Business Ethics BUSINESS ETHICS

Ethics means the set of rules or principles that the organization should
follow. While in business ethics refers to a code of conduct that businesses
are expected to follow while doing business.
This helps them in distinguishing between the wrong and the right part of
the businesses.
Code of conduct is another term that is used extensively in businesses
nowadays. It is a set of rules that are considered as binding by the people
working in the organization.
Business ethics compromises of all these
values and principles and helps in guiding
the behaviour in the organizations.
Businesses should have a balance
between the needs of the stakeholders and
their desire to make profits.
Components of Business Ethics
 Why ethical problem
occurs in business

Personal gain and selfish interest

Competitive pressure on profits
Conflicts of interest
Cross-cultural contradictions
Lack of transparency and accountability in
public/pvt. Sector
Poor regulation of political contributions
 Why ethical problem
occurs in business

Low public sector wages

Weak enforcement of laws and regulations
 Lack of free and independent media
Excessive discretionary authority of public officials
 Ethical problems
occurred in India

CASE 1-Ethical Issues of KFC

 KFC entered India in 1995 and has been in midst of controversies since then.

 The regulatory authorities found that KFC's chickens did not adhere to the
Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times
more monosodium glutamate (popularly known as MSG, a flavour enhancing
ingredient) as allowed by the Act.

 Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of
Animals (PETA), an animal rights protection organization.

 PETA accused KFC of cruelty towards chickens and released a video tape showing
the ill-treatment of birds in KFC's poultry farms.

 However, undeterred by the protests by PETA and other animal rights

organizations, KFC planned a massive expansion program in India
 Ethical problems occurred in India
WHAT ARE THE ISSUES KFC MUST HAVE STUDIED BEFORE?

1.Understand the significance of cultural, economic,

regulatory and ecological issues while establishing business in a
foreign country

2.Appreciate the need for protecting animal rights in

developed and developing countries like India

3.Understand the importance of ethics in doing

business

4.Examine the reasons for protests of PETA

5.Identify solutions for KFC's problems in India

 LETTER WRITTEN BY RAMALINGAN
SATYAM SCAM

“It was like riding a tiger, not

knowing how to get off without
being eater,” while referring to the
widening gap between the real and
artificial numbers in the company’s
books”.
 Case 2: Wells Fargo Banking Scandal

Wells Fargo was the darling of the banking industry, with some of the highest returns
on equity in the sector and a soaring stock price.
In September 2016, Wells Fargo announced that it was paying $185 million in fines
for the creation of over 2 million unauthorized customer accounts.
It soon came to light that the pressure on employees to hit sales quotas was
immense: hourly tracking, pressure from supervisors to engage in unethical
behaviour, and a compensation system based heavily on bonuses.
Wells Fargo also confirmed that it had fired over 5,300 employees over the past few
years related to shady sales practices.
CEO John Stumpf claimed that the scandal was the result of a few bad apples who
did not honour the company’s values and that there were no incentives to commit
unethical behaviour.
Further reporting found more troubling information. Many employees had quit
under the immense pressure to engage in unethical sales practices, and some
were even fired for reporting misconduct through the company’s ethics hotline.
Senior leadership was aware of these aggressive sales practices
Case 3: Apple v.s. FBI

In the wake of the December 2015 terrorist attack in San Bernardino, attention
turned to the perpetrator’s iPhone.

A federal judge asked Apple, maker of the iPhone, to provide “reasonable

technical assistance” to the FBI in accessing the information on the phone with
that hope of discovering additional threats to national security.
Apple provided the FBI with data it had in their possession and sent Apple
engineers to advise the FBI,but refused to comply with the court order to
bypass the phone’s security measures. The FBI argued that the bypass could
only be used for this phone, this one time.
Apple CEO Tim Cook issued a public letter reiterating Apple’s refusal to
cooperate. Cook advocated for the benefits of encryption in society to keep
personal information safe. He stated that creating the backdoor entry into the
iPhone would be akin to creating a master key capable of accessing the tens
of millions of iPhones in the U.S. alone.
The White House and Bill Gates stood behind the FBI. In anticlimactic fashion,
the FBI withdrew its request a day before the hearing, claiming it no longer
needed Apple’s help to assess the phone. It is speculated that an Israeli tech
firm, Cellebrite, helped the FBI gain assess.
 Unethical Practice in Business

Falsifying product information

 Unethical Practice in Business

Brand Bullying
 Unethical Practice in Business

Price Fixing

Creative Accountancy

Lobbying
Managing Ethical Behaviour at Workplace

(i) Recognize that managing ethics is a process

Ethics is a matter of values and associated behaviours. Values are discerned through the process
of ongoing reflection.

(ii)The best way to handle ethical dilemmas is to avoid their occurrence in the first place

That’s why practices such as developing codes of ethics and codes of conduct are so important.
Their development sensitizes employees to ethical considerations and minimize the chances of
unethical behaviour occurring in the first place.

(iii) Make ethics decisions in groups, and make decisions public, as appropriate.

(iv) Use cross-functional teams when developing and implementing the ethics management
program.
Managing Ethical Behaviour at Workplace

(v) To meet demands of business stakeholders

About three-fourths of employees surveyed in 2007 believe their firms are considering the
environment, employee well-being, and the interests of society and the community.

Meeting demands of stakeholders is good business

(vi) To enhance business performance

Research shows linkage between ethically responsible behavior and favorable corporate
financial performance

Imparts trust, promoting positive alliances among business partners

Managing Ethical Behaviour at Workplace

(vii) To comply with legal requirements

Legal requirements provide direction for companies interested in being more ethical in their
business operation. Such as
• To prevent or minimize harm
Overriding principle that business should “do no harm”
Examples include not harming society with toxic waste, protecting business from unethical
employees and unethical competitors
• To promote personal morality
Knowing one works in a supportive ethical climate contributes to sense of psychological security
People want to work for companies that do the right thing.
Managing Ethical Behaviour at Workplace

(viii) Develop a workplace policy

based on your company’s philosophy, mission statement and code of conduct.

(ix) Incorporate the policy into your performance

alert them to their responsibilities to uphold professional standards throughout their job
performance and interaction with peers and supervisors.

(x) Revise your employee handbook

to include the policy and provide copies of the revised handbook to employees. Obtain signed
acknowledgement forms from employees that indicate they received and understand the
workplace ethics policy.
Managing Ethical Behaviour at Workplace

(xi) Provide workplace ethics training to employees

Utilize varied instruction methods to engage employees in learning how to address and resolve
ethical dilemmas.

(xii) Experiential learning, or role-play

is an effective way to facilitate workplace ethics training.

(xiii) Workplace ethics simulations

involve scenarios about the misappropriation of company funds, personal values related to
improper workplace relationships and the organization’s compliance with regulatory controls.
Managing Ethical Behaviour at Workplace

(xiv) Designate an neutral authority in charge

of handling employees’ informal concerns pertaining to workplace ethics.

(xv) Confidential hotlines

are an effective way to assure employees’ anonymity, which is a concern for employees whose
alerts are considered “whistleblowing” actions.

(xvi) Refrain from making employment decisions

such as termination or suspension, in connection with whistleblowing or an employee’s right to
protected activity under whistleblowing laws or public policy.
Managing Ethical Behaviour at Workplace

(xvii) Seek legal advice for employee reports of workplace ethics issues
that increase your organization’s liability under federal, state or municipal employment law.
(xviii) Apply your workplace policy consistently
when addressing workplace issues and employee concerns about workplace ethics.
(xix) Use the same business principles in every circumstance
regardless of the perceived seriousness or the level of employees involved. Communicate the
same expectations for all employees – whether they are in executive positions or front-line
production roles – and approach every issue with equal interpretation of the company policy.
(xx) Value forgiveness
Indian companies followed ethical behaviour
Indian companies followed unethical behaviour
Factors Affect Ethical Behaviour in Workplace

1. Legal factors
2. Organizational factors
3. Individual factors
4. Societal factors
 Legal Factors

Laws support Government regulations regarding the working

conditions, product safety, statutory warning etc.

These provide some guidelines to the business managers in

determining what are acceptable or recognized standards and
practices.
Organisational Factor

When a company grows larger, its

standard of ethical conduct tends to
rise. Any unethical behaviour or
conduct on the part of the company
shall endanger its established
reputation.

public image and goodwill. Hence,

most companies are very cautious in
this respect. They issue specific
guidelines to their subordinates
regarding the dealings of the
company.
Ethical Leadership
Company policy: Selection,
recruiting, training, promotion
program, accepting diversity.
 Social Factor

Social forces and pressures have considerable influence on ethics in

business. If a company supplies sub-standard products and get involved in
unethical conducts, the consumers will become indifferent towards the
company.

Such refusals shall exert a pressure on the company to act honestly and
adhere strictly to the business ethics. Sometimes, the society itself may turn
against a company.
 Individual Factor

A man’s personal code of ethics that is what one considers moral is

the foremost responsible factor influencing his behaviour.

• Personal Values and personality

• Family influences

• Peer Influences

• Life Experiences
Organizational Citizenship Behaviour

Organizational citizenship behaviour

(OCB) is a term that’s used to describe
all the positive and constructive
employee actions and behaviours that
aren’t part of their formal job
description.

It’s anything that employees do, out of

their own free will, that supports their
colleagues and benefits the
organization as a whole.
Organizational Citizenship Behaviour

Organizational citizenship behaviour was first defined by Dennis Organ in

1988 as “an individual behaviour which is not rewarded by a formal reward
system… but that, when combined with the same behaviour in a group,
results in effectiveness.”

Employees who feel organizational citizenship will “go the extra mile” out of
personal motivation.

Positive OCBs reduce the need for supervision, improve workplace morale
and result in cost- saving suggestions.

Employees who are willing and happy to go beyond formal job requirements
will help organizations cope with change and unpredictable circumstances
Types of OCB

Altruism: Altruism in the workplace occurs

when an employee helps or assists another
employee without expecting anything in
return. A simple example of altruistic
behaviour at work is when someone offers
their assistance to a co-worker who is
swamped by taking over (part of) their tasks

Altruism in the workplace can boost

employee morale, productivity, and
effectiveness.
Types of OCB

Courtesy: Courtesy is polite and considerate behaviour towards other people,

in this case, other employees. Examples of courtesy at work include saying
good morning (!), asking a co-worker how their holiday was, how a project
they’re currently working on is going; basically any question related to a
(personal) subject someone has previously spoken about that shows people
you’ve listened to what they were saying.
Types of OCB

Sportsmanship: Put simply,

sportsmanship is about an employee’s
ability to be a good loser. It’s about
being able to deal with situations that
don’t go as planned – or negative
surprises – and to not demonstrate
negative behaviour when that happens.
 Types of OCB

Conscientiousness: Conscientiousness
is defined as behaviour that involves a
certain level of self-control and discipline
and that goes beyond the minimum
requirements. In a work setting, this
means that employees don’t just show up
on time and stick to deadlines, but that
they, for instance, also plan ahead before
they go on holiday so that their colleagues
won’t be drowning in a big workload.
Types of OCB

Civic virtue: Civic virtue is about how well

someone represents the organization they
work for. It’s about how an employee
supports their company when they’re not in
an official capacity. How do they talk about
the organization to their friends and family
for instance? Civic virtue can also be
demonstrated by employees signing up for
business events such as fundraisers, or
running a (semi) marathon for a charity with
a team of co-workers.
 Benefits of OCB

• OCB can boost employee morale

• It increases people’s levels of work
meaningfulness
• It is good for employee performance and
productivity; in fact, research shows that
OCB positively predicts performance
• It creates better social interactions between
employees
• It reduces stress
• It creates a sense of community among
employees
• It is good for your Employer Brand
Best Practices of OCB

Hire right:

a. Job description

b. Realistic job preview

c. Pre-selection

d. Interview
Organizational Citizenship Behaviour

Involve Management:

Managers play an important role when it comes to encouraging organizational

citizenship behaviour.

First, as leaders, they need to set an example. If people see their manager being polite
and considerate, supporting team members where they can, be ‘good losers’, and
participating in (charity) events outside work, it will inspire them to do the same on their
own level, at least to a certain extent.

Second, managers should praise the kind of OCB they’d like to see from their teams. An
easy way to give some well-deserved praise in public to employees who’ve engaged in
organizational citizenship behaviour is during a weekly team meeting. But OCB should
also be recognized on a company level, this can be done for instance during a
company-wide all-hands meeting.
Organizational Citizenship Behaviour

Rethink performance management?

Some companies include their employees’ OCB in their performance management
process and appraisals as a way to formally encourage, measure, and reward this.

Goals and objectives – as well as evaluation and rewards – are set in a way that
encourages workers to look out for the team

Someone’s altruism or other types of organizational citizenship behaviour can result

in a performance rating of more than 100%

Criteria like ‘how people collaborate with other teams in the organization’ are part of
the evaluation
Case Studies

Scenario 1: You are the Superintendent of Police (SP) in the district where instances of
honour killing are rampant. One day you receive a phone call from a girl informing you of
the potential threat to her and her partners’ life from her family as she has decided to
marry a boy belonging to a lower caste. Moreover, the local police station is not filing the
FIR or granting them protection. You ask her to visit your office but she demands police
protection to come out from the hideout as her father’s goons are chasing her.
On further inquiry, you come to know that the girl is the daughter of one of the most
powerful Minister of the State and both girl and boy are legally eligible to get married. The
family is concerned about the family prestige due to the lower caste of the boy and also of
the financial stability of marriage as they both are unemployed. You are under extreme
political pressure to charge the boy of kidnapping the girl or else face the consequences.
In such circumstances, point out the ethical dilemma faced by you and options available to
you. Also, chalk out the course of action you would prefer to follow.
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