GTU, S.K. Mandal by prof. Shirufi , Parul Insitute

1. Concepts and
Theories of Business
Ethics
Prof. Shirufi Purohit
SHIRUFI PUROHIT
Ethics in Business and Corporate
Governance
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Introduction
SHIRUFI PUROHIT
Ethics in Business and Corporate
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Definition of Ethics
Business cannot aim only at making money for a
few individuals, it must lead to social well-being,
national economic growth, and fair distribution of
benefits to all stakeholders.
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Ethics in Business and Corporate
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
Ethics as a moral and normative science refers
to principles that define human behaviour as
right, good and proper.


1
“Morality”, according to philosophers, refers to
human conduct and values
2
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This foundation will affect

In supporting and revealing goodness or
badness of actions, respectively, one has to
examine the case deeper to understand few
more dimensions of ethics, namely utility, rights,
duties, justice, fairness and care.
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Ethics in Business and Corporate
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Employees
Customer
 Dealers
 Suppliers
 Government
 Local body or even with the people affected by
the business.


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2. Supporting Example- Fair

Supporting Example- duty.
If a company does not pay fair wages to
employees, the employees feel that they are
being discriminate or exploited.
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If the senior executives get disproportionately
higher and unjustifiable remuneration than the
others in the company, then general employees
feel differentiated and differentiated and
deprived.
 If a company fails to adequately compensate an
accident victim the employees feel it not doing
its duty.

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Supporting Example-right to
defend

7
Supporting Example-care
If an employees service is terminated without
allowing him to defend his action, he feels that
his right to defend has been denied.
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Ethics in Business and Corporate
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Ethics in Business and Corporate
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
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If a sincere worker, who has served the
company for many years is not offered help
during his long illness, he may feel uncared for
that.
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INTRODUCTION TO ETHICAL
PRINCIPLES
Utility
Rights
 Duties
 Justice
 Fairness
 Care
These aspects form the foundation of ethical
principles, which are universally applicable.
 These dealings can be with the employees,
customers, dealers, suppliers, the government, a
local body or even with the people affected by
the business.



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Ethics in Business and Corporate
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Ethics in Business and Corporate
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3. Moral Theories
The Utilitarian Theory
The Utilitarian Theory
The Theory of Rights and Duties
 Theory of Justice
 The Ethics of Care





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SHIRUFI13
PUROHIT
Ethics in Business and Corporate
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Example

The utilitarian theory is broadly based on the view that
any action or policy should be evaluated on the basis of
benefits and costs it will impose on the society.
The basic approach of this theory is that plans,
programmes and actions of any organisation should be
chosen to produce the greatest net benefits for the
largest number of people associated with the business –
which includes the society.
To determine net benefits, all the costs and benefits (or
damages) – be it financial or otherwise – should be
taken into account.
Effect of Industralization
Setting up a green field industry at he cost of the
environment may be justified by choosing and
considering the return on investment, along with
the employment generation and wealth creation,
t if one considers the dreadful effect of global
warming due to such damage to and depletion
of the environment then the net benefit may not
justify the action
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Destruction of forest
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Destruction of forest
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4. Destruction of forest
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Destruction of forest
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Global Warming
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Earthquake
Earthquake
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5. Floods due to heavy rain
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Icing of Niagara fall
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Melting of polar ice
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Heavy rain fall Kedar Nath
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Kedar and Haridwar
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Cyclone in east India
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6. Unseasonal rain in Gujarat
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Grain Rots due to flood
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The Theory of Rights and
Duties




If an employee has the moral right to be
rewarded ( financially or otherwise)for an
invention of his, one that has led to patents and
benefits for the companies business. But if the
company denies him any benefit on the grounds
that the inventor was only performing his duty,
then it would be unjust and unfair.
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Opposite example

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The Theory of Justice
In media industry whenever you join you are
being informed that whatever your will produce
or write. Company would own it and not the
individual. And company would be benefited and
not the individual and nor individual can claim it.
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example
The theory of rights and duties holds that all people
have some basic rights, concerned with the power of an
individual to choose, pursue and protect his or her
interests, and all such rights are associated with
correlated duties.
When these rights arise from legal provision or social
convention, they become moral rights.
If a company prohibits or denies such rights to its
employees, it may be said to be unfair to its employees
and its action would not be adjudged moral.
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Ethics in Business and
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Ethics in Business and Corporate
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The theory of justice revolves around the
fundamental principles to guarantee a just and
morally acceptable decision.
 It implies that the actions are guided by fairness,
equity and impartiality.

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7. The Ethics of Care
Utilitarianism- Ethics of Welfare
The ethics of care refers to necessity of
showing extra care and consideration to protect
someone else from the adverse effect of one’s
choice that can make someone vulnerable in a
particular situation.
 Ethics of care necessitates examining contextual
details of the situation in order to safeguard and
promote specific interests of those involved
because
they
are
interdependent
for
accomplishing their specific interests – as long
as the interests are moral and legal.

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The proponents were:
Jeremy Benthan (1748-1832)
John Stuart Mill (1806-1873)


In this form of consequentialism, the desired end is not long-term
self-interest of the individual but, it is greatest happiness to the
greatest number. Any action that brings greatest happiness to the
greatest number of people is a desirable action and should be
performed.
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Example study page 66


Utility or benefit of an action to the society.
Basically, the utilitarian approach advocates that
if an action produces greater benefits to the
maximum number of people , the action or
decision should be considered morally right/
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In view of utility theory of action that help in judging
its morality and rightness from the ethical
standpoint.
1.
2.
3.
to find the alternatives available to the given
situation.
to estimate direct and indirect benefits and
costs to deal or action for each alternative and
examine how benefits affects each person at
short term as well as long term tenure.
To choose a particular alternative which
produces the greatest benefits and utility to the
maximum number of people (affected by the
action), and is also morally and ethically
appropriate as per the rules of moral reasoning.
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1. to find the alternatives
available to the given situation.
1. enforcing the law
Shifting industry to a non agricultural / barren
area of that district or state.
 Compensate the persons concerned with
immediate and long term benefits that outweigh
the cost of losing their land, as well as to
consider the side-effects that may precipitate
due to consequent industrialization.


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8. 2. to estimate direct and indirect
benefits
Supporting example
1. livelihood cost to all affected person and
family members
 2. escalation of living cost for the future
 3. cost of acquisition.
Fund allocation in a government budget
Here infrastructure, highways, ports are allocated
higher funds compared to other areas based on
utilitarian principles.

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Supporting example


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Utilitarianism (Conti..)
A person may be unwilling to donate to a street
beggar but same person may donate money in a
NGO thinking it would benefit a larger part of
society.
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Production incentives bonus to workers for
improving productivity in a machine shop. If the
cut off level to qualify for bonus is too high that is
if most workers are unable to reach through
sinere efforts also then its negative utility.
44
For example

43
Supporting example
Formulating company policies for reward and
punishment, incentives, common services(
facilities), social and environment policy etc are
done for benefit for all.
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Utilitarian
principle: an action is
ethically right only if the sum total
of utilities produced by that act is
greater than the sum total of
utilities produced by any other act
the agent could have been
performed in its place.
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9. Utilitarianism (Conti..)
Utilitarianism (Conti..)

A decision is ethical if it provides a greater utility
than any other alternative decision
While
assessing
the
usefulness
of
utilitarianism
in
the
organizational context , it should be understood that;
Utilitarian decision-making relies on tools such
as cost-benefit analysis and risk assessment
to determine the greatest utility.
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It promotes welfare of all
2.

1.
It provides a means of resolving self interest with the action of
common good.
3.
making
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Limitations of Utilitarianism
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Rule-Utilitarian Approach

The Utilitarian approach is difficult to apply
when dealing with values that are difficult to
measure (or estimate) in order to determine the
maximum benefits to all affected persons.

This approach seems inadequate while
handling situations that involve rights and
justice.
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It provides a flexible, result oriented approach to ethical decision
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Rule-utilitarian
prescribes that an
action should be judged in both
contexts – ‘maximizing utility’
and ‘correct moral rules’ – and
not in isolation of each other.
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Supporting example

Employment of a child labour as domestic help
may bring more utility and benefit to both the
household and the parent of the child, but it
cannot be morally justified in modern civilized
society.
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Correct moral rules cannot support any activity
that create or aggravate the sufferings of large
number of people, which cannot be
compensated by financial benefits alone.
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10. Example

Narmada dam
Public movement against the
dam on the Narmada river
displacing a large number
villagers, can be justified
utilitarianism angle.
construction of a
and in doing so
of villages and
from the rule
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Narmada dam
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Narmada dam
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Supporting example


The sprit of either utilitarian or rule utilitarian
theory is to prevent injustice and violation of
rights taking place in the guise of ‘ maximum
benefits to all’



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Industries in mining, electroplating, lather processing are
hazardous to health, they provide a special concessionmilk allowance or hazard allowance to each employee
engaged in such jobs.
But is it moral and ethical to expose the workers to the
toxic fumes and chemicals that may cause permanent
damage to their health?
Yet the rule of moral correctness dies not support the
action as being right.
Hence, rule modifies the correctness of decisions over
utilitarianism.
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11. Common good approach in
ethics

Common good approach in
ethics
The society is divided into underprivileged,
minority, backward class and weaker section,
making difficult to identify direction in which the
principle of common good should work to create
a better society.
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Supporting example




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Example
Protection of environment
Free primary education
Primary healthcare
Schemes and actions for poverty elimination
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Refers to basic rights of individuals in the
society, and fulfillment of some basic
requirements of individuals in the society,
namely food, water, shelter, environment, health,
and dignity that enables the society to better the
quality of life and living.

If a company wants to spend some money for
development of locality. Local people gives
many option like primary education, drinking
water, building roads and infrastructure. Than
company has to take decision which benefits to
maximum number of people and which is for
common good.
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Supporting example
Rights
 Monitoring
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Rights are of two types, legal and moral.
the mobile technology
services and emails in the terrorist
infested areas of the country. It
curtails the freedom of privacy.
 But
considering the grave of
terrorism,
the
common
good
approach will justify.
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Legal Rights are conveyed to a person by the
statue of law or the constitution of the nation.
 Legal rights are limited by the jurisdiction within
which a person or a business operates.

Moral Rights devolve from social norms and
moral standards, and are independent of any
legal system.
 Moral rights are also called human rights.

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12. Distinct features of Moral Rights
Legal vs Moral

Moral rights are closely interlinked with duties.
Moral rights are equally and equitably applied
between the concerned parties.
 Moral rights may be used to justify one’s action
or for invoking the protection or help of others.
Legal right


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Moral Right
Indian can cast his or her
vote only in the place he
or she lives or works that
is voting is jurisdiction
specific.
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
A air passenger who was
stuck at the emigration
clearance department of
a foreign country has
right to be treated
humanly with dignity and
to be provided with food
and shelter till the
investigation was
complete.
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Duties
Supporting example
Duty is either contractual obligation or mutually
understood obligation.
 However, obligations for duty cannot force an
employee to do any immoral or unethical job.
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

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ETHICAL RULES FOR CONTRACTS
AND CONTRACTUAL OBLIGATIONS
Both parties in a contract must have clear
understanding and full knowledge of the
nature of the agreement they are entering into;
 Neither party to the contract shall intentionally
misrepresent the facts of the contractual
situation to the other party;
 Neither party to the contract must be forced to
enter the contract under duress or coercion or
deceit; and
 The contract must not bind the parties to any
immoral or illegal act. Eg karan

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A person seeking medical treatment, has the
moral right to go o a doctor and it is moral duty
of the attending doctor to consider the patients
problem and offer treatment.
 Here it is the mutually understood obligation of
rights and duties that brings them together.
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Kantianism- Ethics of Duty

Proponent: Immanuel Kant (1724-1804)

This theory introduces an important humanistic dimension to
business decisions, which is to behave in the same way that one
would wish to be treated under the same circumstances

Two formulations of Kant are as follows:
1.
Respect-for-persons principle states persons should never be used as a
means to an end. Kant gives more importance to individuals.
2.
To always treat other people with dignity and respect.
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13. Kant’s principle
Kant’s principle
An action is morally right for a person in a certain situation if his or
2. An action is morally right for a person if, in performing the action, a
her reason to carry out that action is one which he or she would be
1.
person does not merely use others as a means to advance
willing to accept as good enough for other persons to adopt
similarly under similar situation. “Do unto others as you would have
individual interest.
Example:- a pharmaceutical company must not use a patient product
them do unto you”
to try to produce new medicine that is being developed already.
Example:- Before firing a subordinate on the spot for some mistake,
A hospital should not make a patient sign a no objection and no
the manager should ask himself if he himself would have liked to
indemnity bond before being treated for an ailment.
be fired similarly by his own boss under a similar situation.
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Kant’s principle
Summaries Kant’s principle

If something is moral to me, it must be morally
right for others too.
2. Everyone is of equal value and has equal
freedom.
Kant’s principle plays a dominant role in
safeguarding ethics in the contractual
dealings of business operations, and has
particularly benefitted workers or employees
in industries and business houses.

i.e. everyone in the society has a moral right to equal
treatment, & everyone has the correlative duty to treat others
in the same way.

His approach to moral rights & duties- known as Kant’s
Principle encompasses following points:
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Justice Principles
 Justice Principles

everyone else.

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Other Non- consequentialist
theory

Kant viewed the moral rights & duties as imperative in a
society where everyone should be treated as equal to
1.
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
Distributive Justice
Retributive Justice
Compensatory Justice


1.
 Rights Theories
2.
3.
Associated with issues of rights, fairness & care.
A just act respects your rights. A just act treats you fairly.
Principles of justice may be divided into three typesdistributive justice
retributive justice
compensatory justice.
 Virtue Ethics
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14. (a) Distributive Justice
Distributive Justice
 Society has many benefits and

burdens that
must be distributed among its members.


Benefits include income, wealth, jobs, education
and leisure. Burdens
include work, taxes and
social and civic obligations.

The allocation of benefits and burdens raises
Distributive justice says that equals should be treated
equally and unequal should be treated unequally, and
there should be consistency in the treatment.
Distributive justice is commonly called for in business in areas like employee gradation and promotion, wage
policy, eligibility for different types of perks, dealers’
commission, dividend distribution, etc. – with a view to
ensuring equality, uniformity and consistency in
operations.
questions of distributive justice.
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(a) Distributive Justice (Conti..)

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Supporting example
The purpose of distributive justice is to ensure consistency in the

way one should treat similar situations

Egalitarianism, advocates adherence to the doctrine of equal
political, economic & legal rights for all human beings

Not offering opportunity for equal living and growth in a society is
unfair and injustice.
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Retributive Justice
Retributive justice demands that a ‘just action’
should be taken either as penalty or reward in a
manner that deserves the cause for which the
penalty or reward is being meted out.
 It generally deals, in practice, with the conditions
under which it is just to punish a person for a
wrongdoing.
If the qualification and capability of a woman for
a job are the same as a mans then there can be
no discrimination between the two.
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In case of compensation offered to the nearest
relatives of all the victims of an accident inside a
factory, justice demands that compensation is
fair and equitable,. There can be difference in
managerial category and factory laborers, but
this should be in norms and should not changed
from victim to victim in the same class or
category of employment.
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Supporting example

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
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15. (b) Retributive Justice
For Example
Failing to attend to duty without prior notice may
be wrong, but it would not be just if the
management suspends an employee for such
isolated offence.
 But if the employee becomes a habitual
latecomer or absentee, he or she may attract
heavier punishment like suspension of duty, etc,
and that would be considered just under the
circumstances.

The questions are when is it just to punish someone and

what should be the nature punishment.
According to Aristotle, a person is morally responsible

for his actions unless he has been forced to take that
decision.
Just punishment must also fit the crime. The severity of

punishment should be in proportion to the magnitude of
the crime.
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Compensatory Justice
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c) Compensatory Justice:
Compensatory justice is that which deals with
the justice of restoration for being wrongfully
harmed by somebody else.
 It demands that a person who has done wrong
should restore or equally compensate for what
has been lost or harmed.

 Compensatory justice is concerned with compensating the party
injured by the wrongful act.

This includes necessary medical treatment and services and
goods that are needed to rectify the injury.

The compensation should be equal to the loss suffered by the
injured party.

However, problems occur
when it is not possible to provide
complete compensation, for example, a life lost cannot be
restored.
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Other types of Justice
1.
Justice of equality
Justice of Fairness
states that every person working in group

should be given equal shares of the group’s benefits & burdens.
2.
Justice based on contribution
thereby ensure that all sections of the society or group have
been treated fairly
contributes to the cause or action.
Justice based on needs and abilities
The purpose of this approach is to safeguard the interest of
minimum standard of living in a society & to fulfill basic needs &
states that benefits and
burdens should be distributed in proportion to what each individual
3.
87

states that the
Justice of fairness is based on three basic principles
burden of work should be distributed as per people’s ability, and benefits
(a)
principle of equal liberty
should be distributed as per people’s needs.
(b)
principle of inequality, and
(c)
principle of fair and equal opportunity
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16. Justice of Fairness (Conti…)
1.
The Ethics of Care
Principle of equal liberty, states that every person’s basic liberties must

Each of us lives and exists in an environment of care
and concern in the society, and we should preserve
and nurture these environments and relationships;
 Each of us should exercise care for those with whom
we are socially and otherwise related by attending to
their needs, wellbeing and desires as seen from their
own personal perspective, and by responding
positively to the same so as to preserve the values of
those relationships;( refer case pg 94)
be protected from the invasion by others & must be equal to those of others.
Eg all shareholder present at the general meeting is entitled to vote.
2.
Principle of inequality, states that though there could be inequality in a
society, steps must be taken to improve the position of the needy & helpless
in society in order to maintain justice, fairness & welfare
3.
Principle of Fair & equal opportunity, states that everybody in the society
should be given fair opportunity to pursue their choices, & to learn a trade or
develop skills to improve their contributions to the society. ( read case pg
92)
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The Ethics of Care (Conti..)
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Steps in Moral Judgment
Ethics of care stems from the sense of moral responsibility that we feel

about our family, relations, friends, colleagues & society. It is essential to
live well & prosper in the society & at our workplace.
Ethics of caring are primarily concerned with the “concept of caring for

someone” i.e. not being concerned for the self, but for the others in the
society or community.
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Virtue Ethics (Conti…)
Virtue Ethics


Virtue is a quality embedded in the personality of an individual &
facilitates ethical behavior & action through the characteristics
Ethics of virtue complement and add to utilitarianism, rights,
behavior of the decision makers.
justice and care by looking not at the actions people are

required to perform, but at the character they are required to
and conscientiousness.
It is not the performance that counts here, but the quality &

character required for the performance

Some typical virtuous traits in the business arena would be
integrity, honesty, truthfulness, courage, loyalty, courteousness,
have.

The theory of utility, rights, justice & care approaches ethics
through an evaluation of actions; whereas virtue of ethics
is expressed in his or her habitual behavior.

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Virtuous traits are acquired and developed throughout our life
experiences..
A moral virtue is an acquired quality that is praised and valued as
a part of a person’s character. It is indicative of good moral
character.
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17. Ethics and religion

Teachings of the Church
The world’s great religions––Christianity, Hinduism, Islam & many

The Church always supports and promotes the welfare of the
other religions have all left their permanent marks on morality and
poor. People often think how we can relate business and ethical
the conduct of people in every aspect of Human Endeavour,
teachings of Church. But now the trend has changed and
including business. Every religion has provided its followers its own
organizations and institutions relate business with religion and
set of moral instructions, beliefs, values and virtues, traditions
ethics. This transition is due to the increased importance of ethics in
and commitments.
business. The Church's concerns and ethical teachings are found in
several papal encyclicals, i.e, letters the pope writes to his
followers.
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Rerum Novarum

Since the late 19th century, there has developed a strong tradition of
reflective thought on economic issues within the Catholic Church.
This concern on economic issues effectively started in May 1891,
with the publication of Rerum Novarum, an encyclical by Pope
Leo XIII. The central theme of the letter was the relationship
among the State, employers and the workers.

It was revolutionary work & strongly laid the foundation for human
dignity.
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18. Key feature of the encyclical

Indian Ethical Traditions
Directs the State and organizations to perform their duties to the

working class

The Hindu scriptures such as the Gita and the Upanishads speak
of the performance of right duty, at the right time in the right
manner.
Because when man is deprived of dignity and equality he will
indulge in unethical practices. Mutual support in the society and

productivity and profit.
The rich Indian tradition has always emphasised the dignity of
human life and the right to live in a respectful manner.
organization will help individuals to perform their best for

The rich values that once prevailed in India are now disappearing
from the mainstream.

Indian traditions are copied & followed by Western countries in their
social welfare & organizational conduct.
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Gandhian Principles of Trusteeship

Implies that an industrialist or businessman should consider
himself to be a trustee of the wealth he possesses.

The wealth belongs to the society & should be used for the
greatest good of all.

Gandhiji also advocated Sarvodaya, meaning welfare for all. He
was of the firm view that there should be a family atmosphere &
harmony in work place
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19. Birla Temple in Kolkatta
Practicing Gandhian Principles

In the recent past, social involvement by business has, for the most
part, taken the shape of public charity. This has included the
building of temples, hospitals and educational institutions.

A few examples include the Birla Temple in Calcutta, the Shree
Vivekananda Research and Training Institute set up by Excel
Industries in Mandvi, the L&T Welfare Centre in Bombay, the Tata
Institute of Fundamental Research, and the Voltas Lifeline
Express, which is very much in the spirit of trusteeship.
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Voltas Lifeline Express
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Tata Institute of Fundamental
Research
L&T Institute of Technology
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Voltas Lifeline Express
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20. Voltas Lifeline Express
Voltas Lifeline Express
The Lifeline Express or Jeevan Rekha
Express is a mobile hospital train
 It was developed in collaboration with the Indian
Railways and Health Ministry and has been
funded by Impact UK, international charitable
sources, Indian corporate houses and
individuals. so far the service has benefitted
400,000 Indians in the remotest rural parts of the
country


The Lifeline express was started to provide onthe-spot diagnostic, medical and advanced
surgical treatment for preventive and curative
interventions for disabled adults and children for
outreach into inaccessible rural areas where
medical services are not available; offered using
the Indian Railway Network which is the largest
in the world comprising about 63,500 kilometres
of tracks.

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Righteousness as the way in Gita

The Bhagawad Gita cites numerous instances of how moral values
and ethics can be incorporated in one's work life.

Many of its verses are directly significant for the modern manager
who may be confused about his direction and struggling to find an
answer to ethical dilemmas.

The Lord repeats that work or karma is the driving force of life,
and that this work has to be ethical.
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Gita’s message in an organization
Message of the Gita: Chapter II, Verse 47
 “You have a right to perform your prescribed duty, but you are


doing your duty”.

This stanza implies that the performer of an action has only to
perform the prescribed duty and not think about the result of the
When applied to an organization where one is only worried
of the result, he is likely to fall into improper activities.
not entitled to the fruits of action. Never be attached to not
On the other hand, if he is ready to do his duty to the utmost of
his ability and set aside the result, he will be an ethical person
in the organization
action, because the result is beyond his control.
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21. Business and Islam

Shariah and Interest on Capital
For Islam, all principles covering business originate from the Holy

Shariah bans the taking of interest, because according to this law,
Quran, as they are explained and amplified in the Hadith (collection
investors can make profit only from transactions based on the
of the Prophet’s sayings)
exchange of assets, not money alone, and therefore, interest is
banned.

The Prophet Mohammed ordained that businesses should

Thus lending money at interest is against Shariah law.
promote ethical and moral behaviour and should follow honesty,

Interest is forbidden, but sharing profit & loss is acceptable
truthfulness and fulfilment of trusts and commitments, while
eliminating fraud, cheating, cut-throat competition, lending
money at interest to people in need and false advertising.
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