Business Ethics and Corporate

Governance (BE&CG)
As per the Syllabus of
MBA Semester 02
Gujarat Technological University
Module 02: Managerial Ethics

Ethical Problems- Overview of

Categories of
Dilemma at Work- Creative
management
Sources and Accounting-Its role
morality
Resolutions in business scandals

Corporate Ethical
Whistle Blowing.
Leadership
Are there
Ethical
Issues at
Workplace?
YES or NO??
Conducting
Personal
Disregard of Business on
Company Policy Company Time

Taking Credit for

Lying
Others' Work

Proactive Harassing
Employers Behaviour

Stealing on the
Job
Employees
Side

Types of
Ethical
Issues at
Work Place
Employers
Side
Ethical Issues from Employees

Making long phone calls at the

company’s cost.

Some organizations provide a

refund for the phone bills of the
employees, especially if the
employee is dealing with a job
which that involves using the
telephone.

Taking advantage of the fact and

making personal phone calls is
unethical.
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Taking home the company’s assets.

Some employees pocket tools and stationery such

as staplers, pins, papers etc. to use them at home.

This would have probably gone undetected by the

cameras, but definitely doesn’t say much about
their behaviour.
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Taking excessive leaves
beyond the allowed
number is a breach of
ethical code. I

t not only leads to

losses for the company
but also brings you a
bad name.
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Improper usage of machineries.

Some employees make use of office computer

and printers for personal uses such as taking
lengthy print outs, heavy downloading and
even unnecessary net surfing etc.

Personal work needs to be kept personal!

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Taking advantage of the travel benefit.

These are applicable to employees who

have to constantly be on the move such
as the marketing personnel.

More than ethical codes, common

sense can tell you not to use this for
personal benefits!
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Breach of rules and regulations of the company.

Accepting terms and conditions are usually done as a part of joining

procedure.
Violating any of these rules may leads to undesirable issues between the
company and you.
Failing to maintain the privacy policy of the company is another sort of
breaking of rules.

Each company has its own privacy policy.

An employee is entitled not to give out the company’s data and other
particulars to another company/competitor.
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Offensive communications.
Employees are not allowed
to use offensive language
in the office.

But anything that goes on

beyond company walls
cannot be taken into
consideration.
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Working for multiple organizations.

An employee cannot work in more than one place

simultaneously – literally and ethically!

If ever caught doing so, the person can be

prosecuted and debarred from being a part of
either organization in the future.
Ethical Issues from Employers

This means that

the employer
may favour a
particular
This conduct is
person with
considered
regard to
Favouritism. highly unethical
promotions and
on the part of
bonuses and
the employer.
evidently
neglect other
eligible
employees.
Continue....

Harassing an employee
Sexual harassment is not sexually, or refraining from
legal/ethical/moral whether taking action against those
in the workplace or out of it. who are involved in such
offences, is strictly forbidden.
Continue....
Such
In some terminations
cases, for should be
reasons like done after
budget prior Notice
Terminating
management, indications periods must
an employee
companies and notice of be served to
without any
opt for mass at least a avoid
notice.
firing to month or confusion.
reduce the two, so that
number of the person
employees. can find
another job.
Continue....

Unnecessary delay in paying

employee’s provident fund
and gratuity after leaving
the organization is a breach
of professional ethics.
Examples of Workplace Ethical Issues
Dilemma #1

Let's say, a client of the company is facing some

financial problems.

He buys certain products from your company at a

very high rate, which he can get at a much cheaper
price from one of your competitors.

Now, the ethical issue is, should you communicate

the same to your client? Or should you remain
silent as long as it does not affect you personally.
Dilemma #2

The company plans

to launch a skin
cream in the market As an employee,
and one of its should you be part
ingredients may be of such a project?
harmful for the
health of the users
in the long run.
Dilemma #3

The company is actually running

into losses, but the management of
the company inflates the profits in
the financial statements to appease
the share holders, lenders, and the
customers. Is this ethical?
Handling Work Place Ethical Issues
can you
handle
Ethical
Issues at
Workplace?
YES or NO??
How??
Put
Know the Set Train Your
someone in Be Fair
law Expectations Employees
Charge
Modern organizations
today do focus mainly
on profit-making, yet
there is a new trend
being observed and that
is bringing back ethics to
the workplace.
Various multinationals today have
incorporated ethics training for all their
employees, right from those working at the
junior level to the CEO of the company.
This helps promote the
understanding of what ethics are
how can they benefit the company
in the long run
These days, many companies design their own ethics' training programs,
which offer practical solutions to employees facing ethical dilemmas.

These programs focus on two things - point 1, there is nothing wrong if an

employee finds himself in an ethical dilemma, and point 2 - they offer
written resources on how to work through these ethical dilemmas.

These resources give a kind of framework to the employees on the basis of

which they can take the right decisions
Basing a rewards system on ethics and values along
with on one's performance is another way of ethics
promotion among the employees, which is being
employed by many organizations.
It has also been observed that organizations promoting values
and ethics have many advantages vis-a-vis other organizations.

Its employees do not experience a lot of stress, as they do not

have to compromise on their values.
Secondly, any kind of misconduct
is immediately reported to the
right person in the organization.
Thirdly, instances of misconduct get
minimized and the overall satisfaction of the
employees increases, as such organizations
offer a 'feel-good' environment.
Process of Ethical Decision Making

2. Making the 3. Resolving to

1. Recognising
ethical do ethical 4. Actually
an Issue: To
judgement: thing: Select acting ethically:
know about the
ethical the alternatives Implement the
problem and its
judgements by with highest ethical thing
reason.
experts priority
Categories of Management Morality
Amoral
Moral

Immoral

Management Morality
Managerial ethics, are standards of conduct
or moral judgement used by managers of
organizations in caring out their business.
Archi B Carroll, notes that three major levels
of moral or ethical, judgement characterize
managers: immoral management, amoral
management, and moral management.
Immoral Management

Immoral management not only lacks ethical

principles but also is actively opposed to ethical
behaviour. This perspective is characterized by
principal or exclusive concern for company
gains, emphasis on profits and company success
at virtually any price, lack of concern about the
desires of others to be treated fairly, views of
laws as obstacles to be overcome, and a
willingness to "cut corners".
Moral Management

In contrast to immoral management, moral

management strives to follow ethical principles
and percepts. While moral managers also desire
to succeed, they seek to do so only within the
parameters of ethical standards and the ideals of
fairness, justice, and due process. As a result,
moral managers pursue business objectives that
involve simultaneously making a profit and
engaging in legal and ethical behaviours.
Amoral Management

The amoral management

approach is neither immoral
nor moral but, rather,
ignores or is oblivious to
ethical considerations.
Intentionally
Unintentionally

Amoral Management
Intentional

A moral managers do not include

ethical concerns in their decision -
making, or behaviour, because they
basically think that general ethical
standards are more appropriate to
other areas of life than to business
Unintentional

Amoral managers also do not think about ethical

issues in their business dealings, but the reason is
different. These managers are basically inattentive
or incentive to the moral implications of their
decision-making, actions, and behaviour. Overall
amoral managers pursue profitability as a goal and
may be generally well meaning, but intentionally or
unintentionally they pay little attention to the
impacts of their behaviours on others.
Creative Accounting

Creative accounting consists of accounting practices

that follow required laws and regulations, but deviate
from what those standards intend to accomplish.

Creative accounting capitalizes on loopholes in

the accounting standards to falsely portray a better
image of the company.

Although creative accounting practices are legal, the

loopholes they exploit are often reformed to prevent
such behaviours.
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Creative Accounting is nothing but presenting the

accounting information in just different manner.

Creative Accounting is the transformation of financial

accounting figures from what they actually are to
what prepares by following the rules and regulations

Creative Accounting may defeat the rule of “True and

Fair” view in financial statements
Key Elements in Creative Accounting

Flexibility: Many ways of presenting the information,

this complements the managers to show the
information in refined manner

Management of the Accounts: Objectives are given

more priority than the true and fair view of
accounting

Interests of Managers: More beneficial to managers

than the shareholders or public related to company
Increase
Income

Strategies
Decrease for Decrease
Liabilities
Creative Expenses

Accounting

Increase
Assets
Corporate Ethical Leadership
Corporate Ethical leadership is leadership that is
directed by respect for ethical beliefs and values and
for the dignity and rights of others.

It is thus related to concepts such

as trust, honesty, consideration and fairness from the
view of corporate relations.

Individuals values and beliefs are related and based

on the values that their leader are having and thus
implemented by them in business.
Leadership Styles Influencing Ethical Decisions

Autocratic Leadership: Leaders have

absolute powers on their workers and
team.
• Staff has little opportunity to make or give
suggestions. Ex: unskilled jobs

Bureaucratic Leadership: “By the book”

concept.
• Follow rules strictly
• Work as per instructed
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Charismatic Leadership: Leaders inspire lot
of enthusiasm in their teams.
• Leaders believe more in self than others
• Long term commitment by leader and credit for success
goes to leader

Participative Leadership: Invite other

members of the team to decision making
process.
• Increase job satisfaction
• Employees are motivated to work hard.
Laissez Faire Relation oriented Servant
Leadership: “Leave leadership: Leadership: Not
it be” Leaders are formally
• Leave their team focused on recognises as
members to work on organizing, leader but leads
their own supporting, and the team only for
• Leader should monitor
the work
developing. meeting the target
• Team members should of firm.
be experienced
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Task Oriented Leadership: Transactional Leadership: Transformational

Leaders focus on getting This style starts only if the Leadership: True Leaders
the job done team members agree to • Routine work should be done
• Actively define the work and accept the idea to achieve reliably
roles of team members the target. • Look after work that add value
to the business.
• Leader has right to punish
Habits / Characteristics of Strong Ethical Leaders

Ethical Ethical Ethical Ethical

leaders have leaders have leaders are leaders
strong a passion to proactive consider
personal do right stakeholders
character interest
Continue...

Role models Transparent Competent

for and actively managers
organisations involved in
value decision
making
On 15 June 2006, Microsoft
announced that, with effect
The case is set during the from 27 June 2008, Gates
leadership transition phase will transition out of a day-
of Microsoft, the world's to-day role in the company
largest software company. to spend more time with the
Bill & Melinda Gates
Foundation.

The two-year transition

process was to ensure that
there was a smooth and
orderly transfer of Gates'
responsibilities.
During that phase, the company
faced several issues like Vista's
unimpressive launch, the company's The main focus of the case is
failed endeavour to purchase Yahoo succession planning.
and increasing rivalry with Google in
the Internet search business.

He also developed a strong technical

It highlights how Gates had groomed
team that would continue the
his colleague Ballmer, to tackle those
company's research and innovation
challenges after his exit.
in the future.
Case 2
A junior member of staff has just returned to work after taking special leave to care for her
elderly mother.

For financial reasons she needs to work full-time. She has been having difficulties with her
mother’s home care arrangements, causing her to miss a number of team meetings (which
usually take place at the beginning of each day) and to leave work early.

She is very competent in her work but her absences are putting pressure on her and her
overworked colleagues.

You are her manager, and you are aware that the flow of work through the practice is coming
under pressure.

One of her male colleagues is beginning to make comments such as “a woman’s place is in the
home”, and is undermining her at every opportunity, putting her under even greater stress.
Question
How should you proceed so as not to
discredit yourself, your profession or the
practice for which you work and at the
same time
maintaining integrity and confidentiality in
your actions?
Case 3
Sumati loved Ranjan when they both were undergoing
training as IAS probationer officers at LBSNAA Company.

After their training, they married each other and were

allotted same state cadre.

Both were posted as SDM to two subdivisions in the same

district. They both stayed together at the district HQ.

The sub division where Ranjan worked was rich in mineral

resources and mining was rampant.

It was home to many rich people.

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Sumati came to know that Ranjan was getting tempted by bribe

offers offered by mining barons in the region to overlook certain
land related issues.

She observed that he was bringing home costly gifts.

One day she confronted him but he told her that he was not doing
anything illegal and some rich people impressed by his working style
were being just very generous in spite of his reluctance to receive
anything from them.

He was also attending parties thrown by some very rich people in

the district.
Continue...

Sumati was now growing uncomfortable with Ranjan’s

attitude. They both loved each other very much, in fact it was
Sumati who had proposed him first.

One day she came to know conclusively that Ranjan had

taken bribes from some people. She also comes to know that
the favour for which Ranjan has compromised would create a
great loss to state exchequer.She is an upright officer and has
made herself a good name.

If she takes a drastic step, it might endanger her marriage.

Question

What should Sumati do knowing her husband is

involved in graft and her marriage to him might
get jeopardized if she takes a drastic step?
Hence Ethical Corporate
leadership Creates....

Excellent Work Culture, happy Employees, Minimization of

errors and a growth of organization as well as employees
Whistle Blowing

Whistle blowing is the term that is used to define an individuals

decision to disclose the information regarding unethical, immoral or
illegal actions that are going in company to higher authority.

Revealing wrong doing or improper conduct within an organisation

to higher authority or to public

The purpose is to encourage employees to disclose any misconduct

taking places within the organisation
Objectives of Whistle Blowing

To bring the unethical matter before the public

To put the wrong doer on ethically right track

The whole company is not wrong only the person

involved is unethical

To bring justice and fairness in all the activities of

company
Procedure of Whistle Blowing

Reporting: Employee should report the manager or higher

authority

Investigation: Action towards whistle blower within 10

working days.

Safeguards: Possible steps to be taken to protect whistle

blower on request and reasonable proofs

Disciplinary Action: If proved appropriate disciplinary

action should be taken such as termination of employment.
THANK YOU
For Your Attention

MR. JIGNESH VIDANI

Author, Researcher and Blogger
Email: [email protected]
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