Business ethics and value centered management

Jayashree Sadri and Sorab Sadri

BUSINESS ETHICS AND

VALUE CENTERED MANAGEMENT

Professor Jayashree Sadri

and

Dr Sorab Sadri


THE BACKDROP

Research Findings: International

A study conducted by the Sloan School of Management (USA) confirmed the fact that only those companies will remain as effective players in the global market which have placed a great importance and which practice Value Based Management

Such a powerful statement needs to be examined in detail to understand what it implies for Indian Industry and business.


VALUES AND ETHICS DEFINED VALUES: They are a set of beliefs held by a person or a group of

persons or an organization and which the organization or group stands for, is known by, and form the basis of its subsequent actions.

ETHICS Ethics are a pattern of moral behavior of a person, a group

of persons or an organization which are in consonance with some assumed, explicit, stated or unstated beliefs.


ETYMOLOGICAL ROOTS

Ethics comes from the Greek word ethos. Morality comes from the Latin word mores. Both signify “from a culture”.

Hence culture specificity is germane to the understanding of what is ethical and what is not.


Stock Market Crash 1987

THE THREE PRIMARY REASONS OF THE STOCK MARKET CRASH WERE IDENTIFIED AS:

Ham handed economic policies on the technical side. Poor communication between the banks (lenders) and the

industries (borrowers) both of whom were speculating without adequate reserves.

Low level of business ethics in the financial sector which created disharmony and lack of trust between the various markets: Sydney, London, New York, Frankfurt, Hong Kong etc.


THEREFORE

A SERIOUS STUDY OF ETHICS IS CRUCIAL FOR UNDERSTANDING BUSINESS AND

INDUSTRY


IMPLICATIONS OF ETHICS FOR BUSINESS

Business Ethics promotes and encourages the following at all levels.

DEPENDABILITY

TRUST RELATIONSHIPS

QUALITY ASSURANCE

CONSISTENCY

MARKETABILITY


IMPLICATION LEVELS OF THE FIVE TRAITS

At the level of the PERSON

At the level of the PROCESS

At the level of the PRODUCT

Business Ethics must thus be seen as operating at all three levels.


HOW DOES THE BUSINESS OR INDUSTRY BENEFIT FROM THIS?

It enables the company to gain a competitive edge in the market place by

converting the customer into a client and also by creating a brand image that reflects excellence and promotes

sustainability.


BUSINESS ETHICS DEFINED

Ethics is a branch of moral philosophy which prescribes a code of conduct, which, in turn, acts as a guide to action

When this code or behavioral norm relates to how industries must function and how businesses must be run it is called Business Ethics.


MANAGERIAL ETHICS DEFINED

Management is that part of an organization which is charged with the responsibility of meeting the goals of the organization.

Management is a dedicated team of persons who are concerned with decision making and decision executing.

In the process of decision making and decision executing the manager often encounters a dilemma which has an ethical connotation.

The study and science of how the managers act or should act in the face of an ethical dilemma is known as Managerial Ethics.


PHILOSOPHICAL CANVAS OF ETHICS

All truth is relative and the only absolute truth is the larger immensity (nature, God etc.) that engulfs us.

This immensity is too much for our mind to comprehend.

So we function within the ambit of our bounded rationality (limited knowledge and comprehension).


SPECIFICITY OF ETHICS Man is a microcosm of a larger reality and acts

according to his own innate logic.

Ethics is therefore:

person specific

context specific

culture specific

Ethical Modes of Conduct are Three Folds.


BEHAVIORAL MODES IN THE FACE OF AN ETHICAL DILEMMA

Consequential Mode (Teleological)

Non Consequential Mode (Deontological)

Acceptance Mode (Praxis)


CONSEQUENTIAL MODE(Teleological )

The manager gets into such a mode when he asks himself the question:

What is in it for me?

Will it benefit to all or most?


NON CONSEQUENTIAL MODE(Deontological)

The manager gets himself into such a mode when he acts on the basis of:

Some actions are right or wrong irrespective of the consequences or the personalities involved

When a moral issue is at stake, the minority opinion is enough to carry the day or make a difference.


ACCEPTANCE MODE(Praxis)

The manager gets himself into such a mode when his decision making is conditioned by an affirmative answer to:

Can the decision be discussed openly and freely within reasonable limits and within reasonable open circles?

Will the decision be in line with what others think and will it meet the peer ground?


RESEARCH FINDINGS & IMPLICATIONS

82% of the top managers studied and interviewed by the authors in India operated in the Acceptance mode when confronted with an ethical dilemma.

Implication: The top level manager was not always a leader who stood for values and blazed a trail for others to follow. Rather he was someone who wanted to play safe, hurt nobody in power, ruffle no feathers and thereby continue to enjoy his position of authority.


History demonstrates and research supports the fact that :

Mangers operating in the Consequential Mode are usually opportunists and carpetbaggers. Very often they do well in life since they take calculated risks.


Contd..

Managers operating in the acceptance Mode are usually insecure, seek peer approval and promote mediocrity. Very often they live behind a façade and become “yes men”.

The more insecure and unscrupulous ones play organizational politics and form a the guile and deceit brigade.


Contd…

Managers operating in the Non Consequential Mode are the trailblazers, history makers and true leaders. Most often they are the ones who make the difference. They are easily misunderstood and often targeted both by the mediocrity and those who rise high through bending rules, sucking up, compromising dignity and playing their political cards well.


WHY DO SENIOR LEVEL MANAGERS WHO ARE FINANCIALLY SECURE, ACT UNETHICALLY

Five possible reasons revealed by research conducted between 1994 and 1997 in the UK.

Unclear or weak individual and internalized values. Solely Bottom line driven concern Belief that anything is right so long as others believe it to

be right. Inherently exploitative nature for meeting personal goals

and ambitions. Feeling of insecurity


WHY DO SENIOR LEVEL MANAGERS WHO ARE FINANCIALLY SECURE, ACT UNETHICALLY

Similar research in USA showed organizations tend to reward behavior that violate ethical norms.

However most societies value ethics and imbibe mortality in its citizen


FINDINGS OF STUDY IN INDIA

To our surprise the findings in India matched those in both UK as well as in USA. There was one more major combination of factors.

The standing army of unemployed professionals, unscrupulous employers and no state social security system usually made

people unable to take a principled stand.


REASONS FOR CONFLICT

SOCIETAL NORMS

Be open and honest

Follow the rules at all costs

Take the responsibility

Be a team leader

ORGANISATIONAL COUNTER-NORMS

Be secretive and deceitful

Get the job done anyhow

Pass the buck

Take credit and move up


ETHICAL CODES AND ETHICS AUDIT

CODE OF ETHICS:

It is a set of documents describing what an organization stands for and the general rules of conduct expected from all employees irrespective of rank


Code of Ethics…

Code of ethics evolves from business ethics. It helps in identifying the business aims, directions and values.

An ethics code describes the general value system or ethical rules that are supposed to guide employees in their everyday behavior in the organization.


Precautions in Evolving a Code

The codes would have a positive impact if they satisfy the following criteria:

a) They are distributed to every employeeb) They are firmly supported by the top management.c) They refer to specific practices and ethical

dilemmas likely to be encountered by target employees

d) They are evenly enforced with rewards for compliance and strict penalties for noncompliance.


Ethics Audit An Ethics Audit is a practice of regular

assessment of employee behavior so as to identify incidents of dubious (questionable) behavior. Here two systems can operate: either there is an Ethics Manager to whom anyone can complain about anyone or where everyone is his brothers’ keeper and is duty bound to complain, correct, guide anyone who may be seen as falling out of line with corporate norms of conduct.


A FINAL QUESTION TO THE LEARNED READERSHIP

Is it just good business sense for managements to be ethical ?

OR

Is it good for managements to be ethical and also be seen to be acting ethically anyway?


Your answer may reflect where you stand ideologically.

THANK YOU