticisms of teleological theory. Deontological theory (Kantianism theory)
meaning, definition, concept & criticisms. Types of business ethics.

Business Ethics:
Business Ethics is the application of ethical principles and methods of analysis to business. Business ethics deals with the topic of
study that has been given its due importance in business, commerce and industry since last three decades.

Most of ethical questions are divided in two types:

1. Overt and

2. Covert.

These two types, their meanings and examples are detailed in Fig. 8.6 below:
 [Link]'S DEGREE & PG COLLEGE

The overt ones are generally deplored. The business avoids overt unethical practices. In business most activities are covert. The
covert activities are bad and harm business.

The characteristics that make a business decision ethical are:

(i) Equitable:
The decision be just and equal.
 [Link]'S DEGREE & PG COLLEGE

(ii) Right:
Morally correct and due.

(iii) Proper:
That which is appropriate to the situation and generally acceptable.

(iv) Good:
Which highest good for highest number of concerned people.

(v) Fair:
Which is honest and due.

(vi) Just:
Justice is done to all and it should appear that justice is given to due.

Ethics means different meaning to different people. It is abstract and does not have universal standards or acceptance due to the
fact that ethics depend on morals and morals on value system of people.

(1) Moral standards change depending on value system.

(2) Ethical standards depend on moral standards.

 [Link]'S DEGREE & PG COLLEGE

(3) Value system is built by in family, upbringing, background and experience.

(4) Ethical practices differ in different organisations. Experiences in turn alter ethical practices.

Many business men do not agree that ethics is necessary in his business dealings. They also say that business and ethics are
opposite terms and hence, combining them is not proper. In the keep competition in the market place earning money is most
important and how it is done is of secondary or no importance.

The golden rule is that a person should have gold to rule. There is lot of misconceptions or myths about business ethics and
business should be done with ethics in mind. Myths are popular unexplained beliefs but not truths.

There are 5 myths:

Myth No.1:
Business and ethics do not go together:
Business runs on scientific management principles whereas ethics is religious.

Myth No. 2:
Ethics in business is relative:
Ethics is in the thinking and eyes of the man who sees business. One customer see business ethically excellent other customer see
it is poor. The experiences are contradictory and cannot be measured as so many kilos.
 [Link]'S DEGREE & PG COLLEGE

Myth No.3:
Good business makes good ethics:
Ethical means may be or may not be always in the interest of business or better profits. Whatever the profit or business of a
company, CEO of the company has to act ethically. The company should be prepared to pay costs for instituting and maintaining
ethical values in the company.

Myth No.4:
MIS is amoral:
Management information systems (MIS) is neither immoral nor moral. While MIS is good management productive tool and
positive dimensions, there are dark usage areas. MIS may be misused. Information and computing can be put to bad use. There
are violations of privacy and questionable use of data or putting the MIS in wrong perspective.

Myth No.5:
Ethics is an individual matter:
The right or wrong thinking is based on religious belief of individuals. Business ethics is not for individuals. Individuals make
ethical choices for their individual or own family life as well as for business. The choices in organisational decision making are
based on data, discussions, purpose and directions in the organisation.
 [Link]'S DEGREE & PG COLLEGE

Organisations that do not act in a socially responsible ways often pay penalties. In all the 5 myths it may be seen that business
ethics is seen in simplistic and unrealistic light. Box 8.2 below gives dilemmas of Director Finance. The 5 myths can be
discussed for the case-let.

Factors Influencing Business Ethics:

Business Ethics is quality of being useful or desirable. It is commonly used to all things which people regard as good, desirable
and just. We generally make value judgments on many matters like good, skilled, unskilled, bad etc. The statements are
comparative. We have few terms generally used with different meaning at times not correctly.

These words and their means are:

(i) Norms:
Norms of expectations of a proper behaviour in a society. These are not requirements or must. Example: We in India treat elder
with respect. When we address our teacher we say ‘Sir’.

(ii) Beliefs:
Ethical codes of thought. Belief is an abstract thinking process. Here there is no action as in norms. Beliefs support norms.
Example: Thinking saving money, or energy.

(iii) Ethos:
 [Link]'S DEGREE & PG COLLEGE

Characteristics of a community or of a culture. Code of values by which a group or a society lives. Example: Generosity of a
group.

(iv) Moral:
Concerns regarding principles of right and wrong. Example: It is always right to tell truth.

(v) Morality:
It is the standard that an individual or a group that knows that is good, what is right and which is proper. Example: Since last
decade political morality is decreasing in India.

(vi) Moral norms:

Are expectations of society a level of morals in the society. Example: Do not harm innocent man.

(vii) Moral values:

Are desired level of morals. Usually these are statements, regarding describing moral features. Example: Honesty is best policy.

(viii) Moral behaviour:

Moral behaviour is a study of right and wrong in human behaviours.

Values of managers:
 [Link]'S DEGREE & PG COLLEGE

Business is driven by values. Values guide what a business manager should do and how the stakeholder reaction to these action.
Following a set of good values a value system can be built in the organisation business thus can create good, services,
employment of larger value.

A manager while accepting the values the considerations are:

(a) The values should be universal.

(b) Maximum good to greatest number of people.

The manager should be pragmatic in his approach. This comes by his experience and skill in knowing as to how a decision works
in a given situation. Manager should have a feel of what is good for highest number. Manager should also evaluate the value built
up in his control.

The manager has to choose values in his day to day business decisions. Basic values cut across culture time and type of industry.
Some values appear overlapping.
 [Link]'S DEGREE & PG COLLEGE

Objectives of Business Ethics:

The Objectives of Ethics are to evaluate the human behaviours and calling up on the moral standards. The ethical standards also
prescribe how to act morally in specified situations.
 [Link]'S DEGREE & PG COLLEGE

The objectives of business ethics are:

(i) Personal level:
At personal level the policy should be set that not to misuse the properties of the others or of the organisation keeping the
promises and extending the mutual help, not to seek quick gains and not to indulge in politics to gain power.

(ii) Internal policy level:

The business organisation should follow fair practices in dealing with employees and other stakeholders. The organisation should
have open and better communication at all levels. The organisation leadership should motivate employees for better productivity
and for common good.

(iii) Societal level:

The social concerns like no discrimination concerned for the down trodden be the prime concerns of the business organisations.
Optimal use of scarce resources, clean environment and ensuring better quality of life to all the stakeholders should be stressed in
the internal policies.

(iv) Stakeholder’s level:

The organisation should take care of the maximum number of stakeholders and follow ethical means with shareholders,
customers, suppliers, employees, banks and financial institutions, government and all others that are connected with the
organisation.
 [Link]'S DEGREE & PG COLLEGE

Teleological ethics
Consequentialism

Consequentialist ethics come from the teleological branch of ethical theory. You will remember that teleological theories focus on the goal
of the ethical action.

Consequentialist theories are those that base moral judgements on the outcomes of a decision or an action. If the outcomes of an action are
considered to be positive, or to give rise to benefits, then that action is held to be morally right. Conversely, if the outcome causes harm, then
the action is held to be morally wrong. The judgement of right or wrong depends on the consequences of the decision or action. The two
main consequentialist theories considered here are egoism and utilitarianism.

Egoism

Egoism is the theory that one's self is, or should be, the motivation for all of our actions. It is worth distinguishing between egoism as
a descriptive argument (an argument that tells us how the world actually is) and egoism as a normative argument (an argument that tells
us how the world ought to be). Egoism as a descriptive argument describes human nature as self-centred. In its strongest form, it argues that
individuals only ever act in their own self-interest. Even where they appear to be acting in others' interests, descriptive egoism explains that
the person is really motivated by their own self-interest disguised by arguments (rationalisations) of 'doing one's duty' or 'helping others'. In
fact, our motivation behind doing 'good deeds' may be to make ourselves feel good; to make ourselves look good in the eyes of others; or
because we believe that, by helping others, others will help us. Even if we donate money to charity anonymously, we may still only really do
 [Link]'S DEGREE & PG COLLEGE

this because it makes us feel good about ourselves. In contrast, egoism as a normative argument tells us that we should be acting in our own
interests, as this is the only way that overall welfare can be improved. If everyone acts in their own self-interest, then society will become
more efficient, which will be in everyone's interest. It is therefore morally right to pursue one's own self-interest.

One of the most famous normative egoists was Adam Smith, one of the pioneers of neo-classical economic theory. He argued that self-
interested behaviour is right if it leads to morally acceptable ends. Smith argued that if everyone followed their self-interest, then society as a
whole would be improved. (Importantly, he also argued that if egoism led in fact to the worsening of society, then it should be abandoned.)
The theory of egoism is at the heart of capitalist arguments that a corporation's sole responsibility is to its shareholders. However, some form
of social and environmental responsibility can be consistent with egoism because egoist decisions may address immediate moral demands by
aiming to satisfy long-term self-maximizing objectives - of the firm (eg profitability) or the individual (eg philanthropy). While it is an
important theory for understanding economic rationality, we do not consider egoism in great depth here. Of more interest is another
consequentialist theory: that of utilitarianism.

Utilitarianism

The modern form of the consequentialist theory of utilitarianism derives from 19th century British philosophers such as Jeremy Bentham
and John Stuart Mill, and it has been particularly influential in areas of the world influenced by British culture. Rather than maximise
individual welfare, utilitarianism focuses on collective welfare and it identifies goodness with the greatest amount of good for the greatest
number of people: the 'greatest happiness principle'. So maximizing benefits for the greatest number of people involves net assessments of
benefit: utility is the net result of benefits and 'disbenefits' - or costs. Utility has entered modern economics as a key quantitative concept. The
 [Link]'S DEGREE & PG COLLEGE

concept of trade-offs is specifically embraced and social and environmental cost-benefit analyses are explicit utilitarian tools for assessing the
goodness of an action. A simple balance sheet of costs and benefits can be drawn up to assess the overall utility of a decision.

Utilitarianism has three essential elements:

 Whether an action is right or wrong is determined solely by its consequences.

 The value of the consequences of an action is assessed in terms of the amount of happiness or well-being caused.
 In assessing the total happiness caused to a number of people, equal amounts of happiness are to have equal value, no one
person's happiness having greater value that another's.

Why preserve biodiversity?

Feeding the world

A mere 20 species provide about 90% of the world population's food. All major food crops, including corn, wheat, and soybeans, depend on
the introduction of new strains from the wild to cope with evolving disease and pests. If those strains are lost, the security of our food supply
will be threatened. For example, a wild relative of corn called milpilla (Zea diploperennis) is exceptionally disease-resistant and is the only
perennial in the corn family. If successfully interbred with domestic corn, its genes could boost corn production by billions of dollars. Zea
diploperennis grows on only one mountain in western Mexico.
 [Link]'S DEGREE & PG COLLEGE

Another branch of the teleological strand of ethics is that of 'being good'. The most well-known of these ethical theories is virtue ethics.
Virtue ethics shifts the analytical emphasis away from rule-based decision-making (of deontological ethics) or of the consequences of an
action (eg in utilitarianism) towards the ethics of individuals and the ethics of human character. So, for example, where a utilitarian would
argue that giving to a charity maximises well-being in society, and a deontologist would argue that we have a duty to help others, a virtue
ethicist would point to the fact that helping others displays desirable virtues such as being charitable or benevolent. Other desirable virtues
include honesty, courage, friendship, mercy, loyalty, modesty, patience, and so on. The opposite of virtues are vices.

Virtues and vices

'[I]t is possible to see the ethical validity or correctness of an action in terms of conformity to certain types of conduct. Instances or patterns of
conduct that are ethically right, good and proper are virtues, while those that are wrong, bad or improper are vices. This [...] pattern of ethical
evaluation lends itself particularly to expressions of ethical judgement that emphasize the character of the actor, so that not only is the act
virtuous, but also the person who reliably acts in virtuous ways.'

Do you could consider yourself to be a 'good person'? What virtues do you generally demonstrate in your actions and in the
decisions you take? Do you have many vices?

Whilst the roots for virtue ethics in Western philosophy can be found in the ancient Greek philosophies of Aristotle and Plato, as a theory it
fell out of favour for many centuries. However, during the 20th century virtue ethics again became an important area of ethical study. In
particular, some philosophers argue that it can overcome some of the criticisms of traditional ethical traditions examined in the next section.
 [Link]'S DEGREE & PG COLLEGE

German philosopher Immanuel Kant (1724-1804) was an opponent of utilitarianism. Leading 20th century proponent of
Kantianism: Professor Elizabeth Anscombe (1920-2001).

Basic Summary: Kant, unlike Mill, believed that certain types of actions (including murder, theft, and lying) were absolutely
prohibited, even in cases where the action would bring about more happiness than the alternative. For Kantians, there are two
questions that we must ask ourselves whenever we decide to act: (i) Can I rationally will that everyone act as I propose to act? If
the answer is no, then we must not perform the action. (ii) Does my action respect the goals of human beings rather than merely
using them for my own purposes? Again, if the answer is no, then we must not perform the action. (Kant believed that these
questions were equivalent).

Kant’s theory is an example of a deontological moral theory–according to these theories, the rightness or wrongness of actions
does not depend on their consequences but on whether they fulfill our duty.
Kant believed that there was a supreme principle of morality, and he referred to it as The Categorical Imperative. The CI
determines what our moral duties are.

the following is an exerpt from the notes of Professor Eric Barnes...

Morality and imperatives: What does it mean for one's duty to be determined by the categorical imperative?
 [Link]'S DEGREE & PG COLLEGE

What is an imperative? An imperative is a command. So, "Pay your taxes!" is an imperative, as are "Stop kicking me!"
and "Don't kill animals!"

Hypothetical Imperatives: these imperatives command conditionally on your having a relevant desire. E.g. “If you
want to go to medical school, study biology in college.” If you don’t want to go to medical school, this command doesn’t
apply to you. Another example, your father says, "if you are hungry, then go eat something!" - if you aren't hungry, then
you are free to ignore the command.

Categorical Imperatives: These command unconditionally. E.g. “Don’t cheat on your taxes.” Even if you want to
cheat and doing so would serve your interests, you may not cheat.

What is the connection between morality and categorical imperatives? Morality must be based on the categorical
imperative because morality is such that you are commanded by it, and is such that you cannot opt out of it or claim that it
does not apply to you.

How does the categorical imperative work? The categorical imperative has three different formulations. That is to say,
there are three different ways of saying what it is. Kant claims that all three do in fact say the same thing, but it is currently
disputed whether this is true. The second formulation is the easiest to understand, but the first one is most clearly a
categorical imperative. Here is the first formulation.
 [Link]'S DEGREE & PG COLLEGE

1) First formulation (The Formula of Universal Law): "Act only on that maxim through which you can at the same time
will that it should become a universal law [of nature]."

a) What is a maxim? A maxim is the rule or principle on which you act. For example, I might make it my maxim
to give at least as much to charity each year as I spend on eating out, or I might make it my maxim only to do what
will benefit some member of my family.

b) Basic idea: The command states, crudely, that you are not allowed to do anything yourself that you would not
be willing to allow everyone else to do as well. You are not allowed to make exceptions for yourself. For
example, if you expect other people to keep their promises, then you are obligated to keep your own promises.

c) More detail: More accurately, it commands that every maxim you act on must be such that you are willing to
make it the case that everyone always act on that maxim when in a similar situation. For example, if I wanted to
lie to get something I wanted, I would have to be willing to make it the case that everyone always lied to get what
they wanted - but if this were to happen no one would ever believe you, so the lie would not work and you would
not get what you wanted. So, if you willed that such a maxim (of lying) should become a universal law, then you
 [Link]'S DEGREE & PG COLLEGE

would thwart your goal - thus, it is impermissible to lie, according to the categorical imperative. It is
impermissible because the only way to lie is to make an exception for yourself.

Kant on Moral Worth

The Moral Worth of Persons: Kant also has something to say about what makes someone a good person. Keep in mind that
Kant intends this to go along with the rest of his theory, and what one's duty is would be determined by the categorical
imperative. However, one can treat this as a separate theory to some extent, and consider that one's duty is determined by some
other standard. Keep in mind that what is said below has to do with how one evaluates people, not actions. A person's actions
are right or wrong, a person is morally worthy or lacks moral worth (i.e., is morally base). A person's actions determine her
moral worth, but there is more to this than merely seeing if the actions are right or wrong.

a) Background concepts: This chart should help explain the basics.

b) The basic idea: Kant argues that a person is good or bad depending on the motivation of their actions and not on the
goodness of the consequences of those actions. By "motivation" I mean what caused you to do the action (i.e., your
 [Link]'S DEGREE & PG COLLEGE

reason for doing it). Kant argues that one can have moral worth (i.e., be a good person) only if one is motivated by
morality. In other words, if a person's emotions or desires cause them to do something, then that action cannot give them
moral worth. This may sound odd, but there is good reason to agree with Kant.

c) Why motivation is what matters: Imagine that I win the lottery and I'm wondering what to do with the money. I
look around for what would be the most fun to do with it: buy a yacht, travel in first class around the world, get that knee
operation, etc.. I decide that what would be really fun is to give the money to charity and to enjoy that special feeling you
get from making people happy, so I give all my lottery money away. According to Kant, I am not a morally worthy
person because I did this, after all I just did whatever I thought would be the most fun and there is nothing admirable
about such a selfish pursuit. It was just lucky for those charities that I thought giving away money was fun. Moral worth
only comes when you do something because you know that it is your duty and you would do it regardless of whether you
liked it.

d) Why consequences don't matter: A reason why Kant is not concerned with consequences can be seen in the
following example. Imagine two people out together drinking at a bar late one night, and each of them decides to drive
home very drunk. They drive in different directions through the middle of nowhere. One of them encounters no one on
the road, and so gets home without incident regardless of totally reckless driving. The other drunk is not so lucky and
encounters someone walking at night, and kills the pedestrian with the car. Kant would argue that based on these actions
 [Link]'S DEGREE & PG COLLEGE

both drunks are equally bad, and the fact that one person got lucky does not make them any better than the other drunk.
After all, they both made the same choices, and nothing within either one's control had anything to do with the difference
in their actions. The same reasoning applies to people who act for the right reasons. If both people act for the right
reasons, then both are morally worthy, even if the actions of one of them happen to lead to bad consequences by bad luck.

e) The wrong interpretation: Consider the case described above about the lottery winner giving to charity. Imagine that
he gives to a charity and he intends to save hundreds of starving children in a remote village. The food arrives in the
village but a group of rebels finds out that they have food, and they come to steal the food and end up killing all the
children in the village and the adults too. The intended consequence of feeding starving children was good, and the actual
consequences were bad. Kant is not saying that we should look at the intended consequences in order to make a moral
evaluation. Kant is claiming that regardless of intended or actual consequences, moral worth is properly assessed by
looking at the motivation of the action, which may be selfish even if the intended consequences are good.

f) Kant does not forbid happiness: A careful reader may notice that in the example above one of the selfish person's
intended consequences is to make himself happy, and so it might seem to be that intended consequences do matter. One
might think Kant is claiming that if one of my intentions is to make myself happy, that my action is not worthy. This is a
mistake. The consequence of making myself happy is a good consequence, even according to Kant. Kant clearly thinks
that people being happy is a good thing. There is nothing wrong with doing something with an intended consequence of
 [Link]'S DEGREE & PG COLLEGE

making yourself happy, that is not selfishness. You can get moral worth doing things that you enjoy, but the reason you
are doing them cannot be that you enjoy them, the reason must be that they are required by duty. Also, there is a tendency
to think that Kant says it is always wrong to do something that just causes your own happiness, like buying an ice cream
cone. This is not the case. Kant thinks that you ought to do things to make yourself happy as long as you make sure that
they are not immoral (i.e., contrary to duty), and that you would refrain from doing them if they were immoral. Getting
ice cream is not immoral, and so you can go ahead and do it. Doing it will not make you a morally worthy person, but it
won't make you a bad person either. Many actions which are permissible but not required by duty are neutral in this way.

g) Summary: According to Kant a good person is someone who always does their duty because it is their duty. It is fine
if they enjoy doing it, but it must be the case that they would do it even if they did not enjoy it. The overall theme is that
to be a good person you must be good for goodness sake.

end of excerpt...
 [Link]'S DEGREE & PG COLLEGE

A Problem for Kant’s Theory

Kant’s view is that lying is always wrong. His argument for this is summarized by James Rachels as follows:

(1) We should do only those actions that conform to rules that we could will be adopted universally.

(2) If we were to lie, we would be following the rule “It is permissible to lie.”

(3) This rule could not be adopted universally, because it would be self-defeating: people would stop believing one another, and
then it would do no good to lie.

(4) Therefore, we should not lie.

The problem with this argument is that we can lie without simply following the rule “It is permissible to lie.” Instead, we
might be following a rule that pertains only to specific circumstances, like “It is permissible to lie when doing so will save a
life.” This rule can be made a universal law without contradiction. After all, it is not as though people would stop believing each
other simply because it is known that people lie when doing so will save lives. For one thing, that situation rarely comes
up—people could still be telling the truth almost all of the time. Even the taking of human life could be justified under certain
circumstances. Take self-defense, for example. There appears to be nothing problematic with the rule “It is permissible to kill
when doing so is the only available means of defense against an attacker”.
 [Link]'S DEGREE & PG COLLEGE

It is not necessary to interpret Kant’s theory as prohibiting lying in all circumstances (as Kant did). Maxims (and the
universal laws that result from them) can be specified in a way that reflects all of the relevant features of the situation. Consider
the case of the Inquiring Murderer (as described in the text). Suppose that you are in that situation and you lie to the
murderer. Instead of understanding the universalized maxim as “Everyone Always lies” we can understand it as “Everyone
always lies in order to protect innocents from stalkers”. This maxim seems to pass the test of the categorical
imperative. Unfortunately, complicated maxims make Kant’s theory becomes more difficult to understand and apply.

Procedure for determining whether a proposed action violates CI1:

(1) Formulate the maxim:

I am to do x in circumstances y in order to bring about z.

Example:

I am to lie on a loan application when I am in severe financial difficulty and there is no other way to obtain funds, in order to
ease the strain on my finances.

(2) Generalize the maxim into a law of nature:

Everyone always does x in circumstances y in order to bring about z.
 [Link]'S DEGREE & PG COLLEGE

Everyone always lies on a loan application when he is in severe financial difficulty and there is no other way to obtain funds, in
order to ease the strain on his finances.

(3) Figure out the perturbed social world (PSW), that is, what the world would be like if this law of nature were added to
existing laws of nature and things had a chance to reach equilibrium. Note: assume that after the adjustment to equilibrium
the new law is common knowledge -- everyone knows that it is true, everyone knows that everyone knows, etc.

Two questions:
Q1: Could I rationally act on my maxim in the PSW?
This is the “Contradiction in Conception Test”
Q2: Could I rationally choose the PSW as one in which I would be a member?

This is the “Contradiction in the Will Test”

The Kantian evaluation rule is this: we must be able to answer yes to both questions for the maxim to be acceptable. If we get a
no answer to either, we must reject the maxim and try to find another one on which to act.

The deceitful promise (Kant’s 2nd example)

This is the example we have been using in spelling out the procedure. The maxim fails because I must answer "no" to the
first question: I could not rationally act on the maxim in the PSW. There are two reasons Kant states for this: (1)
promising and (2) the end to be attained by it would be impossible, since no one would believe what was promised him
 [Link]'S DEGREE & PG COLLEGE

but would laugh at all such utterances as being vain pretenses. Lying on a loan application would not get us anywhere in
a world where everyone always lied when under similar circumstances.

The second part of the test is the "contradiction in the will test." It catches those maxims whose existence as a universal
law of nature is conceivable without contradiction, but which cannot be willed to be such without contradiction. The next
example is supposed to illustrate a failure of this test.

Indifference to the needs of others (Kant’s 4th example)

Here the maxim is something like the following

In order to advance my own interests, I will not do anything to help others in need unless I have something to gain from
doing so.
The PSW will contain a law of nature of the form:

To advance his own interests, everyone always refrains from helping others in need unless he has something to gain from
doing so.
 [Link]'S DEGREE & PG COLLEGE

Now Kant would say that there is no problem in conceiving such a PSW (in fact, those of a cynical bent might think that
the PSW is no different from the existing world). Applying the first question of the procedure, we see that we cannot
answer no to the first question: it would be rational in the PSW to follow the maxim if everyone else is doing the same,
because in that world everyone is indifferent to the needs of others, so the best way for you to advance your interests is to
be likewise indifferent (for you will not gain anything through reciprocity of others by departing from the maxim).

However, according to Kant the second part of the test fails: I could not rationally choose the PSW, because "a will which
resolved itself in this way would contradict itself, inasmuch as cases might often arise in which one would have need of
the love and sympathy of others and in which he would deprive himself, by such a law of nature springing from his own
will, of all hope of the aid he wants for himself (423)." That is, according to Kant it is not rational to choose a world in
which you would not be helped if you were in need and no one was in a position to gain by helping you.

Perfect Duties and Imperfect Duties

If a maxim flunks Q1 (see above) then we have a perfect duty to refrain from acting on that maxim.

If a maxim flunks Q2 (see above) but not Q1, then we have an imperfect duty to refrain from acting on that maxim.
 [Link]'S DEGREE & PG COLLEGE

-Our Perfect duties (duties of justice) are negative in that they require that we never perform certain types of actions, and
can only be fulfilled in very specific ways.

-Our Imperfect duties (duties of virtue) are positive in that they require that we sometimes perform certain types of
actions.

Illustration: We have a perfect duty not to murder. This means that we must never murder under any circumstances. We have
an imperfect duty to help the needy. This means that we should do so on occasion, where this does not conflict with our perfect
duties.

Examples:

Duties Perfect Imperfect

To Others tell truth assist others in need

don’t break promises help others achieve goals

 [Link]'S DEGREE & PG COLLEGE

don’t steal, murder, enslave

To Self no suicide or

develop talents

other forms of self-destruction

According to Kant, perfect duties (duties of justice) can appropriately be enforced by means of the public, juridical use of
coercion, and the remainder are imperfect duties (duties of virtue), which are fit subjects for moral assessment but not
coercion. (Recall that Jan Narveson follows this distinction in his paper “Feeding the Hungry”)

Types of Business Ethics

It is really impossible to classify the business ethics into certain definite types. However, attempts have been made to classify
them into certain categories. They are as follows:

Types of business ethics

 [Link]'S DEGREE & PG COLLEGE

1. Personal Responsibilities: This refers to the personal beliefs of an individual. Every individual has certain firm beliefs on
certain matters’ such as honesty, avoiding criminal acts, obedience to elders, willing to perform accepted duties, promptly settling
the dues etc.
2. Official Responsibilities: Only persons or human beings occupy positions. A person who-is occupying a certain position
should strictly follow certain norms and other standards set for that official capacity.
3. Personal Loyalties: These include loyalties of a subordinate to his superior. So long as the superior is just and honest, the
subordinates shall not face any problem.
4. Corporate Responsibilities: Corporations, as separate legal entities, have certain moral responsibilities. The responsibilities
may not be identical with the personal moral codes of the managers who run the company. These responsibilities may be internal
or external.
5. Organizational Loyalties: Many people develop a deep sense of loyalty towards the organization as an entity that goes
beyond their personal interest. This loyalty has arisen out of love and affection. This factor can be stimulated effectively. If so,
the employees will work hard and help the enterprise in achieving its objectives.
6. Economic Responsibilities: This type of morality guides the individual actions of an economic nature. For instance, some
businessmen think it immoral to borrow. However, this type of people is very rare to see.
7. Technical Morality: Professional people should adhere to certain ethical standards established by competent bodies or persons
or by customs. The Code of Conduct set for them by the concerned institutions governing the profession binds lawyers, chartered
accountants, doctors etc.
 [Link]'S DEGREE & PG COLLEGE

8. Legal Responsibility: It refers to the responsibility imposed by law. What are all illegal are supposed to be unethical also.
Everyone should be a law-abiding citizen.
UNIT-V: ETHICAL ISSUES IN THE FUNCTIONAL AREA
Introduction importance of ethical decision making in business, Ethics in the Functional Area- Ethics in Marketing – (Unethical
practices in Advertising, Personal Selling, Common Deceptive Practices, Pricing Ethics), Ethics in Finance – (Deception,
Churning, Insider Trading), Ethics in IT – (Internet Crime and Computer Abuse), Ethics in HRM& criticisms of ethics in
business.

Ethical Decision Making:

Managers affect the behaviour and decision-making capability of individuals.

The individuals in an organization are responsible for conducting business
operations. Management is defined as a decision-making process. Ethical
decision-making is a method of evaluating and choosing the alternatives decided
by ethics management. The following should be kept in mind while making
ethical decisions:
Identify and eliminate unethical options in the alternatives.
Identify complex, ambiguous and incomplete facts and try to avoid them.
Determine the ethical dilemma and resolve it.
 [Link]'S DEGREE & PG COLLEGE

Select the best ethical alternative.

Organizations need to perform a set of activities and take various decisions to
achieve organizational goals. These are known as the business strategies of the
organization. Business strategies are an important part of businesses, firms and
industries. To make a business strategy, all businesses, firms and industries need
to develop a strategic plan once a year. Managers of the firms are given the
responsibility to achieve the goals stated in the strategic plan. Business strategies
are used for the following purposes:
They help determine the products and services that an organization needs
to provide.
They help determine the various industries in which the organization
competes.
They help identify the competitors, suppliers and customers of the
organization.
They help analyse the long-term goals of the firm.

Importance of ethical decision making in business:

Honesty
 [Link]'S DEGREE & PG COLLEGE

 Informed
 Accuracy, unbiased
 Truthfulness
Fairness

 Knowledgeable
 Just
 Merciful
 Responsible
 Equitable
Respectful & Caring

 Goodwill toward all

 Treat others not just as means to an end
 Beneficial to all wherever possible
 Loyal
Reliability

 Predictable
 Sustainable
 [Link]'S DEGREE & PG COLLEGE

Sensibility

 Fact-based
 Well-reasoned
It should be clear from this list that ethical management creates a win/win, productive, synergistic, empowering, high trust, merit-
driven and accountable, high morale environment which likely will be highly sustainable and one which can be reliably built
upon.

Problems in the Decision-making Process

There are various problems faced by a management in the decision-making
process. These problems are:
Insufficient information: It refers to the lack of information which
affects the performance and quality of the management in an
organization.
Insufficient knowledge: It refers to the difference between available
knowledge and the required information for the management to take a
decision.
Lack of time: It refers to the pressure on the management to make
decisions. If time is limited, then the management needs to take hasty
decisions.
 [Link]'S DEGREE & PG COLLEGE

Poor communications: It leads to the problem that arises due to

improper communication of information.
Other limitations of any management in the decision-making process are with
respect to the inability of the human mind to handle available knowledge as also
human behaviour.
Ethical in the functional areas of any business is necessary to ensure a good
rapport between the management and the employees. In fact, all functional areas,
namely marketing, finance, human resources as well as information technology
should follow a code of ethics so as to function well and give maximum output.
Only one person alone cannot achieve this. Each employee should feel
responsible and try to stand by what is right in any given situation. In other
words, it should be a team effort across all levels of the organization

Ethical issues can arise in various functional areas of a business such as

marketing, research and development, HRM, production and finance. Ethical
issues in all these functional areas must be controlled or coordinated by the chief
executive officer (CEO) of the enterprise.
 [Link]'S DEGREE & PG COLLEGE

Functional
areas

IT MARKETING

FINANCE HRM

ETHICS IN MARKETING
Marketing is a technique that is used to attract and persuade customers.
 [Link]'S DEGREE & PG COLLEGE

Marketing provides a way in which a product is sold to the target audience.

Marketing is a management process that identifies, anticipates and supplies
consumer requirements efficiently and effectively. The main aim of marketing is
to make customers aware of the products and services. It also focuses on
attracting new customers and keeping existing customers interested in the
product. The marketing department consists of various subdivisions, such as
sales, after-sales service and marketing and research. The different subdivisions
of the marketing department are shown in Figure below:

Chief Executive
Officer (CEO)

Personal selling:

General manager,
Marketing In the field of sales, the following
ethical issues require safeguards
against
unethical behaviour:
Sales, Advertising
Marketing Research After Sales Service
and Promotion
 [Link]'S DEGREE & PG COLLEGE

Not supplying the products made by the company as per the order
Not accepting responsibility for the defective product
Not giving details about the hidden costs, such as transportation cost,
while making the contract with the client
Changing the specifications of the product without giving any prior
information to the customer
Changing the terms of the business without taking any approval from the
client
Delaying the delivery of the goods without giving any proper reason
Treating two customers differently
Not providing the after sales service as per the contract
Selling the same product at different prices to different customers
Advertising and promotion provide the means for communicating with the
customer. In the field of advertising and promotion, the following are examples
of unethical communication practices:
Making false commitments to the customers about the benefits of the
product
Supplying products that are different from those that are advertised
Giving wrong prices to the customers during advertising
 [Link]'S DEGREE & PG COLLEGE

Not giving the promised gift in the promotional campaign

Hiding major flaws of the product
Providing wrong testimonials about the product to prospective customers
Not providing the advertised service to the customers as a part of the
promotional plans
Increasing the price of the product before starting its promotional
campaign
Making false references about the competitive products
While selling the product to the customer, a company provides some extended
features or facilities along with the product, such as after-sales service. These
facilities are provided to increase the sale of the product. In the field of after-sales
service, the following ethical issues require safeguards against unethical
behaviour:
Using below-standard material for the service and charging for relatively
better material from the customer
Using outmoded service equipments which can be harmful for the
products during service
Not taking the service calls if the location is not easy to reach, while free
service was promised before the sale of the product
 [Link]'S DEGREE & PG COLLEGE

Making only temporary adjustment in the product, which can last only for
a short time or to make the product useful for the time being
Not keeping proper service records of major products for future use, as
they can help in easy diagnosis of problem
Overbilling the service charges, when the customer is not aware of the
actual rates
Using rejected or below-standard components for customer’s temporary
relief
Refusing the service of the product due to personal reasons
Exchanging healthy parts with below-standard parts when the product
comes for servicing
Marketing research is done to find out the needs of the market, its trends and
competitive activities. In the field of marketing research, the following are
example of unethical behaviour:
Research is conducted only to substantiate the viewpoint of the manager.
Research is focused on the areas that do not need to be covered.
Some old research is presented as the new one just for the purpose of
financial gain.
A biased research report is prepared to suit the marketing manager.
 [Link]'S DEGREE & PG COLLEGE

The research report is sold to the competitor.

The report does not include important facts.

Ethical Issues in Advertising

In the advertising field, the ethical issues include decisions on what business and
market a corporate organization should enter. Another ethical issue can be the
decision on what product should be provided by a corporate organization to its
customers. Though it is important that ethical standards be provided for the
advertising of a particular product, it is not easy to establish common ethical
standards which are agreed upon by different organizations.
In the advertising field, marketing promotion is the area where a large amount of
public scrutiny takes place. Media persons report immediately any lack in ethical
standards while selling products, in public relations and advertising.

Unethical Practices in Advertising:

 Deceptive advertising,
 price fixing,
 holding of
 product test data,
 [Link]'S DEGREE & PG COLLEGE

 falsifying research behaviour in the market

 Ambiguity
 Concealed facts
 Exaggeration
 Psychological appeal

ETHICS IN FINANCE
Finance is an important element of an organization and it helps in its growth and
development. Finance plays an important role in making resources available in an
organization, such as man, machine, material, market and money. The finance
manager of the firm is responsible for arranging the finances for the firm. The
finance manager can raise funds from the following two sources:
Internal Sources: Internal sources means the owner’s own funds that are
invested as equity in the organization. In case of small organizations, the
owner’s contribution in terms of equity is low. Therefore, large amount of
money is raised from external sources. The entrepreneur can raise finance
internally from various sources:
o Deposits and loans given by owner
o Personal loan from provident fund and life insurance policy
 [Link]'S DEGREE & PG COLLEGE

o Funds accumulated by the retention of profits

o Ploughing back of profits
External Sources: External sources means the various financial
institutions from where entrepreneurs can raise funds, such as fixed
capital, commercial banks and development banks. The entrepreneur can
raise finance by:
Borrowing money from friends and relatives
o Borrowing from financial institutionsThe finance department of an enterprise is prone to the following unethical
practices:
Overestimating promoters’ capital utilization
Overbudgeting project costs
Using underhand tactics with the financers to gain benefits for the firm as
well as for themselves
Purchasing capital equipments at a time when there is no requirement for
it
Selling the capital equipments in order to raise additional and
unaccounted funds
Siphoning funds for the promoter’s personal benefit
Investing unapproved funds in order to gain extra profits
 [Link]'S DEGREE & PG COLLEGE

Claiming insurance cover for losses that never happened

Overpricing the current assets in order to gain more working capital than
permitted
Using working capital funds for personal gains

The accounts department of an enterprise is prone to the following types of

unethical issues:
Showing inflated salaries and getting receipts from employees for an
amount larger than what they actually get
Playing inflated vendor bills in order to get discounts or commissions
Paying overtime wages when there in no requirement for them
Maintaining two different sets of books, one for the management and the
other for income tax
Refusing to reject unacceptable raw materials when the vendor bills have
to be paid
Delaying the clearance of the bills payable in order to get maximum
interest for the amount to be paid
Allotting extra travelling allowances to favourite employees
Showing wrong figures in the monthly trial balances for personal
 [Link]'S DEGREE & PG COLLEGE

benefits
The following are the unethical practices of the costing manager:
Reducing manufacturing costs by manipulating work hours
Ignoring cost of rejects
Ignoring cost of rework
Not accounting for man-hours lost due to strikes and absenteeism
Not accounting for man-hours lost in maintenance work
Not considering the work stoppages due to change in models
Ignoring the man-hours lost due to change in the manufacturing process
Ignoring time lost in failed experimentations
Not taking into acccount the benefits of economies of sales and
experience curve
The following points describe the unethical behaviour of the auditing manager:
Ignoring major deviations from the budgets
Rejecting the tender having lowest cost among all due to personal
reasons
Helping in hiding black money in order to reduce the tax payable amount
Ignoring inflated travel bills of selected employees
Accepting payments made by the directors for personal purchases as
 [Link]'S DEGREE & PG COLLEGE

official payments
Enabling the directors in sending and receiving money from overseas
through unofficial hawala channels
Approving payments to suppliers without checking bills or deliverables
Approving the substandard construction made by the constructor and
approving their bills for payment

Ethics in Human Resource Management (HRM)

HRM is concerned with the management of the ‘people’ of an organization. The term HRM is used to refer to the procedures,
philosophy, policies, and practices related to the management of people within an organization. HRM is an approach to bring the
people and the organization together so as to achieve the desired goals. It helps in creating a relation between the management of
the organization and the employees which is based on cooperation and coordination according to the designed strategy. It is the
art of promoting, developing and maintaining a competent workforce to achieve the goals of an organization in an effective
manner. HRM is responsible for performing various functions like planning, organizing, directing and controlling of human
resources. HRM also involves activities like procurement, development, compensation and maintenance.
According to Ivancevich and Glucck, ‘Human resource management is the function performed in organizations that facilitates the
most effective use of people (employees) to achieve organizational and individual goals.’ HRM is extensive in nature and it is
present in all organizations and at all levels of an organization. HRM focuses on action rather than theoretical procedures and
 [Link]'S DEGREE & PG COLLEGE

encourages an employee to utilize his skills and potential completely to give his best to the organization. It encourages the
employees through systematic procedures like recruitment, selection, training and development.

General
MANAGER,HRM

Recruitment
Manager

Administrative Industrial
Training Manager
Manager Relations Manager

An effective HRM works towards achieving its goals by providing a competent and motivated
workforce. The primary aim of HRM is the promotion of effectiveness of the
people employed in the organization and the performance of their allotted duties
 [Link]'S DEGREE & PG COLLEGE

with cooperation. It seeks to develop and bring together an effective organization,

enabling the women and men who make up an enterprise to give their best
contribution towards its success both as members of a working group and as
individuals . HRM can help organizations achieve their goals more effectively
and efficiently. Effective management of human resources helps in improving the
quality of work life. It seeks to provide fair conditions and terms of employment
and work that satisfies all those employed. The following are the key objectives
of HRM:
To recruit trained and spirited employees
To help the organization reach its goals
To train the employees for best results
To communicate HR policies to the employee
To ethically respond to the needs of the society
The following are examples of unethical practices during the recruitment process
of a company:
Recruitment of known persons without assessing their abilities
Recruitment on the basis of financial favours
Recruitment of the relatives of other employees
Recruitment based on the recommendations of friend, business associates
 [Link]'S DEGREE & PG COLLEGE

and other persons close to the leader

Recruitment of underqualified persons
Recruitment of overqualified persons
Recruitment of less acceptable men when there are better suited women
available for the job.
Employing children below fourteen years for the job
Giving less than minimum wages fixed by the government
The training manager of the company can also indulge in unethical practices as
can be seen from the following points:
Arranging training only for favourite employees, whether they deserve it or not
Employing outsiders for providing training to trainees even when there are several persons available inside
Planning and organizing the training programme without even knowing the need for training
Organizing training during peak seasons or on days when workload is very high
Starting training programmes in an ill-prepared manner
Extending the time of the training programme to allow the trainees to have a relaxed time. Supplying outmoded and old
training materials for the purpose of training
Experimenting with trainees by asking them to set their own timetable for training In the area of administration, the following
are the unethical practices the manager can indulge in:
Tampering leave records of the employees
 [Link]'S DEGREE & PG COLLEGE

Giving leaves continuously to favourite employees

Giving promotions to non-eligible persons merely on the
recommendations of a friend or business associate
Ignoring issues related to the security of the company
Interference in various activities of the administration from the top
management
Giving the contract for uniforms of the employees to the wrong
companies just for the sake of personal benefits
Ethics in Information Technology
Information technology refers to the gathering, processing, creation, delivery and
storage of information and all the processes that make all this possible. The
volume of work that is handled using IT continues to increase almost everyday.
Whatever be the field, one is sure to find IT at work.
The characteristic of IT is that it is a particular field which has no geographical
boundaries but application of IT may affect culture and environment differently.
The features which are acceptable in one culture may be unethical in another.

Ethical Issues: There are various ethical issues involved in information

technology. In 1986, Masovi had classified ethical issues in the following four
 [Link]'S DEGREE & PG COLLEGE

groups:
1. Accessibility
It involves the right of accessing the required information as well as the true
payment of charges to access the information.
2. Privacy
It deals with the degree of privacy and dissemination of information about an
individual.
3. Property
It talks about ownership and value of information.
4. Accuracy
The information which is viable and being accessed is now much more accurate
and authentic.

Unethical practices in IT

Internet crime /Cyber crime

Most Popular Cybercrimes:

 [Link]'S DEGREE & PG COLLEGE

1. Phishing scams. Phishing is a practice of a cybercriminal or hacker attempting to obtain sensitive or personal information from a
computer user. ...
2. Identity Theft scams. ...
3. Online Harassment. ...
4. Cyberstalking. ...
5. Invasion of privacy.

Computer abuse
Computer crime—illegal acts in which computers are the primary tool—costs the world economy many billions of dollars
annually. Computer abuse does not rise to the level of crime, yet it involves unethical use of a computer. The objectives of the so-
called hacking of information systems include vandalism, theft of consumer information, governmental and commercial
espionage, sabotage, and cyberwar. Some of the more widespread means of computer crime include phishing and planting
of malware, such as computer viruses and worms, Trojan horses, and logic bombs.
Phishing involves obtaining a legitimate user’s login and other information by subterfuge via messages fraudulently claiming to
originate with a legitimate entity, such as a bank or government office. A successful phishing raid to obtain a user’s information
may be followed by identity theft, an impersonation of the user to gain access to the user’s resources.

Computer viruses are a particularly common form of attack. These are program instructions that are able not only to
perform malicious acts but also to insert copies of themselves into other programs and thus spread to other computer systems.
 [Link]'S DEGREE & PG COLLEGE

Similar to viruses, worms are complete computer programs that replicate and propagate through telecommunications networks.
Because of their ability to spread rapidly and widely, viruses and worms can inflict immense damage. The damage can be in the
form of tampering with system operation, theft of large volumes of data (e.g., credit card numbers), known as data breach, or
denial of service by overloading systems with a barrage of spurious requests.
In a Trojan horse attack, the malefactor conceals unauthorized instructions within an authorized program. A logic bomb consists
of hidden instructions, often introduced with the Trojan horse technique, that stay dormant until a specific event occurs, at which
time the instructions are activated.
The Computer Ethics Institute in Washington DC has laid down the following ten
commandments of computer ethics:
1. You will not use computer to harm other people.
2. You will not interfere with the computer network of other people.
3. You will not snoop around in files of other people’s computer.
4. You will not use a computer to steal.
5. You will not use a computer to bear false witness.
6. You will not copy or use proprietary software for which you have not
paid.
7. You will not use other people’s computer resources without authorization.
8. You will not use other people’s intellectual output.
9. You will think about the social consequences of the programme you are
 [Link]'S DEGREE & PG COLLEGE

writing or the system you are designing.

10. You will always use a computer in ways that demonstrate considerations
and respect for your fellow humans.

THE END