1. Managerial Ethics
Dr M Manjunath Shettigar

2. Types of ethics
• Deontological ethics
• Teleological ethics
• Egoism
• Utilitarianism
• Virtue ethics
• Relativism
• Justice theory
• Care ethics

3. Deontology (or Deontological Ethics)
• Deontology (or Deontological Ethics) is an approach to Ethics that
focuses on the rightness or wrongness of actions themselves, as
opposed to the rightness or wrongness of the consequences of those
actions (Consequentialism) or to the character and habits of the actor
(Virtue Ethics).
• Deon = duty. Logos = science
• Akin to the philosophy of karma – do your duty without thinking
about the rewards (consequences)
• Based on Kant’s concept of ‘Categorical Imperative’ (as distinguished
from ‘hypothetical imperative’)

4. Deontology (or Deontological Ethics)
The 10 Commandments List
• You shall have no other gods before Me.
• You shall not make idols.
• You shall not take the name of the LORD your God in vain.
• Remember the Sabbath day, to keep it holy.
• Honor your father and your mother.
• You shall not murder.
• You shall not commit adultery.
• You shall not steal.
• You shall not bear false witness against your neighbor.
• You shall not covet.

5. Deontology (or Deontological Ethics)
• Central argument of this theory is that there are certain principles which
are in the nature of absolute dictates that one must follow.
• They are what Kant calls – universal laws of action
• Such laws can be discovered through a process of reasoning or the criterion
of ‘universalizability’
• Eg. A world in which everyone steals cannot be practical.
• So ‘not stealing’ is a categorical imperative
• But consequentialism can be applied blindly in all situations !

6. Teleology
• Teleology (from the Greek telos, meaning goal or end) describes an
ethical perspective which contends that the rightness or wrongness of
actions is based solely on the goodness or badness of their
consequences.
• In a strict teleological interpretation, actions are morally neutral when
considered apart from their consequences.
• Ethical egoism and Utilitarianism are examples of teleological
theories.

7. Egoism (Psychological Egoism)
• EGOISM: Egoism is derived from the Latin word 'ego' meaning 'I'.
• The theory of egoism holds that the good is based on the pursuit of
self-interest.
• This model takes into account harms, benefits and rights for a
person’s own welfare.
• Under this model an action is morally correct if it increases benefits
for the individual in a way that does not intentionally hurt others, and
if these benefits are believed to counterbalance any unintentional
harms that follow or occur.

8. Utilitarianism
Utilitarianism prescribes that the moral worth of an action is solely
determined by its contribution to overall utility, that is, its contribution
to the happiness and satisfaction of the greatest member.
Utilitarianism can be described by the phrase, “the greatest good for
the greatest number.”
The utilitarian principle states, “an action is right from ethical point of
view if and only if the sum total of utilities produced by that act are
greater than the sum total of utilities produced by any other act that
can be performed at that point of time by any person”.
The utilitarian approach prescribes ethical standards for managers in
the areas of organisational goals, i.e., maximisation of profits; and
having efficiency which denotes optimum utilization of scarce resource.

9. Utilitarianism
Jeremy Bentham is considered the founder of traditional utilitarianism.
He propagates an objective basis for making value judgements that
would provide common acceptable norm for determining social policy
and social legislation.
J S Mill is another thinker who contributed to this ethical perspective
But consequentialism can be applied blindly in all situations !

10. Virtue ethics
• Virtue Ethics (or Virtue Theory) is an approach to Ethics that
emphasizes an individual's character as the key element of ethical
thinking, rather than rules about the acts themselves (Deontology) or
their consequences (Consequentialism).
• Virtue ethics is person (rather than action) based: it looks at
the virtue or moral character of the person carrying out an action,
rather than at ethical duties and rules, or the consequences of
particular actions.

11. Virtue theory
• Virtue theory is more concerned with answering the question of how to
live a good life or how to be a good person. In business context, it involves
specifying the ways and means of being a virtuous organization or how an
organization can be a good/ethical organization.
• Virtue theory aims to offer an account of the characteristics one must have
to be considered virtuous.
• Virtue theory of ethics is a very old concept existing since the time of
Aristotle (384BC), and there are a variety of theories that fall under the
category of virtue theory.
• According to Aristotle, “role of ethics is to enable us to lead a successful
and good life”. This, in Aristotle's view, is possible only for virtuous people.
In his words “virtue is a character trait that manifests itself in habitual
action”.
• We can define virtue as a trait of character, that is essential for leading a
successful life. Virtues should contribute to the idea of a good life. They are
not merely means to happiness but are constituents of it.

12. Virtues for Business Leaders
• Professional competence
• Trust
• Self-control
• Empathy
• Fairness
• Truthfulness
• Learning
• Gratitude
• Civility
• Moral leadership

13. Virtues for Business Organizations
• Transparency
• Fairness
• Social responsibility
• Compliance with government rules and regulations
• Concern for stakeholder wellbeing
• Ethical orientation

14. Character ethic for All of Us !
• We will respect others' right to live and work
• We will respect others' ways of living (including food habits), without being judgemental
• We will not resort to violence to sort out our differences. Instead, we will engage in debate
and discussion by democratic means
• For us humanity and its wellbeing counts more than anything else, including religion and
caste
• We will profess and practice the principle of gender equity
• We will strive to imbibe the spirit of scientific temper and rational thinking
• We will develop qualities of responsible citizenship
• We will respect the constitution and its democratic tenets
• We commit ourselves to build an inclusive society that works for all of us
• We will rise above all our differences, divisions and deviations, and will build a progressive
and prosperous commonwealth of India
Let’s celebrate our plurality and our oneness!

15. Relativism
It holds that there are no absolute truths in ethics and that what is
morally right or wrong varies from person to person or from society to
society.
• Theory of Relativism promotes the idea that some elements or
aspects of experience or culture are relative to (i.e., dependent on)
other elements or aspects.
• This perspective stresses on the importance of being non-
judgemental and accepting others and their actions as they are
• For example,
- killing animals for sport (like bull fighting) could be right in one
culture and wrong in another.
- Non-vegetarianism

16. Ethical Relativism
This ethical view is important in dealing issues concerning people of
different cultures and different countries.
As such it is of relevance in relation to interregional and international
business
However, when taken to extreme there can be problem
Albert Einstein – Relativity is for Physics; it does not apply in ethics

17. JUSTICE THEORY
• Justice approach is also known as ‘fairness’ approach. Greek
philosophers have contributed to the idea that all equals should be
treated equally. Justice does not depend on consequences; it depends
on the principle of equality.
• The key to a well-ordered society/ organization is the creation of
institutions that enable individuals with conflicting ends to interact in
mutually beneficial ways.
• The focus here is on justice/fairness/equity.
• Modern ‘Stakeholder Theory’ is based on this principle

18. JUSTICE THEORY
The contemporary American Philosopher John Rawl’s objection to
utilitarianism is that it does not give adequate attention to the way in
which utility is distributed among different individuals.
As an alternative to the utilitarian idea of society with highest welfare,
Rawls proposes a society that recognizes its members as free and equal
persons who attempt to advance their own interests and come into
conflict with others pursuing their self interests.
The key to a well-ordered society is the creation of institutions that
enable individuals with conflicting ends to interact in mutually
beneficial ways. The focus here is on social justice.
Rawls promotes “Play It Safe”. He argues that a rational person should
choose the alternative in which the worst possible outcome is still
better than the worst possible outcome of any other alternative.

19. Rawls Principles of Justice
(1) Each person is to have an equal right to the most extensive total
system of equal basic liberties compatible with a similar system of
liberty for all.
(2) Social and economic inequalities are to be arranged so that they are
both:
(a) to the greatest benefit of the least advantaged, consistent
with the just savings principle, and
(b) attached to offices and positions open to all under conditions
of fair equality of opportunity.

20. • Finally, under justice view of ethics, an individual imposes and
enforces rules fairly and impartially.
• For instance, a manager would be using the theory of justice
perspective by deciding to pay individuals who are similar in their
levels of skills, performance, or responsibility the same and not base
that decision on arbitrary differences such as gender, personality, or
personal favourites.
• The goal of this approach is to be equitable, fair, and impartial in
making decisions.
• 2 concepts of justice – Distributive & Retributive

21. Rights based Ethics
• Rights- based ethics
• Rights are claims/entitlements
• Rights may be legal, contractual or moral
• Positive / Negative

22. Ethics of Care (Feminist ethics)
• A version of Virtue Ethics
• Developed by feminists, such as Annette Baier, Virginia Held, Eva
Feder Kittay, Sara Ruddick, and Joan Tronto

23. Ethics of Care
• Ethics of care seeks to determine whether actions are right or wrong. Unlike
some philosophies that deny the existence of right and wrong, ethics of care
acknowledges their existence and seeks to determine the morality of these
decisions. There are three foundational beliefs in ethics of care:
1. We all depend on each other as individuals. We are interdependent and must
work cooperatively to achieve our interests.
2. Those that will be especially affected by my choice, and are therefore most
vulnerable to my decision, must be given extra consideration before I make my
decision. This extra consideration is evaluated in two specific areas:
a. How vulnerable is the individual to my choice?
b. What is the level that this individual will be affected specifically by my
choice and not by the choices of other people?
3. It is vital to understand the context that the decision will be made in so that the
actual interests of those affected are protected.

24. • Strengths: recognizes weaknesses in moral theories and the
importance of rectifying imbalances/inequities
Weaknesses: lack of agreement between theorists and framework

26. Some additional theoretical perspectives
• Stockholder theory
• Stakeholder theory
• Social contract theory

27. NORMATIVE THEORIES OF
BUSINESS ETHICS

28. Introduction
• Managers must assess initiatives from an ethical view.
• Most managers are not trained in ethics, philosophy,
and moral reasoning.
• Difficult to determine or discuss social norms.
• Three theories of business ethics are examined to
develop and apply to particular challenges that they
face (see Figure 1):
• Stockholder theory
• Stakeholder theory
• Social contract theory
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29. Stockholder Theory
• Stockholders advance capital to corporate managers
who act as agents in advancing their ends.
• Managers are bound to the interests of the
shareholders (maximize shareholder value).
• Manager’s duties:
• Bound to employ legal, non-fraudulent means.
• Must take long view of shareholder interest.
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30. • "There is one and only one social responsibility of business -- to use
its resources and engage in activities designed to increase its profits
so long as it stays within the rules of the game, which is to say,
engages in open and free competition without deception or fraud."
-Milton Friedman, New York Times Magazine, September 1970

31. Stakeholder Theory
• Managers are entrusted with a responsibility
(fiduciary or other) to all those who hold a stake in or
a claim on the firm.
• Stakeholders are –
• Any group that vitally affects the corp. survival and success.
• Any group whose interests the corp. vitally affects.
• Management must enact and follow policies that
balance the rights of all stakeholders without
impinging upon the rights of any one particular
stakeholder.
31

32. Social Contract Theory
• Consider the needs of a society with no corporations
or other complex business arrangements.
• What conditions would have to be met for the
members of a society to agree to allow a corporation
to be formed?
• Corporations are expected to create more value to
society than it consumes.
• Social contract:
• 1. Social welfare – corporations must produce greater
benefits than their associated costs.
• 2. Justice – corporations must pursue profits legally,
without fraud or deception, and avoid actions that harm
society.
32

33. Figure 1 Three normative theories of business ethics.
Theory Definition Metrics
Stockholder Maximize stockholder
wealth, in legal and non-
fraudulent manners.
Will this action maximize stockholder
value? Can goals be accomplished without
compromising company standards and
without breaking laws?
Stakeholder Maximize benefits to all
stakeholders while weighing
costs to competing interests.
Does the proposed action maximize
collective benefits to the company? Does
this action treat one of the corporate
stakeholders unfairly?
Social
contract
Create value for society in a
manner that is just and
nondiscriminatory.
Does this action create a “net” benefit for
society? Does the proposed action
discriminate against any group in particular,
and is its implementation socially just?
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34. Influences on Ethics
• Cultural factors influencing ethics & CSR
1. Individual and
2. Situational
1. Individual
• Age & gender
• National & cultural beliefs
• Education and employment
• Psychological factors
• Locus of control
• Personal integrity
• Moral imagination

35. Influences on Ethics
• Cultural factors influencing ethics & CSR
2. Situational
• Issue related factors
• Moral intensity
• Moral framing
• Context related factors
• System of reward
• Authority
• Bureaucracy
• Work roles
• Organizational field
• Organizational culture
• National and cultural context

36. Stages of Ethical
Consciousness in
Business
• Law of the jungle
• Anything for profit
• Profit maximizing in the short run
• Profit maximizing in the long run
• Stakeholder concept
• Corporate citizenship
Each stage represents a higher stage
of ethical consciousness

37. Global initiatives for popularising Business
ethics
• World Business Academy
• Business for Social Responsibility
• UN Global Compact

38. UN Global Compact
• The United Nations Global Compact is a United Nations initiative to
encourage businesses worldwide to adopt sustainable and socially
responsible policies, and to report on their implementation. The UN
Global Compact is a principle-based framework for businesses, stating ten
principles in the areas of human rights, labour, the environment and anti-
corruption.
• Under the Global Compact, companies are brought together with UN
agencies, labour groups and civil society.
• with 10000 corporate participants and other stakeholders from over 130
countries with two objectives:
• "Mainstream the ten principles in business activities around the world“, and
• "Catalyze actions in support of broader UN goals

39. UN Global Compact
• It is a call to companies to align strategies and operations with
universal principles on 1) Human rights, 2) Labour, 3) Environment
and 4) Anti-corruption, and take actions that advance societal goals.

40. UN Global Compact – 10 Principles
Human Rights
• Principle 1: Businesses should support and respect the protection of
internationally proclaimed human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses.
Labour
• Principle 3: Businesses should uphold the freedom of association and the
effective recognition of the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labour;
• Principle 5: the effective abolition of child labour; and
• Principle 6: the elimination of discrimination in respect of employment and
occupation.

41. UN Global Compact – 10 Principles
Environment
• Principle 7: Businesses should support a precautionary approach to
environmental challenges;
• Principle 8: undertake initiatives to promote greater environmental
responsibility; and
• Principle 9: encourage the development and diffusion of environmentally
friendly technologies.
Anti-Corruption
• Principle 10: Businesses should work against corruption in all its forms,
including extortion and bribery.

42. Nature of Business Ethics
• Business ethics is an applied branch of Ethics (also called Moral
Philosophy)
• Ethics deals with human conduct
• Ethics is a normative science
• Ethics is a set of systematic knowledge
• Ethics distinguish between right and wrong
• And, Business ethics is application of ethics in the context of business
• Analysis and description of ethical contexts in relation to business
• A set of normative ethical principles in relation to business decisions
• A code of ethical standards for businesses

43. Dimensions of business/corporate ethics
• It is about fairness to all stakeholders
• It is about transparency in the processes
• It is about raising the level of trust and confidence of stakeholders in
the way the company is run
• It is about understanding and discharging societal responsibility
• It is about long term thinking – sustainability
• It is about overcoming greed, insecurity, and lack of confidence
• It is about following the law of the land

44. Scope of Business Ethics
• Business ethics covers analysis of principles and
practice of ethical issues at 3 levels, viz.,
•Systemic
•Corporate/organizational
•Individual

45. Objectives of Business Ethics
• Global objectives:
• Developing normative principles/ theories
• Analysis and evaluation, development of ethical code and practices
• Provide therapeutic advice
• Practical objectives
• To create goodwill and enhance profits
• To bring loyalty of customers and workers
• To reconcile corporate interest with moral demands
• To earn healthy rewards in the long run
• To create an ethical working environment

46. Areas of Business Ethics
• Managerial mischief
• Moral maze
• There are two broad areas associated with the concept of
managerial ethics: 1) managerial mischief, and 2) moral mazes.
• "managerial mischief" includes "illegal, unethical, or
questionable practices of individual managers or organizations,
as well as the causes of such behaviors and remedies to eradicate
them“.
• "moral mazes of management" include the numerous ethical
problems that managers must deal with on a daily basis, such as
potential conflicts of interest, wrongful use of resources,
mismanagement of contracts and agreements, and misuse of
power and influence.

48. Importance of Business Ethics
1. Attention to ethics has substantially improved society
2. Ethics programmes help maintain a moral course in turbulent times
3. Ethics programmes cultivate strong teamwork and productivity
4. Ethics programmes support employee growth and meaning
5. Ethics programmes are an insurance policy – they help ensure that policies are
legal
6. Ethics programmes help avoid criminal acts and lower cost
7. Ethics programmes help manage values associated with quality management,
strategic planning and diversity management
8. Ethics programmes promote a strong public image
9. Adds to the morale and effectiveness of the organization
10. Last and the most important – formal attention to ethics in the workplace is the
right thing to do

49. Arguments for Business Ethics
• Creates rapport with the public
• Develop mutual faith between management and employees
• Better decision making
• Economic success and development
• Positive consequences

50. Arguments against Business Ethics
• Perfectly competitive markets ensure social benefits
• Manager’s obligation towards the company
• Ethics versus profitability
• Business ethics is merely restricted to obeying the laws

51. Causes of unethical behaviour
• 1. Focus on Profit maximization
• 2. Considering ethics only a voluntary responsibility
• 3. Deliberate mishandling
• 4. Insufficient scope for whistle blowers
• 5. Pressure from stakeholders
• 6. Corruption
• 7. Lack of social responsibility and integrity

52. Myths about Business Ethics

53. Myth 1: Business ethics is more a matter of
religion than management.
Altering people's values or souls isn't the aim of an
organizational ethics program -- managing values and
conflict among them is ...

54. Myth 2: Our employees are ethical so we
don't need attention to business ethics.
Most of the ethical dilemmas faced by managers in the workplace are highly complex.
People have a significant ethical conflict when there is presence of
• significant value conflicts among differing interests,
• real alternatives that are equality justifiable, and
• significant consequences on "stakeholders" in the situation.
When the topic of business ethics comes up, people are quick
to speak of the Golden Rule, honesty and courtesy. But when
presented with complex ethical dilemmas, most people realize
there's a wide "gray area" when trying to apply ethical
principles.

55. Myth 3: Business ethics is a discipline best led by philosophers,
academics and theologians.
Lack of involvement of leaders and
managers in business ethics literature and
discussions has led many to believe that
business ethics is a fad or movement,
having little to do with the day-to-day
realities of running an organization. They
believe business ethics is primarily a
complex philosophical debate or a religion.
However, business ethics is a management
discipline with a programmatic approach
that includes several practical tools. Ethics
management programs have practical
applications in other areas of management
areas, as well.

56. Myth 4: Business ethics is superfluous -- it
only asserts the obvious: "do good!"
Many people react that codes of ethics, or lists of ethical values to which the organization aspires,
are rather superfluous because they represent values to which everyone should naturally aspire.
The value of a codes of ethics to an organization is its priority and focus regarding certain ethical
values in that workplace.
• it’s obvious that all people should be honest.
• if an organization is struggling around continuing occasions of deceit in the workplace, a priority
on honesty is very timely -- and honesty should be listed in that organization’s code of ethics.
Note that a code of ethics is an organic
instrument that changes with the needs of
society and the organization.

57. Myth 5: Business ethics is a matter of the
good guys preaching to the bad guys.
Some writers do seem to claim a moral
high ground while lamenting the poor
condition of business and its leaders.
Those people well versed in managing
organizations realize that good people can
take bad actions, particularly when
stressed or confused. (Stress or confusion
are not excuses for unethical actions --
they are reasons.)
Managing ethics in the workplace includes
all of us working together to help each
other remain ethical and to work through
confusing and stressful ethical dilemmas.

58. Myth 6: Business ethics in the new
policeperson on the block.
• Many believe business ethics is a recent phenomenon because of increased
attention to the topic in popular and management literature.
• Business ethics was written about even 2,000 years ago -- at least since
Cicero wrote about the topic in his On Duties.
• Business ethics has gotten more
attention recently because of the
social responsibility movement that
started in the 1960s.

59. Myth 7: Ethics can't be managed.
Ethics is always "managed" -- but, too often, indirectly.
• For example, the behavior of the organization's founder or current leader is a strong
moral influence, or directive if you will, on behavior or employees in the workplace.
• Strategic priorities (profit maximization, expanding market share, cutting costs, etc.)
can be very strong influences on morality.
• Laws, regulations and rules directly influence behaviors to be more ethical, usually
in a manner that improves the general good and/or minimizes harm to the
community.
Some are still skeptical about business ethics, believing you can't
manage values in an organization. Management, after all, is a value
system. Skeptics might consider the tremendous influence of several
"codes of ethics," such as the "10 Commandments" in Christian
religions or the U.S. Constitution. Codes can be very powerful in
smaller "organizations" as well.

60. Myth 8: Business ethics and social
responsibility are the same thing.
The social responsibility movement is one aspect of the overall
discipline of business ethics.
The definition of business ethics includes:
1 • an application of ethics to the corporate community,
2
• a way to determine responsibility in business
dealings,
3
• the identification of important business and social
issues, and
4
• a critique of business. Items 3 and 4 are often matters
of social responsibility.

61. Myth 9: Our organization is not in trouble
with the law, so we're ethical.
One can often be unethical, yet operate within the limits of the law, e.g., withhold
information from superiors, fudge on budgets, constantly complain about others,
etc.
However, breaking the law often starts with unethical behavior that has gone
unnoticed.
The "boil the frog" phenomena is a useful parable
here: If you put a frog in hot water, it immediately
jumps out. If you put a frog in cool water and slowly
heat up the water, you can eventually boil the frog.
The frog doesn't seem to notice the adverse change in
its environment.

62. Myth 10: Managing ethics in the workplace
has little practical relevance.
Managing ethics in the workplace involves identifying
and prioritizing values to guide behaviors in the
organization, and establishing associated policies and
procedures to ensure those behaviors are conducted.
One might call this "values management.“
Values management is also highly important in other
management practices, e.g., managing diversity, Total
Quality Management and strategic planning.