Business and Ethics-Session: 6

Ethical Theories, Theory of Justice

and their relevance to Business

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1.Ethics and ethical used synonymously with
morals and morality.
2.Ethics derived from Greek word ethos and
morality from Latin word mores – both
connote habits or custom
3. Ethics is the branch of philosophy that is
concerned with what is morally good and bad
and right and wrong.

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Ethics should not be confused with
religion though religion is very often a
champion of ethics.
Morality is doing what is right no matter
what you are told. Religion is doing what
you are told no matter what is right.
Individual responsibility in ethics or
morality. In religion you can always hide
behind an authority.

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Two types of Ethics
Meta-ethics- analyzing the meaning
and nature of the moral element in
man’s action, thought and
language

Normative Ethics- what should be

done, prescribing criteria for
differentiating between what is right
and what is wrong 4
Types of Normative Ethics
---Virtue Ethics
--- Deontology
--- Consequentialism or teleology

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Virtue Ethics
• Goodness or righteousness is an attribute of
individual
• Ethical laws cannot be violated. Violation makes
one a sinner
• Compliance with ethics dictated by conscience.
Conscience is a personal sense of moral
goodness or blameworthiness in one’s conduct,
intention or character with regard to a feeling of
obligation to do right or be good.

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Limitations of Virtue Ethics
• Applicable to natural person. Are they
applicable to artificial or legal persons? The
myth of corporate veil. The responsibility of
Board, owners, management, employees.
• Does not define what is right or wrong
• Emphasis on personal attribute not on
consequences. Lying by the nuns for Van Trapp
Family in the movie Sound of Music.
• Who will enforce?

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Deontological Ethics
• Derived from Greek word deon which implies
obligation
• Ethics is based on rules prescribed as duty or
obligation (telling the truth to a murderer
irrespective of consequences)
• May be religious or Categorical imperative of
Immanuel Kant – the unconditional command of
our conscience to act as if the maxim of our
action were to become by our will a universal
law of nature”

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Limitations of Deontological Ethics

• Evil is Evil – no concession for evil that

results in good. Killing one person for
saving five lives.
• No trade-off. Bengali-Arabic dilemma. No
mechanism for compromise.More
Idealistic less practical
• No unanimity on definition

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Consequentialism or Teleological
Ethics
• Ends justify the means (accepted in
Islamic ethics)
• It is possible to chose from several options
on the basis of outcome
• The best course of action is the one that
produces the greatest happiness to
maximum number of people
• Consequences could be used as yardstick
for rightness

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Limitations of Consequentialism
• It creates a divide between intention and
action. Is intended bad acceptable if it
delivers unintended good?
• It is difficult to disentangle cause and
effect.

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Can business be built on normative
ethics?
• Business Ethics comprises the principles
and standards that guide behavior in the
world of business.
• Problems
• No single ethical theory is sufficient. All of
the provides useful guidance.
• It has to be less idealistic and more
practical.

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 Four important issues of ethics

• Why?
• Who?
• What?
• How?

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Three Theories on why
• Ethics as a means of good business
• Ethics as an end in itself
• Ethics as the marketable product

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Who
• Corporate
• Collective
• Personal

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Two approaches on how to define
What
• Holistic
• Incomplete

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Strengths and Weaknesses of
holistic approach
Holistic ethics has two important features:
a. Assumes the unity and integral
wholeness of all people and all nature.
Not confined to current generation but to
all future generation and not to particular
segments of nature
b. Impractical to formulate because so
much information not available,
c. Not enforceable.

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Amartya Sen’s argument for
incomplete justice
• The failure to define justice cannot be the
excuse for tolerating manifest injustice.
• Like obscenity, justice may remain
undefined, but you know when you see it.
• Incomplete morality may be subjective,
But it may be highly subjective

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Who
• Three ways
• A. Laws, rules and regulations
• B. Code of Conduct
• C. Voice of Conscience

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 Lessons from overview of
philosophy
• No philosophy of Ethics is complete. Each
of them contains certain elements.
Business ethics must be eclectic and
practical – not dogmatic.
• Human ethical behavior shall not be
perfect. Incompleteness cannot be the
justification for inaction. Through
recognizing incompleteness we can move
gradually to more completeness.

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 Lessons
• Must be flexible. Compromises will have to
be made consciously

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 Major Guiding principles
• 1. Honesty and fairness:
• A. obey laws, rules and regulations.
• B. should not knowingly harm any
stakeholder
• 2. Avoid Conflict of Interest. E.g. Conflict
of Interest in Arthur Anderson.
• 3. Fraud must be avoided. It is disastrous
in the long run.
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 Major Guiding Principles

C. Avoid all forms of discrimination in employment,

in provision of services
D. Respect the privacy of customers, employees
particularly with electronic data new.
E. Address manifest injustice and do not hide
behind law.
F. Recognize new Ethical issues. If an issue is
raised, discuss within the organization, ask other
individuals in the business and continue to have
dialogue with stakeholders

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 Major Guiding Principles
• G. Avoid the duality. As Russell said, “We
have in fact two kinds of morality side by
side. One which we preach but do not
practice and another which we practice but
seldom preach
• H. Do to others what you would do to
yourself. Conscience at individual level.

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Ethical Mechanisms in organizations

• .A. Corporate culture for ethical behavior

• Corporate or organization culture is a company’s
ethical climate. The ethical climate is a function
of corporate policies on ethics, top
management’s leadership on ethical issues, the
influence of coworkers and the opportunity for
unethical behavior.
• B. Code of Conduct in the Company. Ethical
standards of a company are embodied in code
of conduct.

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Code of Conduct as a double-
edged sword.
• Code of Conduct should be useful for
enforcing ethics. However, the experience
of USA shows that most of the companies
that experienced ethical or legal difficulties
• Have had formal ethics and programs.
Code of conduct creates complacency.
The main issue is compliance. Code of
Conduct must be built into corporate
culture

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Ethical Mechanisms
• C. Ethics office and Ombudsman
• Ethics officers are responsible for
managing their organizations’ ethics and
legal compliance programs. Ombudsman
reports directly to Board and can receive
complaints from outside

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Ethics Audit
• D. Ethics audit includes regular, complete and
documented measurement of compliance with
the company’s published policies and
procedures. A related concept is social auditing.
• Social auditing is the process of assessing and
reporting a business’s performance in fulfilling
the economic, legal, ethical and philanthropic
responsibilities expected of it by its stakeholders.

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Benefits of Ethics Audit
• Ethics audit helps management in
identifying its weaknesses and improves
compliance. It improves relationship with
stakeholders. However, it may also create
problems if immediate actions are not
taken by the company.

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• D. Industry-wide of code of conduct should
be encouraged e.g. Equator code of
conduct of Banks for enforcing
environmental standards.

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The Caux Round Table Business
Principle of Ethics
• The Caux Round Table in Switzerland in
collaboration with business leaders in
other European Countries, Japan and the
United States has created an international
ethics code. The main principles are as
follows:
• 1. The Responsibilities of Business:
Beyond Shareholder Towards
Stakeholders

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Business Principles
• 2. The Economic and Social Impact of
Business: Toward Innovation, Justice and
World Community
• 3. Business behavior: Beyond the letter of
law Toward a spirit f trust
• 4. Respect for rules
• 5. Support for multilateral trade
• 6. Respect for the Environment
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 Business Principles
• 7.Avoidance of illicit operations
• 8. Principle: Customers
• 9. Employees
• 10. owner/investor
• 11. Suppliers
• 12. Competitors
• 13. Communities

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Individual code of conduct
• Health Corporation of America Code of
Conduct

Vision and mission statement

Purpose of code of conduct- to carry out daily

activities within appropriate legal and ethical
standards

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• --Code for ethics for Senior Financial
officers and CEO
• ---Commitment to Stakeholders: patients,
colleagues, affiliated physicians, third
party payers, regulators, joint venture
partners and communities
• --- patient care and rights
• --- patient information

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• --- legal and regulatory compliance
• --- Coding and Billing for Services
• --- Cost Reports
• --- Emergency Treatment
• --- Surveys
• --- Accuracy, retention and disposal of
documents
• --- Information security and Confidentiality

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• ---Electronic media
• --- Financing reporting and records
• ---Conflict of interest
• ---Controlled Substances
• --- Copyrights
• ---Diversity and Equal Employment
Opportunity
• ---- Harassment and workplace violence

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• ---- Health ad Safety
• --- Hiring of Former and current
government and fiscal intermediary
employees
• ---Insider information and securities
trading
• --- Interaction with physicians
• ---- License and certification renewal
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• Personal use of HCA resources
• ---Relationship among HCA colleagues
• --- relationship with subcontractors and
suppliers
• --- Research, investigations clinical trials
• ----Ineligible persons
• ---- Substance abuse and mental acuity

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• Anti Trust
• Gathering Information about competitors
• Marketing and advertising
• Foreign Corrupt Practices Act
• Environmental Compliance
• Business courtesies: General
• Receiving Business courtesies

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• Extended Business courtesies to non-
referral sources
• Extending Business Courtesies to possible
referral sources
• Government Relations and Political
activities

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• The Company Ethics and Compliance
Program
• Program Structure
• Corporate Integrity Agreement
• Setting standards
• Training and communication
• Resources for Guidance and Reporting
Concerns
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• Personal obligation to Report
• Internal Investigations of Reports
• Corrective Action
• Discipline
• Measuring Program Effectiveness
• Acknowledgement Process

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Ethical Business
• Ethical business refer to those businesses which
are undertaken specifically to implement ethical
principles. The goal of such businesses are not
profit but to uphold ethical ideals. They are
different from non-profit organizations. Non-profit
organizations may invest in unethical business
(Nobel peace prize is financed by dynamite and
arms sale).
• Examples of ethical business
• Islamic bank
• Micro credit

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Ethics of Islamic Bank

• Interest is banned. It must perform banking

functions without interest. The unambiguous
commitment to Islamic principles attract lot of
cheap deposit.
• Are banks Islamic? Can artificial persons be
treated at same level as natural persons.
• The main plank in Islamic banking is profit-loss
sharing. Globally, PLS is less than 5 per cent. In
Bangladesh, it is about 1.38%. The rest are
variants of mark-up. The Jewish experience of
sabbatical.
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Ethics of Islamic bank

• Basically urban banks. Less than !% credit

given to agriculture.
• They can be run by homo Islamicus or
Islamic persons. About half of the Islamic
banks are in distress.

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Ethics and micro credit

• All micro credit organizations are not ethical.

They can be ethical or normal business.
• Micro credit organizations may be for profit or
non profit. All for profit organizations are not
ethical.
• All non-profit organizations are not ethical. Their
ends may be ethical but means are not ethical.
To be ethical both ends and means should be
ethical.

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Main issues
• Normative ethics- three schools virtue ethics, deontology
and consequentialism not enough for business ethics
• The Components of Business Ethics
• Why? Means and end
• Who? Corporate, collective and individual
• What? (i) incomplete (ii) manifest injustice
• (iii) some guidelines: honesty, transparency, avoid
conflict of interest, fraud, harming stakeholders,
discrimination,, respect privacy and rights of all
stakeholders, compliance of laws, remove manifest
injustices

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Main Issues
• How
• Corporate culture
• Code of Conduct
• Ethics office and Ombudsman
• Ethics audit
• Ethical Business

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