KASH Ethical Issues in Management

Learning
Diary
Session Topic of the Learning Diary Components
Number Session
Knowledge Attitude Skill and Habit
1 >> Morals are notions of right and wrong. Morals are relative
and vary according to different individuals.
>> Ethics are morals in action. They are not
about individuals, they are not about law. Ethics are influenced
by factors like religious beliefs, family background, media
influence , education to name a few.
>> TCS and Wipro have been known Businesses are done to
to uphold high ethical standards. fulfill the needs of
Introduction to >> Levels of decision making: society therefore
Ethics individual, organization, and business system. managers must follow
>> The Social Network (movie) ethical practices.
- In business do not trust people, keep a record of agreement
with the other party.

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2 The Changing >> Ethical failures are business failures.

business >> Ethical management is about doing the right thing as
environment: managers. Management of ethics consists of policies ,
Making the case guidelines, frameworks relating to ethics.
for business ethics >> Business environment can be external or
internal based on two factors:
1) Economic: the profit that a business
seeks 2) Formal
setup: formal relations with the clients.
>>Ethical issues can arise in any of these
business environments.
>> Various dimensions of ethics are: intimidating
behaviour, lying, bribery, discrimination, fraud. Doing the ethically right
>> Role of Manager by Henry Mintzberg thing as managers.
(1990)- informational, decisional, and interpersonal roles
>> Role of
managers as economic actors, company leaders and community
leaders. >>Entreprenuers
bring change by constantly innnovating. They start new
ventures and hence ethics are essential to lay down a strong
foundation for them.

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3 Ethical Decision >> In a capitalist economy, what to produce, how much to

Making- The produce and how to produce is decided by the market.
market system >> Market system
breaches and is characterized by voluntary exchange, satisfaction of buyers
frauds, roles, and sellers, rights transferred after transaction, advantages to
relationships, and the parties involved in transaction, and both parties want what
firms the other has.
>> Markets want low involvement of government.
>> Consumer has variety of choices because of competing
producers. Consumers cannot be forced to buy a product.
>> Perfect markets do
not exist. In markets there are frauds, breach of contracts,
wrongful harms and market failures. As managers our actions
>> Breach of contract is when should compensate any
contract is implicit , incomplete or there are no remedies harm done. Ex: If our
specified in case of breach. It may be intentional or company pollutes the
unintentional. environment, we should
>> Frauds happen when there is misrepresentation of plant trees to compensate
facts, intention to deceive and harm to a person. for it.
>> Wrongful harms include failure to fulfill duty and
negligence.
>> Reasons for market failures are: monopolies, negative
externality, positive externality, collective choice, public goods,
merit goods, and de-merit goods. >>
Agency relationship. The principal does not have enough
information about the service or good , the agent is an expert
and knows about the good or service.

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4 >>Psychological and philosophical approaches to ethical

reasoning
>>One philosophical account engages in moral point of view.
It involves willingness to seek out and act on reasons. It
requires us to be impartial. We must consider interests of others
as well as ours.
>>An individual's previous decisions set precedent for
future decisions. One must consistently apply ethical
Ethical Decision principles. Psychological accouts show that our decisions are
After reading the KPMG
Making- based far less on reasoning and more on intuition.
case, I felt one must
Philosophical and >>Psychologist Kahneman attributed Consider your own
fulfill his/ her
Psychological right conduct to sub-conscious intuitive reactions. Kohlberg interests also while
professional duty and be
accounts and proposed that people develop the cognitive ability through ethical reasoning.
honest in all business
framework for series of stages that take place from infancy to adulthood.
transactions.
reasoning >>Pyschologists identified context and
rationalization as counter to reasoning.
>>We can formulate a few ethical
principles for reasoning - integrity, fairness, duty, dignity,
rights, welfare, honesty.

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>>Teleological ethics talk about the consequences of an action.

Actions are ethical if they produce good consequences.
Example is utilitarianism.
>>Deontological ethics focus on the nature of the
action. >>Utilitarianism talks about pleasure and the absence of
pain. It takes everyone into account.
>>Act-Utilitarianism produces greatest balance of pleasure.
Rule -Utilitarianism is about rules generally accepted which
Ethical theories
would produce greatest balance of pleasure over pain for
Utilitarianism,
everyone. >>Cost
Kantian Ethics,
benefit analysis is difficult in life. Measuring utility for
Virtue Ethics
someone is impossible. Cost benefit analysis also requires
attaching value to human life.
>>Kantian Ethics talk about two implications for moral
reasoning. First, the natural temptation of an ours to make an
exception for ourself. Second, the universalizability principle,
"What if everyone did that?"
>>Virtue Ethics talks about the moral character of a person
rather than the right action

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6 >>Rights: These are entitlements and we do not need anybody

else's permission to practice them.
>>Various kinds of rights- legal and moral rights, specific
and general rights, negative and positive rights, and natural
rights.
>>Justice is fairness. It is also righting of wrongs. Justice
can be compensatory, distributive, and retributive.
>>Gandhian Concept of Trusteeship: Everybody
should have enough for his or her needs.
>>Framework for
ethical reasoning. 1. Am I Common moral duties we
Ethical Decision confotable with the consequences of the action? Answer to this are expected to uphold:
Making Contexts: question doesn't take into account the rights and duties of all Property Principle,
Personal & the stakeholders. 2. Reliability, Transparency,
Professional A Am I meeting my duties and respecting others' rights? Fiduciary, Dignity,
decision making Different communities follow different norms. Answering this Fairness, Citizenship,
process for ethics question doesn't consider the feelings of the communities. Responsiveness
3. Am I Principle.
respecting the community and its norms? My decision might be
in accordance with the community norms but it may conflict
with my commitments and my company's commitments.
4. Am I meeting my
commitments and my company's commitments? Am I leaving
behind a legacy.

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7 Ethical Decision Most of the managers want to run organizations ethically, yet As managers we should
Making Contexts: there exists corporate corruption. Employees break and bend stop unethical practices at
Personal &
Professional rules sometimes unknowingly or are blind to unethical the very beginning.
bhevaiour.
>> Ill conceived goals- Organizations set incentives to
encourage productvity , this may backfire and the employees
resort to unfair means to achieve the targets. >> Many a
times, people overlook unethical behviour when their interest is
the focus. >> When
unethical behaviour is carried out through third party, the
people do not question this and feel it is less unethical.
>> Firms may
commit unethical action once but gradually they will develop a
tendency to carry out unethical actions. >> If the outcomes of
unethical behiour are good , people may ignore the unethical
actions. in such cases, the actions should be evaluated.
>> Managers should be aware
of the biases that can lead to unethical behaviour.

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8 The relevance of There are companies whose success is built on responsible

ethics in doing business practices.
business
>>Dutch firm, Royal DSM supplies nutritional supplemnets,
pharmaceutical ingredients and enegery efficient building
materials. Their CSR activities have nothing to do with their
core business of offering petrochemicals, base chemicals and
materials, and plastics.

>>Southwest airlines have been successful for 38yrs

consecutively. They focus on keeping their employees happy
with initiatives like "Delight and Surprise".
>>Broad group is a
manufacturer of AC systems and air purifiers. Based in China,
the company's products were developed partly as response to
social and environmental crises.
>>Potash corporation is known for its
disclosure of compensation to employees.
>>Unilever buys palm oil from certified users only,
this is also true for the top 10 raw materials consumed by the
company. Unilever believes in sustainability of the resources.

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9 Relevance of Personal Values and Professional responsibilities In

developing an the ideal world a manager would be a person who will follow
ethical culture in
the context of his/her personal values as well as commit to the organizations
Business values. In the real world, the managers are unable to practice
their personal values. Situations arise that demand the
managers to go against their personal values. Some factors that
hamper practicing personal values in workplace are: Sustaining
Commitments, Self interests, right vs right conflicts, right vs
wrong situations.
Sometimes pressure comes from superior to commit unethical
actions. In such cases, there are three options available to a
person. Exit, loyalty ,and voice.
>> Exit: Exit means simply quitting the organization. This
step may seem easy for the employee but then this makes the
job of organizations easy. They can replace him/her and hire
people to get the work done.
>> The employees have choice of continuing in the
organization and not do anything about the bad being done.
>> Voice is about voicing what the employee
feels is wrong. This action doesnt gaurantee that the
organization will correct itself. So, if things turn out to be bad,
the employees are left with the option of exit or loyalty.

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10 International When the Crowd Fights Corruption

Business Ethics >>RosPil's founder, Alexey Navalny has set up a
crowdsource. RosPil is run by employees who search for
promising leads and pursue them. They take these leads to the
court. RosPil's half of the work is done voluntarily by people
who want to fight corruption.
>> In India, IPaidABribe.com is a banglore
based not for profit set up. Users can go the website and
anonymously post incidents where they are asked for a bribe or
where they expected a bribe but were not asked.
>> As in case of RosPil in Russia, the business
leaders are cautious about their opposition towards the
corruption when the government is involved.
>> Business leaders must consider
several factors. One is political. The repurcussions of
displeasing the state can lead to severe actions being imposed
on them. Employees are dependent on them and they have an
obligation towards their family. >> Second factor is
cultural context. In India, alarming the authorities might not
lead to severe consequences but in Russia it will. Indians like
companies that come out vocal about corruption.
>> Corruption has a social
cost. It erodes a firm's competitiveness. The employees and
consumers lose trust towards the company. It questions the
legitimacy of capitalism.

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