business ethics 09
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Courseware from the course on Business Ethics that I taught at St. Joseph\'s College of Business Administration in 2009TRANSCRIPT
Business Ethics Tathagat Varma
Session 10/12: 11-‐Sep-‐09
Rotary 4-‐Way Test • From the earliest days of the organizaAon, Rotarians were concerned with promoAng high ethical standards in their professional lives. One of the world's most widely printed and quoted statements of business ethics is The 4-‐Way Test, which was created in 1932 by Rotarian Herbert J. Taylor (who later served as RI president) when he was asked to take charge of a company that was facing bankruptcy.
• This 24-‐word test for employees to follow in their business and professional lives became the guide for sales, producAon, adverAsing, and all relaAons with dealers and customers, and the survival of the company is credited to this simple philosophy. Adopted by Rotary in 1943, The 4-‐Way Test has been translated into more than a hundred languages and published in thousands of ways.
Rotary 4-‐Way Test
Ethics Axis
Ethical Dilemma Grid • A 2005 global study of over 1100 managers and execuAves, commissioned by the American Management AssociaAon idenAfied the top three factors most likely to cause business people to compromise ethical standards. All three impact most of us from Ame to Ame, so it would be an unusual person who would not have experienced temptaAon. The factors, in order, are: – Pressure to meet unrealisAc business objecAves/deadlines – Desire to further one's career – Desire to protect one's livelihood
• So here is a theory. Model the dynamics that put pressure on people's ethics and you have an early warning of possible problems.
Ethical… • Dynamic A is Pressure. SomeAmes the pressure to compromise comes at a person externally on vectors such as: – Urgent Aming, 'I don't care what the policy book says, I need your decision now.'
– Entrenched opposiAon that can be avoided, 'HR won't find out All it is too late'
– Superiors or colleagues, 'If you don't do this, we'll all pay a price'
– CriAcal impact, 'NaAonal unity is at stake here' – CompeAtor's tacAcs, 'CompeAAon gives them money under the table. We have no choice.'
• Any single one of these, let alone a combinaAon, can isolate a person on ethical grounds.
Ethical… • Dynamic B is Personal Benefit. Even scrupulous people generally look at choices through a lens of self-‐interest that includes: – Financial gain – Financial risk – ReputaAon – Career and stature – Power and influence
• The greater the personal upside or downside associated with a decision, the more internal pressure will build to compromise on honesty and ethics.
Ethical…
Ethics… • That is what our panel of 1100 managers in enterprises around the world thought. If you want an ethical organizaAon, our research recommends you should have: – A code of conduct -‐ known and enforced – Ethics training -‐ for everyone, with annual re-‐cerAficaAon
– Social responsibility programs – An ombudsman -‐ for unvarnished feedback to the C-‐Suite
– An Ethics help line -‐ for immediate guidance on issues – Ethics audits -‐ of all stakeholders including suppliers
Ethics in Professions
Ethics in Professions
Ethics in Professions
Global Ethics Issues • Sexual and Racial DiscriminaAon • Human Rights
• Price DiscriminaAon
• Bribery • Harmful Products
• PolluAon and the Natural Environment
• Internet, online privacy, idenAty thec • Intellectual Property protecAon • WTO
Poor Development breeds CorrupAon
Ethical Business Cultures
• Dimensions of Ethical Business Cultures: Comparing Data from 13 countries of Europe, Asia, and the Americas
Means and Standard DeviaAons
Homogeneous subsets for select survey items
InternaAonal Context • Return of Ethics hdp://www.forbes.com/2009/07/21/business-‐culture-‐corporate-‐ciAzenship-‐leadership-‐ethics.html?partner=whiteglove_google
Ethical Aitudes in India • Business Scenario in India and Ethical A>tudes of Business Execu@ves -‐ P. M. Joseph ChrisAe, S.J., Loyola InsAtute of Business AdministraAon, Chennai, India
Where does India rank ? • CorrupAon PercepAon Index 2008: #85 in 180 countries
• Bribe Payer Index 2008: #19 in 22 of the world’s wealthiest and economically dominant countries
Global Integrity Index
Global Integrity -‐ India
Indian Context • Jagdish Sheth, execuAve director of the India, China and America InsAtute and a professor of markeAng at Emory University – Indian business culture puts a premium on favors, friendship and clanship. Friendship is highly valued, whether based on mulAgeneraAonal family friendships, school friendships or personal friendships. The Western concept of conflict of interest does not always mesh well with the Indian value of loyalty to one’s group.
– Western business has its own versions of these ideas: Procurement departments in U.S. companies are more likely to buy from the company’s customers, for example.
Indian… • In terms of government rules and regulaAons, Sheth said that in India, the government acts as a gatekeeper rather than an enabler, with slow approval, a complex bureaucracy and corrupAon. Enforcement is also lax.
• There is a strong belief in corporate social responsibility in India, Sheth said. He also noted how Indian management style differs from that in the West: Decisions are made by the person at the top, not in a parAcipatory way. And there is what he called a caste system by educaAon.
Indian… • What are the implicaAons of these differences – and of India’s rise – for business ethics? Sheth cited, among other ideas, a shic from a focus on shareholders to a focus on stakeholders. He predicted that ethics will be anchored to the idea of business as a profession, similar to the way the field of medicine is now. And he said there will be global standards of governance, but their applicaAon will be adapted to local condiAons.
Wipro -‐ Premji • Even as it stands out for its sterling financial performance,
Wipro is a good example of a rare Indian company that plays by the rules. Apart from innovaAon and giving the customer value for money, the organizaAon pays great adenAon to integrity in all its business dealings.
• According to Premji, being ethical is a business tool that gives structure to Wipro's funcAoning and brings in more business in the long run. "We have had no problem with pracAcing the value of integrity. Because Wipro has a reputaAon of being transparent in every respect, we have saved Ame and effort in conducAng business interacAons and Wipro employees have been able to stand public scruAny and maintain their self esteem under all eventualiAes," the shy and reAcent Wipro chairman has been quoted as saying.
Wipro… • At Wipro, integrity comes into play in all situaAons, within the
company itself as well as in its dealings with the outside world. The story is ocen recounted in Indian business circles of how Wipro had to wait for 18 months to get an electricity sub-‐staAon for one of its units because the company refused to bribe the concerned people. The unit was run on capAve generaAon for nearly 20 months. This cost the company dearly but Premji preferred that to breaking his values.
• Another anecdote has Premji asking a senior general manager of the company to leave because he had inflated a travel bill. The man's contribuAon to the company was significant; the bill's amount was not. Yet he had to go for this solitary lapse. It was, Premji stressed, a mader of principle.
Wipro… • Wipro's code of conduct for employees says it all: Do not do anything that you are unwilling to have published in tomorrow's newspaper with your photograph next to it.
• It is this kind of integrity that has catapulted Premji and Wipro to unprecedented heights. But then, Premji has never been your usual Indian businessman. Unlike others of his ilk, he shuns flashy cars and drives an ordinary Ford sedan. Even today, he flies economy, stays in budget hotels and asks his managers to do the same. None of his relaAves find a place in Wipro.
References • hdp://www.san.beck.org/EC10-‐Social.html • hdp://content.msn.co.in/MSNContribute/Story.aspx?
PageID=94bd7e1e-‐670f-‐4287-‐914c-‐a17badd98tf • We failed to communicate, says Coke India • India: Using Ethics to Build an Industry • Business Ethics in a Global World: India's Changing Ethics • Business Ethics: India Knowledge @ Wharton • Coke & Pepsi in India • hdp://www.in.iofc.org/node/40481 • hdp://assets.cambridge.org/97805218/63797/excerpt/
9780521863797_excerpt.pdf • The Business Ethics of JRD Tata • Confucian Ethics, China and India • hdp://www.financialexpress.com/news/business-‐ethics-‐leadership-‐
qualiAes-‐intertwined-‐ghandy/199102/ • hdp://www.amnesty.org/en/library/asset/ASA20/002/2009/en/
79a5264e-‐2dd2-‐44f1-‐8c92-‐b2f0cd8f5c72/asa200022009en.pdf
References • hdp://www.bized.co.uk/educators/16-‐19/business/external/acAvity/ethics.htm
• hdp://www.jmu.edu/cob/ethics/Case_studies.shtml
• hdp://www.cebcglobal.org/uploaded_files/Dimensions_of_Ethical_Business_Cultures_-‐_June_2009.pdf
• hdp://Amesofindia.indiaAmes.com/news/india/Lack-‐of-‐professional-‐ethics-‐led-‐to-‐Metro-‐mishap-‐Sreedharan/arAcleshow/4869884.cms
• hdp://blog.nasscom.in/nasscomnewsline/2009/02/raising-‐the-‐bar-‐on-‐corporate-‐governance/