CORPORATE GOVERNANCE &

PROFESSIONAL ETHICS
(CB3003)
Unit 1
By Dr. Ruchi Priya Khilar
For B.com 5 th semester
KIIT Deemed University
Introduction
◦ Ethics: Rules and moral principles that define human conduct as right and wrong.
◦ Business ethics is the application of ethics to business activities. When applied to
business, this means business with character.
◦ Rule based morality in business ethics: It refers to applying established ethical principles
or rules to guide decision-making and behavior within a business environment. This
approach emphasizes adherence to predefined standards and codes of conduct,
ensuring that business practices are consistent with ethical norms and legal
requirements.
◦ Adherence to Codes of Conduct: Businesses often establish codes of conduct that outline
acceptable behaviors and practices in an organisation.
◦ Legal Compliance: Businesses are expected to adhere to legal standards, such as anti-
corruption laws, labor regulations, and environmental laws.
◦ Consistency and Objectivity: This approach seeks to ensure that business decisions are
made consistently and objectively based on established rules, rather than on subjective
judgments or personal biases.
Branches of ethics
◦ Normative ethics: This is the largest branch of ethics which deals with how individuals can decide
the correct moral action that they should take in a given situationof ethical nature. Socrates and
John Stuart Mill are the main propounders of this ethic.
◦ Meta-ethics: This branch of ethics seeks to understand the nature of ethical properties and
judgements such as if true values can be found and the theory behind moral principles.
◦ Applied ethics: It is a branch of ethics that focuses on the practical application of moral principles
and theories to real-world issues and situations. Unlike theoretical ethics, which deals with abstract
questions about the nature of morality, applied ethics addresses specific ethical problems and
dilemmas that arise in various domains of human activity.
◦ Moral ethics: It is typically understood as the study of what is right and wrong in human behavior
and how individuals should act based on moral principles. This term encompasses the general
principles and theories that guide moral behavior and decision-making.
◦ Descriptive ethics: It is a branch of ethics that focuses on describing and analyzing how people
actually behave and what moral beliefs they hold. Unlike normative ethics, which is concerned
with how people should act and what moral principles they should follow, descriptive ethics aims
to objectively document and understand existing moral practices, beliefs, and systems as they are
observed in different cultures, societies, or groups.
 Ethics Morality

◦ The word Ethics originated from the Greek ◦ The word Morals originated from the Latin
word ethos. The meaning of ethos is a word Mos. The meaning of Mos is custom.
character.
◦ When it comes to the acceptability of
◦ Legal guidelines and professional rules morality it transcends the norms laid
govern ethics. The acceptability of ethics down by culture.
is confined within a particular space and
time frame. ◦ Morality is seen from the perspective of
an individual.
◦ Ethics are dependent on the prism of
others. ◦ Change in morality depends on the
difference in the beliefs of an individual.
◦ If the contexts are different, then the
ethics could be different. Hence there is ◦ Morality is followed because a person
some degree of flexibility in ethics. believes that it is the right course of
action.
◦ Ethics are followed because society has
decided it is the right course of action. ◦ Morality has a religious connotation.
◦ Ethics is something usually associated in
the field of law, medicine or business.
Ethics does not have a religious
connotation.
Theory of business ethics
1. Teleological theory of ethics
1. Theory of Utilitarianism
2. Theory of virtue
3. Theory of justice and fairness
2. Deontological theory of ethics
1. Duty Theory
2. Rights Theory
3. Kantian theory of duty
4. Ross’s duty theory
Types of business ethic issues
Business ethics issues arise when there are conflicts between what is considered right or wrong in the
business environment. These issues often involve questions of fairness, transparency, and the impact of
business practices on stakeholders. Here are some common types of business ethics issues:
◦ Corporate governance
◦ Bribery and corruption
◦ Discrimination and harassment
◦ Fair and labour practices
◦ Environmental responsibility
◦ Product safety and quality
Principles of business ethics
Ethical principles in business serve as the foundation for making decisions that are not only legally
compliant but also morally sound. These principles guide behaviour and decision-making processes,
ensuring that businesses act responsibly toward their stakeholders, including employees, customers,
suppliers, and the broader community.
Key principles in Business Ethics
◦ Integrity: Acting with honesty and strong moral principles in all business dealings; Being truthful in
communications, fulfilling promises, and maintaining consistency between words and actions.
Example: A company openly disclosing both positive and negative aspects of a product to consumers.
◦ Transparency: Providing clear, truthful, and complete information to stakeholders; Ensuring that
financial reports, marketing materials, and other public disclosures are accurate and not misleading.
Example: A business releasing an annual report that accurately reflects its financial status without hiding
any potential liabilities.
Cont…
◦ Fairness: Treating all stakeholders equitably and making decisions impartially; Avoiding favoritism,
discrimination, or bias in hiring, promotions, and other business practices.
Example: A company implementing policies to ensure equal pay for equal work, regardless of gender or
other factors.
◦ Accountability: Taking responsibility for one's actions and their impact on others; Admitting mistakes,
taking corrective action, and being answerable to stakeholders for business decisions and outcomes.
Example: A business issuing a public apology and compensating affected customers after a product recall
due to safety issues.
◦ Respect for people: Valuing and honoring the dignity, rights, and diversity of individuals; Promoting a
culture of respect in the workplace, fostering inclusivity, and protecting the privacy and well-being of
employees and customers.
Example: A company implementing strong anti-discrimination policies and offering training on diversity
and inclusion.
Cont…
◦ Confidentiality: Safeguarding sensitive information and using it appropriately; Protecting trade secrets,
personal data, and other confidential information from unauthorized access or disclosure
Example: A business implementing robust data protection measures to secure customer information and prevent
data breaches.
◦ CSR: Acting in a socially responsible manner, contributing positively to society, and minimizing negative
impacts on the environment; Engaging in sustainable practices, supporting community initiatives, and reducing
the environmental footprint of business operations
Example: A company committing to reducing carbon emissions and supporting renewable energy projects as
part of its CSR strategy.
◦ Empathy: Understanding and being sensitive to the needs, feelings, and perspectives of others; Considering the
human impact of business decisions, especially those that affect employees, customers, and communities.
Example: A company offering flexible working arrangements and mental health support to employees during
challenging times
Cont…
◦ Lawfulness: Complying with all applicable laws and regulations; Ensuring that business practices
adhere to legal standards in areas such as labor, environmental protection, and consumer rights.
Example: A business ensuring compliance with labor laws by providing fair wages and safe working
conditions.
◦ Sustainability: Making decisions that do not harm future generations, considering the long-term impact
on society and the environment; Implementing practices that reduce waste, conserve resources, and
promote environmental stewardship.
Example: A company adopting a zero-waste policy and focusing on recycling and sustainable sourcing.
Dipankar Gupta (2006): Three principles of business ethics
1. Standardization
2. Workable
3. Driven from top
Implementing ethical principles in
business
◦ Developing a code of ethics: A formal document outlining the company’s ethical standards,
guiding principles, and expectations for behavior
◦ Ethics training and education: Providing regular training to employees on the importance of ethical
behavior and how to apply ethical principles in their roles.
◦ Ethical leadership: Leaders setting an example by embodying the company's ethical principles and
promoting a culture of integrity.
◦ Whistleblower protection: Establishing safe and confidential channels for reporting unethical
behavior without fear of retaliation.
◦ Stakeholder engagement: Actively engaging with stakeholders to understand their concerns and
ensuring that business practices align with their ethical expectations.
◦ Regular ethical audits: Conducting periodic reviews of business practices to ensure compliance with
ethical standards and to identify areas for improvement.
Ethical Dilemmas in Business
◦ An ethical dilemma is a situation in which one has to make a choice between the two
equally undesirable choices each of which leads to unacceptable or unwanted
consequences. Ex: in the opening case(page no. 115) the sales manager left with two
choices: either adopt illegal strategy and risk going to jail or do nothing and risk going
bankrupt.
Types of ethical dilemma
◦ Organisational goals vs personal values
◦ Organisational goals vs social values
◦ Organisational practices vs personal beliefs
◦ Organisational profit vs production of sale of Hazardous products
◦ Work time vs personal business
Resolving ethical dilemma
Resolving an ethical dilemma in business involves a structured approach to make a
decision that aligns with ethical principles and organizational values. Here are the steps
that need to be considered:
1. Identify the Ethical Dilemma
2. Gather Relevant Information
3. Generate the alternative options
4. Apply Ethical Principles
5. Make the Decision
6. Implement the Decision
7. Monitor and Reflect
Example: A company discovers that one of its suppliers is using child labor in their
factories.
Ethical decision making
◦ Ethical decision-making involves evaluating choices and actions based on moral
principles and values to determine what is right or wrong. It involves several steps:
◦ Identify the problem: Clearly define the problem on which decision needs to be made.
◦ Gather Information: Collect relevant facts and consider the context.
◦ Identify Stakeholders: Recognize who will be affected by the decision.
◦ Consider Alternatives: Explore different options and their potential impacts.
◦ Evaluate Alternatives: Assess each option against ethical principles such as honesty, fairness,
respect, and responsibility.
◦ Make the Decision: Choose the option that aligns best with ethical standards.
◦ Implement the decision: Implement the decision and communicate it appropriately
◦ Review and reflect: After implementing the decision, review the outcomes and reflect on the
process
◦ Example: A company discovers that a product they sell has a defect that could
potentially harm consumers. The company needs to decide whether to recall the
product or continue selling it.
Models of ethical decision-making
1. Consequentialist Theory: see from the lens of teleological theory perspective
2. Non-consequentialist Theory: see from the lens of deontological theory perspective
Kohlberg’s Model of Moral
development
Lawrence Kohlberg's model of moral development outlines a theory of how individuals develop
moral reasoning over time. Kohlberg proposed that moral development occurs in stages, each
representing a more advanced level of moral understanding. His model is divided into three main
levels, each having two stages:
1. Preconventional stage: At this level, moral reasoning is based on direct consequences for oneself.
Stage 1: Self: sticking to rules to avoid physical punishment.
Stage 2: Self-interest and reciprocity: "I'll do this for you if you do that for me."
2. Conventional stage: At this level, moral reasoning is based on social norms and expectations.
Stage 3: Good Interpersonal Relationships:Moral behavior is guided by the desire to be seen as a good
person by others. Actions are evaluated based on how they impact relationships and gain social approval.
Stage 4: Preserving the Social Order: Morality is defined by adherence to laws, rules, and social conventions.
The emphasis is on maintaining order and fulfilling one's duties within the society.
cont...
3. Post-conventional stage: Influenced by personal ethical principles of what is right.
These may or may not be in accordance with rules or laws of society.
Stage 5: Free arguments and social contracts: Morality is based on the understanding that laws
and rules are social contracts that should promote the greatest good for the greatest number.
There is an emphasis on individual rights and the need to challenge unjust laws.
Stage 6: Universal ethical principles: Moral reasoning is based on abstract principles of justice,
equality, and human dignity. Individuals follow self-chosen ethical principles and are willing to
act according to these principles, even if it conflicts with laws or social norms.