UNIT – 5 Individual factors

Moral Philosophies and values – Moral Philosophy defined:

Moral philosophy is the branch of philosophy that contemplates what is right and wrong. It
explores the nature of morality and examines how people should live their lives in relation to
others.

Moral philosophy has three branches.

One branch, meta-ethics, investigates big picture questions such as, “What is morality?”
“What is justice?” “Is there truth?” and “How can I justify my beliefs as better than
conflicting beliefs held by others?”

Another branch of moral philosophy is normative ethics. It answers the question of what we
ought to do. Normative ethics focuses on providing a framework for deciding what is right
and wrong. Three common frameworks are deontology, utilitarianism, and virtue ethics.

The last branch is applied ethics. It addresses specific, practical issues of moral importance
such as war and capital punishment. Applied ethics also tackles specific moral challenges that
people face daily, such as whether they should lie to help a friend or co-worker.

So, whether our moral focus is big picture questions, a practical framework, or applied to
specific dilemmas, moral philosophy can provide the tools we need to examine and live an
ethical life.

Applying Moral Philosophy to Ethical decision Making

Applying Moral Philosophy to Ethical Decision Making Individuals make judgements about
what they believe to be right or wrong, but in their business lives they make decisions that
may be based not only on perceived right or wrong but also on producing the greatest benefit
with the least harm.

Applying Moral Philosophy to Ethical Decision Making: Applying moral philosophy to

ethical decision making is a normal process individuals resort to. However, what moral
philosophy they take depends on whether they make a personal decision outside the work
environment or they do so in a work-related matter. As we have seen earlier, this difference
in the approach of applying moral philosophies may arise because the kind of goals and
pressures that motivate persons to achieve success in the work environment does not exist in
their domestic or personal lives. As a result, a worker may consider a certain deed good in his
or her job-related environment, but unacceptable in the domestic arena. For instance, an
executive if asked by his manager, may prepare an exaggerated expenditure account for his
department for necessary sanction by the corporate office so that his department will have a
comfortable annual budget with no constraint on expenditure, but when he has to prepare one
for his domestic budget, he cannot be so generous, as he has to live within his means and so
he will have to cut out all the ‘frills and pads’ in it. Intense and fierce competition to reach to
the top in the organization may be wanted in the dog-eats-dog corporate world, but if this is
practised among siblings it will lead to domestic discord and dismemberment of the family.
The other reason why persons change their moral philosophies when applying them to ethical
decision making may be due to the corporate culture that is practised in their work
environment. According to Ferrel et al. ‘Rules, personalities, and historical precedence exert
pressure on the person to conform to the new firm’s culture. As this occurs, the individual’s
moral philosophy can change to be compatible with the work environment.’ When an
employee joins a new firm, he or she may try to change certain values within his or her moral
philosophy to suit the moral philosophy of the new firm. Employees face any number of
problems in the workplace when they cannot solve successfully, ethical situations with the
help of moral philosophy. If they have a clear understanding ‘of the basic premise of their
decision rationale,’ they will have a firm grasp of the situation and can take sound decisions.
In many developing countries like India, paying a ‘commission’ to get a large government
contract has almost become a norm. It has now become common in the private sector
industry. But if the company policy forbids it and the law is against it, then the employee
concerned will be guided by his or her moral philosophy and may not offer such commissions
to bureaucrats or to company executives in similar situations. But on the other hand, if the
person’s goal is fast-track promotion and an exponential career graph, he or she may resort to
such unethical practices and even may rationalize it by saying. ‘If you can’t beat them, join
them in the game’. In this case, paying ‘commission’, a form of bribery, may be consistent
‘with the person’s moral philosophy of acceptable business behaviour’.

While studying and evaluating the process of ethical decision making, it is appropriate, and to
a great extent even necessary, to understand the concept of cognitive moral development as
enunciated by psychologist Lawrence Kohlberg.His six-stage model of cognitive
development explains why people make different decisions in similar ethical situations.
According to him, they do so because they are in one of the six easily identifiable moral
development stages, which grow from a lower level to the higher level as people’s knowledge
and socialization continue to develop over time. Though Kohlberg’s model is not directly
related to the business context, it explains how people make decisions based on stage of
cognitive moral development that they have reached. In Kohlberg’s model, people pass
through the following six stages of moral development.

The Stage of Punishment and Obedience

This stage is generally associated with the behaviour of small children who respond to rules
dictated to them by their parents or teachers and consider what is good or bad purely in terms
of the potential penalty they have to suffer if they violate the rules. Even adults who are in
this stage of cognitive moral development may follow this behaviour of obedience to rules
out of fear of possible punishment by those who wield the power rather than adopting an
attitude of reasoning by themselves what is good and what is bad.

The Stage of Individual Instrumental Purpose and Exchange

At this stage, the individual evaluates behaviour on the basis of its fairness to him or her. This
is also called the stage of reciprocity because one’s decision and behaviour is not based on
any eternal values of loyalty, or commitment to the job, but to what one gets in return. In
India, in most rural communities, there is a practice among relatives to donate a sum of
money to families that either celebrate a marriage or have to meet funeral expenses, so as to
reduce their financial burden. It is an unwritten obligation for the recipient to pay back the
amount when the donor has to meet similar expenses. It is only fair for donors to expect the
return receipts when they need them most.

The Stage of Mutual Interpersonal Expectations, Relationships and Conformity

This is a stage where individuals consider the well-being of others, though they may still be
motivated by the obedience to rules. Unlike in the second stage, where the individual is
concerned primarily with his or her own needs, in this stage, fairness to others is one of the
individual’s ethical motives. At this stage, people tend to live up to what is expected of them
by those close to them. People at this stage render the help without expecting any quid pro
quo. It is expected of friends, especially when they are young, to go to the rescue of their
close friends without expecting a return favour.

The Stage of Social System and Conscience Maintenance

During this stage, an individual considers his or her duty to society as being the right thing to
do. ‘Duty, respect for authority, and maintaining the social order become the focal points.’ In
this stage, people tend to uphold laws except when they conflict with fixed social duties. We
come across many persons to be law abiding and have such a commitment to these values
that they follow them even at great in though they may still be motivated by the obedience to
rules. Unlike in the second stage, where the individual is concerned primarily with his or her
own needs, in this stage, fairness to others is one of the individual’s ethical motives. At this
stage, people tend to live up to what is expected of them by those close to them. People at this
stage render the help without expecting any quid pro quo. It is expected of friends, especially
when they are young, to go to the rescue of their close friends without expecting a return
favour.

The Stage of Prior Rights, Social Contract or Utility

At this stage, an individual has a broader vision and develops a sense of social obligation or
commitment. He or she is also concerned with the maintenance of values of society and
observes the ‘social contract’ to other groups and recognizes the legal and moral views that
may conflict. These individuals reduce such conflict and arrive at decisions by rational
calculation of overall utilities. For instance, there are several instances of doctors attending to
critically injured patients with a view to reviving them back to life, even ignoring the legal
provision that in most such cases complaints have to be registered with the police before
patients are attended to. The controversy that has arisen about doctors at Apollo Hospital,
New Delhi, when they did everything they could to save the life of the critically ill Rahul
Mahajan, even though they could have overlooked some legal problems to save the life,
illustrates this point.
The Stage of Universal Ethical Principles

An individual at this stage realizes that there are certain universal principles that are to be
respected. Justice and equality before law are inalienable rights to which every person is
entitled to and are ‘universal in nature and consequence’. These rights, laws, or social
agreements are more effective because they are universal and a person in this stage favours
social ethics to organizational ethics for ethical direction. There had been several instances of
employees of organizations that produce harmful products demonstrating against such
unethical practices notwithstanding the consequences because they believed that nobody had
the right to harm or kill others for the purpose of enriching themselves or for any other
reason.

White – Collar Crime

The term "white-collar crime" refers to financially motivated, nonviolent crime committed by
individuals, businesses and government professionals.

[1] It was first defined by the sociologist Edwin Sutherland in 1939 as "a crime committed by
a person of respectability and high social status in the course of their occupation".

[2] Typical white-collar crimes could include wage theft, fraud, bribery, Ponzi schemes,
insider trading, labor racketeering, embezzlement, cybercrime, copyright infringement,
money laundering, identity theft, and forgery.

[3] White-collar crime overlaps with corporate crime.

 White-collar crime is a type of non-violent crime that is financially motivated.

 White-collar crimes may be perpetrated by individuals or at a corporate level. Due to

the sophisticated technology now available, however, even white-collar crimes
committed by an individual may result in tens of millions in losses for the victims.

 A sociologist and criminologist, Edwin Sutherland, invented the phrase “white-collar

crime” in 1939. Prior to his writings on the subject, many people resisted believing
that members of the “upper class” engaged in criminal activity.

Individual factors in Business Ethics

Business leaders today are well aware of the ethical issues and hence they want to improve
the ethical standards of the business. Self-regulation is, of course, better and produce
impressive results. Besides, there are also a number of factors, which significantly influence
the managers to take ethical decisions.

Factors influencing Business Ethics

Business leaders today are well aware of the ethical issues and hence they want to improve
the ethical standards of the business. Self-regulation is, of course, better and produce
impressive results. Besides, there are also a number of factors, which significantly influence
the managers to take ethical decisions. Some of them are:

1. Personal Code of Ethics

A man’s personal code of ethics that is what one considers moral is the foremost responsible
factor influencing his behavior.

2. Legislation

It is already stated that the Government will intervene and enact laws only when the
businessmen become too unethical and selfish and totally ignore their responsibility to the
society. No society can tolerate such misbehavior continuously. It will certainly exert
pressure on the Government and the Government consequently has no other alternative to
prohibit such unhealthy behavior of the businessmen.

3. Government Rules and Regulations

Laws support Government regulations regarding the working conditions, product safety,
statutory warning etc. These provide some guidelines to the business managers in
determining what are acceptable or recognized standards and practices.

4. Ethical Code of the Company

When a company grows larger, its standard of ethical conduct tends to rise. Any unethical
behavior or conduct on the part of the company shall endanger its established reputation,
public image and goodwill. Hence, most companies are very cautious in this respect. They
issue specific guidelines to their subordinates regarding the dealings of the company.

5. Social Pressures

Social forces and pressures have considerable influence on ethics in business. If a company
supplies sub-standard products and get involved in unethical conducts, the consumers will
become indifferent towards the company. Such refusals shall exert a pressure on the company
to act honestly and adhere strictly to the business ethics. Sometimes, the society itself may
turn against a company.

6. Ethical Climate of the Industry

Modern industry today is working in a more and more competitive atmosphere. Hence only
those firms, which strictly adhere to the ethical code, can retain its position unaffected in its
line of business. When other firms, in the same industry are strictly adhering to the ethical
standards, the firm in question should also perform up to the level of others. If the
company’s performance is below than other companies, in the same industry, it cannot
survive in the field in the long run.

Factors affecting business ethics

The business executive working as a professional manager has to decide what is ethical or
unethical. Many factors influence this decision. In part, what is ethical is based on:

1. The individual’s personal code of behavior: The personal Code of Behavior is the result of
the complex environment that influences one’s life.

2. The ethical standards imposed on a manager by his superiors also influence him in his
decisions as to the morality of behavior. If the superior condones unethical activities such as
padding expenses accounts, the subordinate is encouraged to look upon this activity as an
acceptable practice.

3. The policies of the company also influence the determination of ethical conduct.
Standards of behavior in an industry are often influenced greatly by the dominant firms in
that industry. The authors of the company policy obviously have an effect that is decisive.

4. The ethical climate of a country. If, it is poor, then only giant corporations and large
undertakings can stand competition and be viable; a small concern is apt to go bankrupt,
since business is concerned with employment of a large number of persons, it has the
obligation to see that it adheres to an ethical atmosphere. However, considerable
differences occur among managers as to what is ethical or unethical; and business truly
lacks a Code of Ethics.