Abstract

Many large corporations have added ethical framework to their business processes as these organizations have realised that in long run an ethical business has a bright future. This includes customers, employees, vendors and the public. Every decision made by the business is based on the effect it may have on any one of these groups of people, or the environment surrounding it.

In organizations ethics go beyond the legal requirements; organizations understand that ethical framework helps in making supple decisions making and it also guides organizational behaviour and culture. Morality governs private, personal interactions. Ethics governs professional interactions. Law governs society as a whole, often dealing with interactions between total strangers. The legal environment in India includes various laws regulating business activities like Companies Act 2013, Consumer Protection Act, 2019 and many other such legislations, policies relating to licensing and approvals, foreign trade etc. Ethics are a set of moral values an individual/organization establishes for one own entity and own culture and behaviour whereas laws are structured rules utilized to govern the entire society.

A good example of how advertising can become responsible unethically is: Volkswagen’s campaign that promoted environmentally friendly “Clean Diesel” vehicles that had low-carbon emissions. In India, the National Green Tribunal (NGT) had penalised car manufacturer Volkswagen with a “conservative” fine of Rs 171.34 crore, for contributing to air pollution in Delhi through excess nitrogen oxide (NOx) emissions and for causing extensive health damage. The company admitted to having installed software that manipulated emissions readings to make its cars appear as if they were environmentally friendly. Volkswagen erred by misleading consumers with false claims.

There’s a huge difference between using marketing to paint a product or service in the best possible light by outright lying. With traditional advertising, it’s easier to monitor if companies are using misleading language to target customers. With digital advertising, anyone can run an ad and face minimal oversight.

Airlines are notorious for advertising low prices to entice travellers, but some of them manage to keep things on the ethical side by disclosing when Jetstar and Virgin Airlines decided to forgo this disclosure, they were fined $745,000 for marketing false low prices in their ads. Whereas customers had to pay additional fees involved to finalize the booking.

The Wikipedia defines ethics as a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong behaviour. It is also known as moral philosophy. For all of us ethics means living our life responsibly; to review whether our actions are right or wrong. Ethical behaviour is that which is morally accepted as “good” and “right” as opposed to “bad” or “wrong” in a particular situation. All of us live in an ethical illusion about ourselves. The ethical illusions are discrepancies between how we think and how we behave and how we take an action. It also includes our sense of reasoning for our behaviour. Laws are the regulations established, and usually written, by a governing power. Ethics are the morals of a culture, and often, they define the laws of the land. The distinction is that, while you may obey the law, you might not always act ethically. It would be a rare case for something to be ethical, but against the law. An important point to keep in mind is that ethics do not have any associated punishments when broken. A law, however, specifically sets the types of repercussions that should occur or should it be broken.

The fundamental of any business firm cannot claim to be ethical firm if it looks at profits and numbers while ignoring the legitimacy. Today, businesses and industries increasingly find themselves facing external pressure to improve their ethical practices. The alert and well-informed customers today scrutinize business activities. Pressure groups are a good example of this. They are external stakeholders they focus on activities & fair practice of industries with direct and indirect actions which at times has forced some firms to close down their shutters.

Ratan Tata, the then Chairman of Tata Group of Companies, did something that is totally out of the world. He in fact taught the world some lessons in business ethics. After the November 2008 Mumbai attacks which were a series of terrorist attacks that took place in Hotels Taj and Oberoi were badly hit, Ratan Tata went all out to help every single person who was affected in Hotel Taj including those like the pav bhaji vendor outside the hotel. Each one was offered compensation running into several lakhs of rupees. The education of children of those affected, free medical facilities for those survivors at Tata hospital for the rest of their lives, total education of the 46 children who were affected by the bomb blast but survived, has been taken up by the Tata group. A Trust has been formulated to shoulder responsibility for the rehabilitation of the families of the victims. Ratan Tata himself visited the families of each of the 80 employees affected by the bomb blast, and offered compensation running into several lakhs of rupees. Such examples define business ethics. Leaders like Ratan Tata establish faith in customers. He calls himself an industrialist not a businessman.  He has strong attachment to his businesses yet an executive’s ability to make rational decisions.

For leaders at all level, it’s more important to learn how to make the right decision while dealing with different kinds of feelings rather than suppressing those feelings.

Some of the top B Schools such as IIMs in India and other top rung B schools in the world are revamping their syllabus adding business ethics as a core paper, adding projects on ethical values. The process of revamping is for also pondering over and challenging the standard of business wisdom practiced for decades. Ethics and social responsibility seem to be in limelight by some serious thinkers and practitioners.

Chairman of Wipro ltd, Azim Premji, is another example of modesty and a man who doesn’t believe in extravaganza. He annoyed several other fellow industrialists when he said that rich people should pay more taxes, in response to some budget proposal. Not stopping there, he justified his views in many interviews as well. WIPRO has spent upwards of some nine hundred crores in Karnataka and in Andhra Pradesh, where it has helped build school infrastructure, improve standards of education and so on. Its donations to several Government hospitals in Tamil Nadu is very much an example of the highest quality of business ethics.

In the world-famous Enron scandal, which was a series of events involving dubious accounting practices that resulted in the bankruptcy of the energy company, the accounting firm Arthur Anderson got shut down. Enron executives used fraudulent accounting practices to inflate the company’s revenues and hide debt of its subsidiaries. The Securities and Exchange Commission credit rating agencies (SEC), and investment banks were also accused of negligence and outright deception that enabled the fraud. I think it’s symptomatic of a breakdown of the ethical values of business over a period of perhaps 20 years, a gradual erosion of business ethics.

Business organizations dillydally from ethical practices because of compelling and persuasive day-to-day organizational practices. Ethics take a backseat because of the multifaceted processes and practices of businesses which leaves little time or penchant to divert attention to the moral content of organizational decision-making. Morality in business appears to be so ambiguous and qualitative in nature that it lacks substance in relation to business objectives and goals in today’s world. Business relies on quantitative performance than qualitative performance. The pace leaves hardly any time for the managers in reworking their decisions based on ethical framework. Hence the entire framework and thinking of the managers lacks ethical decision making.

Scams such as Satyam Case, Enron Case, I Gate Case, 2 G, 3G, Commonwealth games, Bofors, Fodder scam, IPL, Citibank the list can go on and on. Our memories are so short, that by the time we are fatigued with one scam there appears another scam. The big money, the lifestyles of cheaters, their overstated personas, and the glamour that comes with money feature more prominently in the young students of Business Management if the ethical frameworks in these and many other case studies are not tackled in the classrooms.

Conclusion

Dear friends Socrates, Plato and Aristotle sadly have no place in the twenty first century business environment. A yawning gap exists between philosophical knowledge and business practices. Each generation has learnt ethics and morality with a divergence. Morality is just a dictionary word. Yet, like it or not, there has and will continue to be a surge of interest in ethics.

Ethics and morality are foundations of human society. Individuals, government, and organizations make decisions in line with the interests and values of the society. Ethics and morality set up path for excellence and they limit wrong doing in society in a world which is in true sense interdependent. Societies, nations and people must necessarily follow ethical behaviour. Ethics refer to rules provided by an external source, e.g., codes of conduct made by government, organizations, school and college etc. whereas morals refer to an individual’s own principles regarding right and wrong.

For example, nuclear ethics is a cross-disciplinary field of academic and policy-relevant study in which the problems associated with nuclear warfare, nuclear deterrence, nuclear arms control, nuclear disarmament, or nuclear energy are examined through one or more ethical or moral theories or frameworks. It is moral duty of every nation to safeguard their nuclear arsenal and fissile material from the reach of terrorists for the security and safety of others as well as their own, because they are responsible for climate change, destruction of mankind and ecology of planet.

Another example for moral behaviours: If we want to save our planet from the worst effect of climate change, we need to get our greenhouse gas emissions to zero by 2070: a target that requires immediate and drastic action, but, our indestructible addiction to fossil fuels makes this goal seem more and more unreachable. Can we make some stringent laws to drastically reduce the usage of fissile fuels? This is a moral issue. Moral reasoning is a thinking process with the objective of determining whether an idea is right or wrong. To know whether something is “right” or “wrong” one must first know what that something is intended to accomplish.

David Hume (April 1711 –  August 1776)  was a  Scottish Philosopher, historian, economist and author, who is best known even today for his highly significant system of philosophical empiricism, scepticism and naturalism. David Hume worked very hard to create a total naturalistic science of man that examined the psychological basis of human nature against philosophical rationalism. Hume believed that passion rather than reason governs human behaviour. He said that genuine knowledge must either be directly traceable to objects perceived in experience, or result from abstract reasoning.  There is a relationship between ideas which are derived from experience, he called the rest “nothing but literalism and illusion”, a dichotomy (a division or contrast between two things that are or are represented as being opposed or entirely different) which later was given the name of Hume’s Fork.

Hume’s fork shows us that we can have only two forms of lawful knowledge; relations of ideas and matters of facts. Matters of fact are source of substantive knowledge, facts that can tell us something new about the world. Knowledge in matters of fact is also a subsequent knowledge that is gained after experience and synthetic knowledge is something new about the world.

Our feelings or sentiments produce our actions, so much so that present actions resemble the past actions. We therefore can conclude that human actions depend on their beliefs which are in customary associations with human feelings. Clearly, rationality has no place in the account of morality. Being rational means acting wisely and efficiently to choose the appropriate means to advance one’s goals. Even though reasoning depends upon ideas and matters of fact, its most dramatic outcomes may come of out of feelings. All human actions flow naturally from human feelings, without any interference from human reason.

In major parts of the world, caste hierarchy is one of the oldest forms of social stratification. Deep down, the biggest features of casts is its ability to render a rigid and invasive hierarchical system of inclusion and exclusion. Whether it is India or America, people have not been able to get rid of the caste system. The caste system is based on deep feelings of people with an outcome of prejudice, stereotyping and pigeonhole mentality. Our emotional and intellectual mechanisms work together and sustain each other. Sometimes they cannot be separated at all. Rationality and empiricism (knowledge is based on experience) do not go hand in hand. Only ideas cannot be used to prove matters of fact; like it is pointless to prove existence of God.

We are experiencing progress in society because of some good institutions that have contributed to the quality of human life, scientific research, development in arts art, and education. Progressive businesses have given a lot to society because they have broken down myriad centuries-old barriers of racial, sexual, religious, and ethnic prejudice. And they have been the vehicle for countless numbers of individuals to develop their fullest potentials in achieving their dreams.  In short, some business organizations have been prime movers in making it possible for millions to pursue their lives in a wealthy, healthy, rational and exciting world. Good organization is built upon ethical business practices.

Corporate Governance which is offshoot of Business Ethics is based on the foundation that companies should engage in fair dealing with all of their stakeholders who are customers, employees, suppliers, and communities, as well as shareholders. Companies must engage in accordance with the expectations of the larger society in which they operate. An organization exists on its purpose in society. And an organization which exists on a shareholder-centric model also recognizes that it owes a lot to society, therefore, must minimize its negative externalities such as pollution and destruction of ecology.

And finally, for all individuals and organizations integrity is a choice, which depends to a large extent on culture, upbringing, peer influences, etc. it can’t be forced.  One who has strong and well-defined standards of integrity behaves with wholeness, integration, honesty, and does right by him and by others.

We see countless professionals giving up their integrity and morals for the sake of money and money is a big addiction. Wealthy people get imprisoned into their lifestyle and their need to impress the world.  It’s sad that people forget to create their legacy.

What is your legacy? It’s what you will be able to say about yourself when you’re old and look back at life. It’s about what you have stood for, given to the society, taught, imparted, and left behind. It’s not what you dreamed of being, but what you have been.  It’s not a dress rehearsal, but the reality of what you have left behind. Many professionals forget that they have this one chance to build a life that’s meaningful for them.  It’s sad that people compromise their legacy for a futile greed to grasp success, money, accolades and power.

Chester Barnard has authored a great book titled ‘The Functions of the Executive’ which presents a theory of cooperation and organization. This book was published in 1938.   The book is noteworthy for its focus on how organizations actually operate. The book is considered as one of the first books to focus on leadership from a social and psychological viewpoint.

Barnard’s philosophy and thought processes in writing the book were characterized by humanism, empiricism, speculative philosophy and analysis of the contrasting nature of individualism and collectivism.

Barnard was a student of Harvard University between 1906 and 1909 where he majored in economics. However, he did not obtain a degree. He joined AT & T Corporation and rose through the ranks. Barnard became president of New Jersey Bells which was founded in 1904 as an AT&T’s arm serving southern New Jersey, named Delaware and Atlantic Telegraph & Telephone Company. Barnard served the company as President between 1927 and 1948. At New Jersey Bell, Barnard enjoyed “long hours of self-absorbed reflection and study.

He describes the four spheres of morality in his book:

The Commitments of Private Life: This the first sphere of morality. In this part Barnard describes the manager’s duties and obligations which are usually stated as intangible yet universal principles. Always tell the truth, keep your promises, never hurt others, be good to everybody these morals are taught to us from childhood. Individuals get puzzled when it comes to organizational role to be played by them; many people disagree about the origins of these moral duties. Such principles, however, offer only an abstract, mitigated view of philosophers. The morals are very complex to practice. It comes in way in a person’s commitments, ideals and aspirations. Morality is a man-made concept that is defined by the society you live in; it is subjective.

Yet hard moral choices are at times unavoidable for many people in positions of power. How do you fire a friend, someone you have grown up with for years? How do you evaluate performance of one of your relatives who works under you? How to violate an employee’s privacy with a drinking problem, for example how to intervene in his private life to get him help which he badly needs? Can you be at peace when your company’s product will be misused by some customers and hurt innocent people? You have clear conscience; you don’t like to pay bribe, but you are forced to pay bribe to get a work done for your company. These and so many more examples describe the personal life sphere of an executive. Executives are always struggling to clear moral dilemmas while doing their jobs.

The Commitments as Economic Agent: the second sphere of morality in a manager’s life is the role of an economic agent.  Managers need to create profits for the organization. An executive works to improve economics of a firm. The management of the firm and his superiors often remind him to serve in the interests of shareholders. What is realized rarely is that the manager is loaded with so many other responsibilities to stick in the framework created by the organization; he is responsible for legal, financial, HR, marketing etc. The ties between the owners of a company and the managers who act as their agents are unavoidably moral. Shareholders entrust their assets to managers, and managers promise, implicitly to work for the shareholders’ interests. Like any other promise, this relationship of trust carries strong moral weight. Moreover, this obligation is strengthened by the duty that all citizens have to obey the law. For the sake of profits, on few occasions managers compromise on their values which disturb their personal lives.

Commitments as Company Leaders: This is the third sphere of responsibility which exists because employees and managers are members of organizations which is compared to human body and therefore it is said that organizations do not have permanent status. In the wake of new economy, where value comes increasingly from the knowledge of people, and where workers are no longer undifferentiated cogs in an industrial machine, management and leadership are not easily separated. People look to their managers, not just to assign them a task, but to define for them a purpose. And managers must organize workers, not just to maximize efficiency, but to nurture skills, develop talent and inspire results.

Managers need to act as per situation; there is no permanent style of leading leaders must manage show as per demand of a situation. They need to show lot of flexibility while managing challenging and difficult situations. They need to command, demand, inspire, prompt, mentor, guide, coach, sell ideas, take part, act, build, and sometimes even reprimand. Often the leadership style may change as per need of the hour

The late management guru Peter Drucker was one of the first to recognize this truth. He identified the emergence of the “knowledge worker,” and that created profound differences the way business world was organized.

The fundamental sustaining style of leadership is that there is no ‘best’ or ‘worst’ style of leadership. Effective leadership is task-relevant, and the most successful leaders are those who adapt their leadership style maturely. Matured leaders set high but attainable goals, they are willing to take responsibility for the task. They are best learners; they learn from each situation and mold themselves.

Responsibilities beyond Firm’s Boundaries: it is natural to think that executives’ responsibilities stop at their organization’s boundaries. But firms do not exist in vacuum. And they have complex relationships with government agencies, labor unions, with strategic alliance partners, distributors, customers, suppliers, and even competitors. Globalization has blurred national boundaries. This organizational reality creates a new and enormously complex sphere of responsibilities for managers. Again, the central issue is power. Just as business executives have enormous influence over the people inside their company, they have the power to create influence outside their company because of their operations and sometimes their destinies which are tangled. In Japan, West Germany, and other countries, groups of large and small firms are clustered in the form of cartels, keiretsu (a conglomeration of businesses linked together by cross-shareholdings to form a robust corporate structure) and other confederations. America, despite its ideological preference for the Adam Smith model of small-firm competition, is home to many of the largest firms in the world, and they, too, are surrounded by vast cadres of suppliers and customers and often have close relationships with many government agencies.

For the sake of clarity I would like to give an example of global firm Nike. NIKE owns no factories for manufacturing its footwear and apparel, which make up ~88% of its revenues. Instead, manufacturing is outsourced to third parties because of the cost advantages of doing so. Most raw materials in NIKE’s supply chain are sourced in the manufacturing host country by independent contractors mostly existing in Asian countries.

Conclusion: Globalization has stimulated changes in all aspects of human endeavor. Therefore, everywhere, people, institutions, roles, statuses, organizations etc, are changing. Changes are therefore inevitable consequence in any organization. It has been argued that change is the very essence of the environment in which an organization operates. A change is any deviation from normal situation and its management requires special skills to weather the change.

Most people get confused with their faulty thinking of unethical behavior; they think that “bad” people do “bad” things and “good” people are ought to do “good” things. This good-bad tagging of people that we do misleads us in most situations. The moral dilemmas of managers are many.  They keep battling conflicting moralities among different spheres of responsibilities. Each sphere is, in many ways, a nearly complete moral universe comprising of its own world of commitments, human relationships, strong duties, norms of behavior, personal aspirations, and choices that bring happiness and suffering to others. When a manager faces problems simultaneously in different spheres of commitment, he faces the hazards of which Chester Barnard has warned in his book.

Kong Qiu famously known as Confucius was a Chinese teacher, editor, politician, and philosopher of the approximately until 403 BC which is also called the Spring and Autumn Period of Chinese history which corresponds roughly to the first half of the Eastern  Zhou dynasty. This period can also be described further as a golden era because the concept of morality was established and practiced. Confucius emphasized personal and governmental morality, correctness of social relationships, justice and sincerity. His followers competed successfully with many other schools during the Hundred Schools of Thoughts. The concept ‘hundred schools of thought’ refer to an era of great cultural and intellectual expansion in China. Though, that era was loaded with chaos and bloody battles, but it was also known as the Golden Age of Chinese philosophy because a broad range of thoughts and ideas were developed and discussed freely. This phenomenon is also been called the Contention of a Hundred Schools of Thought.  The Qin Dynasty tried to suppress Confucius’s philosophy and thinking but Qin lost his dynasty soon, and Confucius’s thoughts received official sanction and were further developed into a system known as ‘Confucianism’.

Confucius’s teachings center on graceful existence of people; he also imbibed correctness and integrity in his philosophy. It seems Confucius was threatened with his life; but he kept going. He used say “I hear and forget. I see and I remember. I do and I understand.” He believed that every human being is capable of cultivating moral feelings and virtues. To the morally cultivated individual, virtue is what he or she desires for its own sake and virtuousness is the foundation of a successful society.

If you read Confucianism in details, you will observe that Confucius overestimated the power of virtue. Virtue cannot protect the weak against the strong, and it is powerless against wickedness and naked selfishness. In pressing situations, people often simply find it more convenient to resort or submit to the use of power in order to protect themselves or advance their interests. Ironically, Confucius was keenly aware that his moral approach could not save the world from moral and political decay.

Confucianism is a complex system of social and political ethics based on dutiful piety, kinship, loyalty and righteousness. His teachings cover a wide range from how a “true gentleman” should behave in his daily life to how a ruler should govern with a benevolent concern for the well-being of his subjects. In other words, it’s a kind of moral guide and direction for good governance based on values of hierarchy, group orientation, and respect for seniors in age and tradition. The Confucian system is based on morality.

The Analects of Confucius is a collection of sayings and ideas discussed between him and his followers and contemporaries, traditionally believed to have been written by Confucius’ followers. The Analects was considered merely a commentary. But its status grew to be one of the central texts of Confucianism. The Analects has been one of the most widely read and studied books in China for the last 2,000 years, and continues to have a substantial influence on Chinese and East Asian’s thoughts and values today. In today’s chaotic world where morality has lost its value it’s all the more important for us to read about Confucianism. Once Confucianism is saved, it could make the world a much better place to live in.

Today’s generation feels that Confucianism is a very old tradition of thought that can no longer work effectively. They feel it is utopian in nature; hence for the modern world it requires systematic reconstruction. Confucianism also needs saving because of the chronic gap between its political ideals and the reality of societal circumstances. But to save Confucianism and to let it save the world, we must first learn its profound insights and its profound failures. Even in those days i.e 403 BC the political elite were motivated more by self-interest than by virtue, and played by the rules of power rather than the rules of rituals designed to ensure good governance. Same is the case even today. Confucius’s solution was to revitalize the style of governance. He observed that power goes to head and it is difficult to stay grounded when people have power in their hands.

Confucius felt that legalism spoils the social fabric; legalism is based on the belief that people are evil by nature and that people behave properly only if compelled by strict laws and harsh punishments. Xunzi who was one of the contemporaries of Confucius, led to the development of Legalism. He believed that people had to be forced to make the right decision. He did not believe in the essential goodness of all human beings, and he did not believe that they could make the right decisions. Whereas, Confucius felt that reward and punishment makes people shameless and turns them further away from independent moral cultivation. To accept Legalism is equal to abandoning the best aspects of humanity. Second, reward and punishment alone cannot ensure long-term stability and peace. If people have no virtue, sophisticated systems of sanction only breed ingenious crimes, and no government of any kind can save the day. If you see our system closely, that’s what criminals do. They study the loopholes in laws and exploit it to the hilt.

The Confucians cannot agree with the Legalist strategy, yet they admit that their rituals and virtues fail to control elite behavior. The challenge then becomes this: Is there any alternative that effectively tackles problems in the non-ideal world and yet retains Confucian ideal aspirations? This question has haunted Confucians for over 2,500 years, and continues to do so even today.

The best way to meet this challenge is to adopt liberal democratic institutions that are shaped by the Confucian conception. Confucianism has good instrumental reasons to adopt democracy, because of its view that political authority exists for the happiness of the people. Under suitable social and economic conditions, the institutions of liberal democracy – limited government, democratic elections, human rights, and civil liberties appear to be more effective than other political systems in restraining political power, preventing unconcealed corruption, and forcing elected officials to work for and respond to the people. Well, all this does sound utopian.

While democracy can promote and express Confucian values, Confucianism can also work to the advantage of democracy. For a democracy to function well and not deteriorate into aggressive politics based on narrow self-interest, it needs virtuous citizens. The cultivation of Confucian morals, as a form of humanity-based moral education, may well be more effective than liberal civic education in instilling the virtues of such a citizenry.

Confucianism can also provide food for thought on how to select virtuous and competent people to serve in politics. If democratic elections do not furnish an adequate number of high-caliber politicians, or if they discourage politicians from making policies conducive to the people’s long-term interests, Confucianism would consider alternative institutions to supplement democracy. By way of example, establishing a second legislative chamber whose members consist of seasoned participants in public service with good reputation in serving the people.

The Confucius Institute program began in 2004 and is overseen by Hanban – the Office of Chinese Language Council International. The program is governed by a council whose top-level members are drawn from Communist Party of China and various state ministries. The institutes operate in co-operation with local affiliate colleges and universities around the world, and financing is shared between Hanban and the host institutions. The related Confucius Classroom program partners with local secondary schools or school districts to provide teachers and instructional materials. Confucius Institutes are sometimes compared to language and culture promotion organizations such as Britain’s British Council, France’s Alliance Françoise and Germany’s Goethe Institute. Unlike these organizations, however, Confucius Institutes operate within established universities, colleges, and secondary schools around the world, providing funding, teachers and educational materials.