Ethics in Business, Government & Society

Prof Anand & Gurparkash Singh

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Session 1
Session plan Readings Assessments Introduction to course

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Session 2
Introduction to ethics & business ethics Defining key terms

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Focus of the course

Managerial approach with emphasis on
Use of frameworks & tools to manage ethical issues

Appreciating the BGS relations; Corporate governance theme; and Social responsibility theme.

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What is the Business Government Society Field?

Business broad term encompassing a range of actions and institutions. Government refers to structures and processes in society that authoritatively make and apply policies and rules. Society a network of human relations that includes three interacting elements: Ideas Institutions Material things
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How Institutions Support Markets

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Ethics: An Introduction
The word Ethics is derived from the Greek word Ethikos (or ethos) meaning custom and Latin word mores meaning character. It is the science of morals describing a set of rules of behaviour. Involves determining what is right and wrong, and then doing the right thing.
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Introduction to ethics
What does right really mean? How do you know when something is truly right or truly wrong? Why do peoples views on what is right and wrong differ? Why emphasis on ethics?

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Ethics in Business, Govt. & Society : A real-life scenario

Ganga Expressway case: a 1047 km access controlled eight-lane expressway running along the Ganges & provide a flood control embankment Perspectives of actors:
A farmer along banks of Ganges whose land is being acquisitioned The interests of the highway construction company Environmentalist groups Politicians Higher level view of economic development

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What do you think is the right decision in Ganga expressway case?

Ethics & morals

Morals A societys rules of conduct What people ought / ought not to do in various situations Ethics Rational examination of morality Evaluation of peoples behavior

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Sources of Morals
Fellow Workers Social norms

Regions of Country

Family

Profession

An Individual
Conscience Friends Employer

The Law

Religious Beliefs

Society at Large

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Developing Moral Judgment

Ethics & the Law

Law often represents an ethical minimum Ethics often represents a standard that exceeds the legal minimum
Frequent Overlap

Ethics

Law

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Ethics & Law

Both define proper and improper behavior Laws are societys attempt to formalize ethical standards Ethical concepts are more complex than laws
Often apply to areas not covered by laws Some businesses proactively address ethical areas not covered by law through voluntarily adopted practices

Managers who are trying to improve their companys ethical performance need to do more than comply with laws
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Ethical issues in India

Bribery Corruption

Black money
Coercion Insider trading

Tax evasion
Conflicts of interest Pollution & so on

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What is business ethics?

Business ethics is the application of ethical ideas to business behavior.
Based on the principle of integrity and fairness and concentrates on the benefits to the stakeholders, both internal and external.
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Ethics & Business Ethics: What Does It Really Mean?

Normative ethics
What is right Focus on determining right course of action

Business (applied) ethics

What should be done Focus on how ethical and socially responsible outcomes can be achieved in specific situations
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What is NOT business ethics?

1. Ethics is different from religion 2. Ethics is not synonymous with law 3. Ethical standards are different from cultural traits 4. Ethics is different from feelings

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Why Ethical Problems Occur in Business

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Importance of Business ethics (1)

Meet demands of business stakeholders Considering the environment, employee well-being, and the interests of society and the community. Enhance business performance Research shows linkage between ethically responsible behavior and favorable corporate financial performance Imparts trust, promoting positive alliances among business partners

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Importance of business ethics (2)

Comply with law and regulations Prevent or minimize harm 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

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Why is the BGS Field Important to Managers?

To succeed in meetings its objectives a business must be responsive to both its economic and its noneconomic environment. Recognizing that a company operates not only within markets but within a society is critical. A basic agreement or social contract exists between the business institution and society. Managers must respect and adhere to societys expectations. This contract defines the broad duties that business must perform to retain societys support, but these duties are often ambiguous.
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Session 3

The Study of Business, Government, and Society

The four basic models of the business-government-society relationship

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Four Models of the BGS Relationship: The Market Capitalism Model

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Four Models of the BGS Relationship: The Market Capitalism Model (continued)
The market capitalism model depicts business as operating within a market environment, responding primarily to powerful economic forces. The market acts as a buffer between business and nonmarket forces. History and nature of markets Capitalism- individuals & corporations own means of production, motive is profit Managerial capitalism- market dominated by large firms

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Four Models of the BGS Relationship: The Market Capitalism Model (continued)
Important assumptions of the market capitalism model: Government interference in economic life is slight (laissez-faire). Individuals can own private property and freely risk investments. Consumers are informed about products and prices and make rational decisions. Basic institutions such as banking and laws exist to ease commerce. There are many producers and consumers in competitive markets.
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Four Models of the BGS Relationship The Market Capitalism Model (continued)
Critiques of the Market Capitalism Model Increased prosperity comes at the cost of increased inequality Results in base values being energized and virtue being eroded The BGS relationship according to the Market Capitalism Model: Government regulation should be limited. Markets discipline private economic activity to promote social welfare. The proper measure of corporate performance is profit. The ethical duty of management is to promote the interests of shareholders.
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Four Models of the BGS Relationship: The Dominance Model

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Four Models of the BGS Relationship: The Dominance Model (continued)

Business and government dominate the great mass of people, which results in the enrichment of a few at the expense of many. Populist reform movement opposed the dominance model. Marxism emerged in Europe about the same time. Most accurate in the 1800s, but is being resurrected due to the fear of transnational corporations in a global context.
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Four Models of the BGS Relationship The Countervailing Forces Model

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Four Models of the BGS Relationship The Countervailing Forces Model (continued)
Countervailing forces model conclusions: Business is deeply integrated into an open society and must respond to many forces, both economic and noneconomic. Business is a major initiator of change in society through its interaction with government, its production and marketing activities, and its use of new technologies. Broad public support of business depends on its adjustment to multiple social, political, and economic forces. BGS relationships continuously evolve as changes take place in the main ideas, institutions, and processes of society.
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Four Models of the BGS Relationship The Stakeholder Model

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Four Models of the BGS Relationship The Stakeholder Model

Stakeholders are those whom the corporation benefits or burdens by its actions and those who benefit or burden the firm with their actions. Primary stakeholders Secondary stakeholders Debate about how to identify who or what is a stakeholder. Stakeholder model is an ethical theory of management in which the welfare of each stakeholder must be considered as an end.

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Four Models of the BGS Relationship The Stakeholder Model (continued)

Criticism of the stakeholder model: It is not a realistic assessment of the power relationships between the corporation and other entities. There is no single, clear, and objective measure to evaluate the combined ethical/economic performance of a firm. Advocacy for the stakeholder model: A corporation that embraces stakeholders performs better. It is the ethical way to manage because stakeholders have moral rights that grow from the way powerful corporations affect them.

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Approach to the area of BGS

Comprehensive scope Interdisciplinary approach with a management focus Use of theory, description, and case studies Global perspective Historical perspective

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