introduction to managerial ethics

Jayashree Sadri and Sorab Sadri

INTRODUCTION TO MANAGERIAL ETHICS

PROFESSOR JAYASHREE SADRI

and

DR SORAB SADRI


MANAGERIAL ETHICS

WE WILL EDAL WITH ISSUES CONCERNINGCharacteristics of Ethical Problems .Morality and ethics.Analysis Normative Philosophy.


Managerial and Business Ethics Whereas Business Ethics deals with how a

business entity behaves in relation to the civil society in general and its stakeholders in particular, Managerial Ethics deals with how a manager will react in the face of an ethical dilemma.


ETHICAL DILEMMA

Any action / decision which affects others in ways which are beyond their control.

Any action wherein there can be more than one correct interpretation.

Any action where values may be at risk.


Response to Dilemma

THE MANAGERIAL RESPONSE COULD BE: Consequential: what is in it for me or will it do good to all.

Non consequential: some things are right or wrong irrespective of the personae involved or the conditions under which action was taken or when a moral issue is at stake the minority of one is enough.


Characteristics of Ethical Problems Extended Consequences. Within the organization Extends to sections of society. Eg. Bribes that change the govt processes.

Pollution that affects environmental and public health.

Unsafe products that destroy lives.

When the judiciary is up for sale.

When politics has been criminalized.


The Gray Area

In Managerial Economics there is no clear cut black and white segregation as in right or wrong but a vast gray area with various shades in between that depicts reality and is open to interpretation.

Multiple Alternatives present themselves. Not generally dichotomous answers – yes or no. Alternatives need to be considered all the time. No single correct answer or no single best

solution.


Some Contradictions

Mixed Outcomes. Assumed to be antithetical, directly opposed

to financial results and social costs .For example: Pay a bribe and maintain sales volume Make a slightly unsafe product but save on material and design cost. Social benefits as well financial revenues are always associated.


Social Reality

Uncertain Consequences. Not free of risk / doubt. Out comes not known / predictable. Behavior not always predictable. Everything is mutable (in a state of flux)


Irrational Man

Personal Implications. Issues are never impersonal but integral to

lives and careers of managers. Performance evaluation related to financial

results. E.g., Delay the installation of pollution control

equipment and Registration of the Company will be also delayed as planned.

Redesign product to reduce material cost even at the price of lower quality.


CONTROL SYSTEMS

Manager as a part of Control System. Comparison between actual results and

planned objectives. How are the objectives set ? Extrapolation of past results. Correction for present environment. Government regulation. Internationally accepted norms.


ANALYSIS

Why do we need analysis ? To achieve a balance between economic and

social performance. ECONOMIC ANALYSIS. LEGAL ANALYSIS. ETHICAL / PHILOSOPHICAL ANALYSIS.


Economic Analysis

Relying on impersonal market forces for decision making between economic and social performance.

Work force reductions. Plant closure. M &A.Market economy has limited number of resources .

Consumers being supplied with highest quality and lowest prices, resources are being most effectively and efficiently used.


Legal Analysis

Take a impersonal stand as per the law. Eg. Retrenchment. Plant closure , Wholesaler replacement Underlying belief – In a democracy society

forms its own rules and all its members are treated justly as possible.


Philosophical Analysis

Problems have a moral content. Moral standards differ amongst individuals . Because systems of belief – values / priorities,

convictions . Beliefs depend upon family background, cultural

heritage, religious associations, education etc. Basis is on Normative philosophy. Analyse based on “ Greatest good for greatest nos’


EHICS AND NORMATIVE THEORY Relates to philosophical analysis. Philosophy – Study of thought and conduct Analysis based on single principle / belief that defines

what is right , proper or just. Moral reasoning requires understanding of

Normative philosophy. . Normative Philosophy – Study of proper thought and

conduct. HOW SHOULD ONE BEHAVE.


Normative Philosophy

Philosophical analysis based on thought processes. States that a manager should act in accordance with either a single principle of behaviour or a single statement of belief .

Morality and ETHICS. Morality – Standards of behaviour by which

people are judged in relationships to others. Eg. A person in midst of a dessert.


Philosophical Positivism

Normative philosophers tried to establish a logical thought process which could decide between right or wrong , good or evil, fair or unfair. But not relevant to managerial ethics.

All ethical problems are compromises between economic and social performance, wants and duties of an individual. This philosophy helps to some extent to make that compromise.

This is what we mean by positivism.


A General Perception

ETHICS. Encompasses a system of beliefs that supports a particular view of morality (not necessarily shared by all).

For Example: Smoking in public place. Morality in standards of public behavior. Inter-racial marriages Child labour Ethics is thus a system of beliefs. Generally

expressed in plural. Since people have set of interrelated beliefs.


ETHICAL RELATIVISM

Are there universal principles for constructing an ethical system of belief that is applicable to all the groups in all cultures at all times ?

What we know that moral standards of behavior differ between groups within a single culture, between cultures, and between times. Eg. product safety standards – Mineral water issue.

Differences in moral standards and ethical beliefs exist.

Perceptions of morally acceptable behaviour from generation to generation.


ETHICAL RELATIVISM

Is there any commonality that overrides the differences? OR

All ethical systems are valid and that a person’s choice is equally valid relative to his upbringing, education, position , culture or country .

COMMON THREAD OF ALL ETHICAL SYSTEMS – Members of a group bear some form of resp for the well being of others in the group.


Commonality

Common Principle that exists across all groups, cultures and times –

Members of groups bear some form of responsibility for well being of others . This cooperation is necessary for the survival and perpetuation of civil society.


The Civil Society Perspective

QUESTION OF MORAL RELATIVISM IS NOT WHETHER YOUR MORAL STANDARDS ARE AS GOOD AS MINE ?

IT IS WHETHER YOUR MORAL STANDARDS WHICH BENEFIT THE SOCIETY ARE AS GOOD AS MINE THAT DO THE SAME BUT ARE DIFFERENT?

E.g – Bribe payments to customs and police.

American Vs Indian manager.


ETHICAL SYSTEMS

Mankind over its intellectual history of over 2400 yrs has attempted to establish ethical systems , major ones are.

Eternal Law. Utilitarian Theory. Universalistic Theory. Distributive justice. Personal Liberty.


ETERNAL LAW

Ethical Belief . Moral std are given in

an eternal law, which is revealed in Scripture or apparent in nature. Interpreted by religious leaders, philosophers.

Every one to act in accordance with intre.

Problems. Multiple inter.of law. No method to choose

amongst them except rationality.

Rationality needs absolute principle or value to choose.


UTILITARIAN THEORY

Ethical Belief. Moral std applied to

outcome . Principle is that every

one to act to generate greatest benefit for largest number.

Problems. Immoral acts can be

justified. Benefit – cost

justification requires additional principle / value.


UNIVERSALIST THEORY

ETHICAL BELIEF Moral std applied to the

intent. Principle is that similar

decisions are reached by others in similar circumstances.

Intentions – Duties – Universality .

PROBLEMS Immoral acts can be

justified by self deceptive / self imp persons.

No scale to judge the intent.

Interpretation is situation based.


Values and Principles

Universalism and Utilitarianism are based on principles . This means that there is a theoretical construct supporting them.

Distributive Justice and Personal Liberty systems based on values. This means that there is a certain belief determining them.


DISTRIBUTIVE JUSTICE

John Rawls proposes that society is an association of individuals who cooperate to advance the good of all.

THERE IS COLLABERATION AND CONFLICTS.

WHY COLLABERATION AND WHY CONFLICTS ?


Rawls Cont’d.

Distributive system basis. To each person equally. To each as per need. To each as per contribution. To each as per effort. To each as per competence.


Distributive Justice

Ethical Belief. Moral std based on

single value – justice Everyone should

ensure more equitable dist of benefits, - promote self respects-leads to social co –op.

Problems. Interpretation of justice. Equitable dist. Of

benefits promotes social co- op ?


Three Concepts

Concepts of absolute equality , absolute inequality and conditional inequality are imbedded within the larger social reality and it is for the political philosopher to unearth these.


PERSONAL LIBERTY

Proposed by Prof Nozick of Harvard Business School.

Ethical system based on value of liberty. Institution or law that violates individual liberty ,

though it may result in increased benefits to others needs to be rejected.

Society as association of individuals and cooperation between individuals necessary for economic gains.

Economic gains comes about through exchanges. EXCHANGES MUST BE VOLUNTARY.


CONT’D.

PERSONAL LIBERTY FROM SYSTEM OF EXCHANGES TO ETHICAL SYSTEM.

Individuals must be allowed to make informed choices and these choices are ethical if extended equally to others.


PERSONAL LIBERTY

Ethical Belief. Moral std based on

single value – liberty. Act to ensure freedom

of choice. Promote market

exchange – leading to social productivity.

PROBLEM. Can liberty lead to

market system to exchange and thereon to Social productivity.


THE ULTIMATE DILEMMA

What should one do ? Balanced use of all ethical systems. Does my decision result in greater benefits than

damages for society not just for the org ? Is the decision self serving or others also would take

similar decision under similar circumstance. Will our decision increase or decrease willingness of

others to contribute. Will our decision increase or decrease personal

freedom of others.


LIBERTY?

Liberty is the freedom to do what one wants as long as it does not impede with what the other does what the other wants.

Liberty if unrestrained or ungoverned degenerates into license.

Every Liberty is activated fairly when duties and obligations are conjoined with freedom and rights.


HENCE

When we deal with issues concerning Managerial Ethics we need to have a multi-disciplinary view based on positive social science.

Theories of Sociology, Psychology, Political Science and Economics are often used to explain positions taken.

Bounded Rationality plays a major role in ascertaining the preferred option.


Conclusion

No single system of belief exists to guide mangers.

Are we free to take decisions as we like, especially those that affect others?

We have obligations towards others. Difficulty comes in identifying obligations and

evaluating alternatives with no single set of moral standard.

Every manager like every country must make his/her own history but do so under definite conditions.


SOME HOME TRUTHS

Theorists who use spirituality extensively to explain managerial behavior are invariably soul based thinkers.

Theorists who use bounded rationality and positive philosophy, instead, are invariably mind based thinkers.

Those, however, who try to use both spirituality and rationality tend to be merely tautological and descriptive.