Business Ethics and Governance

Course code MGMT108

The Ethical Dilemma: Employee Layoffs vs. Financial Survival

Scenario:

● A manufacturing company, TechParts Inc., has been struggling financially

for several years due to increased competition and rising operational costs.
The company’s leadership has tried various strategies to increase revenue,
but they are now at a breaking point where drastic action is necessary to
stay afloat.

● The CEO and board of directors face a difficult choice:

1. Lay off 20% of the workforce (about 500 employees) to reduce costs and
keep the company running.
2. Keep the employees but risk bankruptcy, which could lead to the
company shutting down entirely and everyone losing their jobs.
 Conflicting Ethical Issues: Scenario based
● Employee Welfare vs. Financial Responsibility:
Laying off employees causes significant harm to those individuals and their
families.
However, keeping all employees on the payroll could bankrupt the company,

● Short-Term Harm vs. Long-Term Impact:

The layoffs will have an immediate and painful impact on employees, but if the
company survives, it can continue to provide jobs.
On the other hand, if the company goes bankrupt, the damage is irreversible

● Profit vs. Social Responsibility:

The company’s investors and shareholders expect the leadership to make
decisions that ensure profitability.
At the same time, the company has a social responsibility to its employees and
Analysing the Ethical Dilemma Using Ethical Perspectives: Scenario based

UTILITARIAN PERSPECTIVE:

• Focus: Maximize overall good.

• Option: Lay off 20% of the workforce.
• Rationale: Though layoffs will cause immediate harm to some, saving the company
could protect the jobs of the remaining employees and keep the business afloat for
the long-term benefit of the community and economy.

DEONTOLOGICAL (DUTY-BASED) PERSPECTIVE:

• Focus: Follow moral rules or duties, regardless of consequences.

• Option: Avoid layoffs.
• Rationale: The company has a duty to its employees, and laying off a significant
Analyzing ethical dilemma: Scenario based

VIRTUE ETHICS PERSPECTIVE:

• Focus: Reflect on the moral character and intentions behind the decision.
• Option: Consider creative alternatives (e.g., voluntary early retirements, reduced
work hours).
• Rationale: A virtuous business leader would demonstrate compassion for
employees, but also wisdom by finding a balanced solution that minimizes harm to
both the workforce and the company’s survival.

JUSTICE-BASED PERSPECTIVE:

• Focus: Ensure fairness.

• Option: If layoffs are necessary, implement them in the fairest way possible.
• Rationale: Consider factors like seniority, performance, to make the process
equitable, minimizing unfair treatment or discrimination.
Potential Solutions : Scenario based (continued)

1. Layoffs with Support:

2. Salary Reductions for All:

3. Part-Time or Voluntary Leave Programs:

4. Transparent Communication:
 Ethical Leadership in Business

• Role of Leadership:
• Leaders set the ethical tone of an organization.
• Ethical leadership involves fairness, transparency, and integrity.

• Encouraging Ethical Behaviour:

• Code of Ethics : Establish clear rules and guidelines.
• Training Programs : Regular ethical training for employees.
• Whistleblower Protections : Encourage reporting unethical behaviour without
fear of retaliation.
 Moral Development

Where does morality come from ?

“ Can virtue be taught ?

And if not, does it come by practice ?
Or does it come neither by practice nor by teaching,
But do people get it by nature, or in some other way ? ”

Moral standards are developed during childhood from the environment

Maturity with age develop people’s physical, emotional, cognitive abilities,

Similarly matures the ability to deal with moral issues

 Stages of Moral Development

Lawerence Kohlberg (1976)

Three level with two stages = Total six stages of moral development.

LEVEL 1 : Pre-Conventional Level

At this level, moral reasoning is usually driven by self-interest and

external consequences.

Children typically operate within this level, and some adults under
certain conditions.
 Kohlberg : Stages of Moral Development

Level 1

Stage 1: Obedience and Punishment Orientation

• Individuals believe that rules are fixed and absolute.

• Actions are considered wrong if they result in punishment.

Moral Reasoning:
Morality is focused on avoiding punishment and understanding that
rules must be followed to avoid harm to oneself.
The mindset here is, "If I don’t want to get in trouble, I won’t do it."
 Kohlberg : Stages of Moral Development

Level 1

Stage 2: Self-Interest Orientation

• Moral reasoning is based on self-interest

• Reciprocity is important, but only if it benefits oneself.

Moral Reasoning:
Individuals in this stage act out of their own needs and desires, asking,
"What’s in it for me?"
They now understand that others also have desires/needs but prioritize
 Kohlberg : Stages of Moral Development

LEVEL 2 : Conventional Level

This level is also known as the ‘adolescent level’, but is also common among
adults.

Individuals at this level follow social rules

Stage 3: Interpersonal Accord and Conformity (Good Boy/Good Girl

Orientation)

• Individuals at this stage are concerned with social relationships,

expectations,
 Kohlberg : Stages of Moral Development

LEVEL 2 : Conventional Level

Moral Reasoning:

• Actions are morally justified if they enhance relationships, bring approval, or

fulfill a role.

• There is an emphasis on being a "good person."

 Kohlberg : Stages of Moral Development

LEVEL 2 : Conventional Level

Stage 4: Authority and Social Order Maintaining Orientation

• Moral decisions are guided by laws and authority figures, with a focus on
maintaining social order and respecting rules.

Moral Reasoning:

Actions are right if they conform to rules, laws, or social conventions,

which are
 Kohlberg : Stages of Moral Development

LEVEL 3 : Post-Conventional Level

At this level, the person no longer simply follows norms and rules given my
family or society

There’s a chosen moral standard

With which one starts questioning, examining and categorizing the existing
rules and norms

Usually from an impartial point of view

 Kohlberg : Stages of Moral Development
LEVEL 3
Stage 5: Social Contract Orientation

• Individuals understand that laws are social contracts

and they should promote the general welfare.
• They believe rules are flexible and can be changed if they no longer
serve society’s best interests.

Moral Reasoning:
Morality is based on the greatest good for the greatest number.
Laws are respected, but individuals recognize that sometimes breaking
 Kohlberg : Stages of Moral Development
LEVEL 3
Stage 6: Universal Ethical Principles Orientation

• Individuals base their morality on abstract, universal principles like

justice, dignity, and equality
• This is regardless of whether these principles align with laws or social
expectations.

Moral Reasoning:
• Morality is an internal process
• individuals at this stage would actual break laws and endure
consequences if laws conflict with their ethical principles.
Conclusion

● Each stage – represents moral reasoning

● The progression through stages – depends on person’s ability

● Not everyone reaches highest stages

 Gilligan : Theory of Moral Development

Gilligan considered Kohlberg’s theory as limited

● included only male participants
● Focus on only justice-oriented reasoning

Proposed that there are two different approaches to study morality (human
beings) :

• Male centric approach

- impersonal, impartial and abstract moral guidelines

• Female centric approach

- care and responsibility oriented moral guidelines
 Gilligan : Stages of Moral Development

Stage 1 : CG – Caring for Oneself

(LK- Preconventional Stage)

Stage 2 : CG – Caring for Others

(LK- Conventional Stage)

Stage 3 : CG – Dynamic chemistry between Caring for self and Others

(LK- Post-Conventional Stage)

Impact

• Represented woman’s experiences and value systems – which traditional

models of moral development often ignored/couldn't capture

• Focus on both :

Care oriented (empathy and relationships) and

Justice oriented (rules and principles)

• Context-dependent moral reasoning

Criticism

● Stages of moral development should not vary among men and woman
(Eisenberg, 1989)

This suggests : moral development is more complex and cannot be

strictly
divided along gender lines.

● Limited Empirical Evidence

● Favoring Stereotypes

● Cultural and Contextual Factors

 Whistleblowing
Whistleblowing is the act of reporting unethical, illegal, or improper behaviour within
an organization, typically by an insider.

It is a mandatory requirement the company should have whistle blowing policy to

protect the interest of whistle blower.

Importance in Business Ethics:

• Whistleblowing serves as a crucial mechanism to uphold ethical standards.

• It encourages certain crucial attributes in an organization:
accountability,
transparency, and
legal compliance.
 Whistleblowing

Types of Whistleblowing

1. Internal Whistleblowing

2. External Whistleblowing

3. Anonymous Whistleblowing
Consequences for Whistleblowers

1. Positive Outcomes:

 Upholding ethical standards.

 Preventing harm to the public or other employees.

 Potential financial rewards (e.g., through government

whistleblower programs).
 Consequences for Whistleblowers

2. Negative Consequences:

 Retaliation

 Social Isolation

 Emotional and Financial Stress

 Key Ethical Issues in Business

1) Workplace Ethics:

• Discrimination and Harassment: Ensuring a fair, inclusive workplace.

• Workplace Safety: Prioritizing the health and safety of employees.
• Fair Compensation: Ethical concerns around wage disparities, fair labour practices.

2) Marketing and Advertising Ethics:

• False Advertising: Misleading consumers with exaggerated claims.

• Targeting Vulnerable Populations: Ethical concerns around marketing to children,
elderly, or those with limited information.
 Key Ethical Issues in Business

3) Environmental Ethics:

• Sustainability: Balancing profitability with environmental responsibility.

• Pollution and Resource Depletion: Ethical concerns around environmental damage
caused by business activities.

4) Corporate Governance:

• Transparency and Accountability: Ensuring decisions are made in the

best interest of all stakeholders.
• Executive Compensation: Addressing the ethics of out of proportion
favouring -CEO pay.
 Key Ethical Issues in Business

5) Supply Chain Ethics:

• Labor Practices: Addressing issues like child labour, forced labour, and poor working
conditions.
• Sourcing of Raw Materials: Ethical concerns in the mining or farming sectors, such as
conflict minerals or fair trade.

6) Technology and Data Ethics:

• Privacy Concerns: Ethical issues surrounding the collection and use of personal data.
• Artificial Intelligence: Ensuring AI is used ethically, avoiding bias or harm.
• Cybersecurity: Protecting customer and company data from breaches.
The Future of Business Ethics

Emerging Issues:

● Ethical concerns around AI : Impact on employment, data privacy, and decision-

making biases.

● Environmental sustainability: Addressing climate change and sustainable resource

management.

● The Role of Technology : How blockchain, AI, and data transparency can enhance
business ethics.

● Ethics in the Gig Economy: Ensuring fair wages, benefits, and protection for gig
Blockchain and Business Ethics

How Blockchain Enhances Ethics:

• Secure

• Shared

• Transparency
Blockchain and Business Ethics

How Blockchain Enhances Ethics:

• Accountability

• Supply Chain Integrity

 Artificial Intelligence (AI) and Business Ethics

How AI Enhances Ethics:

• Bias Reduction:

(e.g., recruitment, promotions, and financial lending).

• Automation of Ethical Compliance:

(e.g. retail bank uses AI to monitor customer transactions for unusual activity that could
indicate fraud or money laundering).
Artificial Intelligence (AI) and Business Ethics

How AI Enhances Ethics:

• Predictive Analytics for Ethical Risks:

(e.g., unsafe working conditions, environmental hazards).

Data Transparency and Business Ethics

How Data Transparency Enhances Ethics:

• Informed Decision-Making

• Corporate Governance

• Consumer Empowerment
End