BUSINESS ETHICS & CORPORATE GOVERNANCE

Assignment No. 2

Submitted By:

Name: Gourab Roy,

ID: 19PMHS010 Dept. of MHSS,
MBA, 3rd Semester NIT Agartala
Q1. What are ethics?

Ans: Ethics is a branch of philosophy that involves systematizing, defending and

recommending concepts of right and wrong conduct. Ethics in Latin language is called ‘Ethicus’
and in Greek, it is called ‘Ethicos’. The term comes from the Greek word ethikos from ‘ethos’,
which means custom, habit, character or manners. Ethics is thus said to be the source of
morals; a treatise on this; moral principles; recognized rules of conduct. Ethics can be defined
as the study of what makes up good and bad conduct inclusive of related actions and values.

Q2. What are the various ethical theories?

ANS: There are four broad categories of ethical theories which include deontology,
utilitarianism, rights, and virtues.

Deontology
The deontological class of ethical theories states that people should adhere to their obligations
and duties when engaged in decision making when ethics are in play. This means that a person
will follow his or her obligations to another individual or society because upholding one’s duty
is what is considered ethically correct. For instance, a deontologist will always keep his
promises to a friend and will follow the law. Deontology contains many positive attributes, but
it also contains flaws. One flaw is that there is no rationale or logical basis for deciding an
individual’s duties. For instance, a businessperson may decide that it is his/her duty to always
be on time to meetings. Sometimes, a person’s duties are in conflict.

Utilitarianism
Utilitarian ethical theories are based on one’s ability to predict the consequences of an action.
To a utilitarian, the choice that yields the greatest benefit to the most people is the one that is
ethically correct. There are two types of utilitarianism, act utilitarianism and rule utilitarianism.
Act utilitarianism subscribes precisely to the definition of utilitarianism; a person performs the
acts that benefit the most people, regardless of personal feelings or the societal constraints
such as laws. Rule utilitarianism takes into account the law and is concerned with fairness. A
rule utilitarian seeks to benefit the most people but through the fairest and most just means
available. Both act and rule utilitarianism has disadvantages. Although people can use their life
experiences to attempt to predict outcomes, no one can be certain that his/her predictions will
be accurate. Uncertainty can lead to unexpected results making the utilitarian decision maker
appear unethical as time passes, as the choice made did not benefit the most people as
predicted. In rule utilitarianism, there is the possibility of conflicting rules. Recall the example of
the business person running late for a meeting. Suppose the business person happens to be the
CEO, who may believe that it is ethically correct to arrive at important meetings on time as the
members of the company will benefit from this decision. The CEO may encounter conflicting
ideas about what is ethically correct if he/she is running late. Yet, the CEO believes that he/she
should follow the law because this benefits society. Simultaneously, he/she believes that it is
ethically correct to be on time for his meeting because it is a meeting that also benefits the
society. There appears to be no ethically correct answer for this scenario .

Rights
In ethical theories based on rights, the rights established by a society are protected and given
the highest priority. Rights are considered to be ethically correct and valid since a large
population endorses them. Individuals may also bestow rights upon others if they have the
ability and resources to do so. For example, a person may say that her friend may borrow her
laptop for the afternoon. The friend who was given the ability to borrow the laptop now has a
right to the laptop in the afternoon. A major complication of this theory on a larger scale is that
one must decipher what the characteristics of a right are in a society. The society has to
determine what rights it wants to uphold and give to its citizens. In order for a society to
determine what rights it wants to enact, it must decide what the society’s goals and ethical
priorities are. Therefore, in order for the rights theory to be useful, it must be used in
conjunction with another ethical theory that will consistently explain the goals of the society.
For example in America people have the right to choose their religion because this right is
upheld in the Constitution. One of the goals of the Founding Fathers’ of America was to uphold
this right to freedom of religion.

Virtue
The virtue ethical theory judges a person by his/her character rather than by an action that may
deviate from his/her normal behavior. It takes the person’s morals, reputation, and motivation
into account when rating an unusual and irregular behavior that is considered unethical. For
instance, if a person plagiarized a passage that was later detected by a peer, the peer who
knows the person well will understand the person’s character and will judge the friend
accordingly. If the plagiarizer normally follows the rules and has good standing amongst his
colleagues, the peer who encounters the plagiarized passage may be able to judge his friend
more leniently. Perhaps the researcher had a late night and simply forgot to credit his or her
source appropriately. Conversely, a person who has a reputation for academic misconduct is
more likely to be judged harshly for plagiarizing because of his/her consistent past of unethical
behavior. One weakness of virtue ethical theory is that it does not take into consideration a
person’s change in moral character. For example, a scientist who may have made mistakes in
the past may honestly have the same late night story as the scientist in good standing. Neither
of these scientists intentionally plagiarized, but the act was still committed. On the other hand,
a researcher may have a sudden change from moral to immoral character may go unnoticed
until a significant amount of evidence mounts up against him/her.

Q3. Implication of ethical theories in corporate sector(s) with special emphasis

on Indian organization.
Ans: Ethical issues in business encompass a wide array of areas within an organization’s ethical
standards. Fundamental ethical issues in business include promoting conduct based on integrity
and trust, but more complex issues include accommodating diversity, empathetic decision-
making, and compliance and governance that is consistent with the organization’s core values.

In order to manage the ethical issues in business that arises in your organization, you first need
to develop a thorough understanding of what those issues can look like. Understanding how to
detect and, most importantly, deter these issues before they become a problem can ensure
your focus stays on business growth and success instead of remediation . 

There are Six ethical issues in business which are as follows:

1. Harassment and Discrimination in the Workplace:
Harassment and discrimination are arguably the largest ethical issues that impact
business owners today. Should harassment or discrimination take place in the
workplace, the result could be catastrophic for your organization both financially and
reputationally.  Every business needs to be aware of the anti-discrimination laws and
regulations that exist to protect employees from unjust treatment. The U.S. Equal
Employment Opportunity Commission (EEOC) defines many different types of
discrimination and harassment statutes that can have an effect on your organization,
including but not limited to:
 Age: applies to those 40 and older, and to any ageist policies or treatment that
takes place. 
 Disability: accommodations and equal treatment provided within reason for
employees with physical or mental disabilities. 
 Equal Pay: compensation for equal work regardless of sex, race, religion, etc. 
  Pregnancy: accommodations and equal treatment provided within reason for
pregnant employees. 
 Race: employee treatment consistent regardless of race or ethnicity. 
 Religion: accommodations and equal treatment provided within reason
regardless of employee religion. 
 Sex and Gender: employee treatment consistent regardless of sex or gender
identity.

2. Health and Safety in the Workplace  

As outlined in the regulations stipulated by the Occupational Safety and Health Administration
(OSHA), employees have a right to safe working conditions. According to their 2018 study,
5,250 workers in the United States died from occupational accidents or work-related diseases.
On average, that is more than 100 a week, or more than 14 deaths every day.
The top 10 most frequently cited violations of 2018 were: 

1. Fall Protection, e.g. unprotected sides and edges and leading edges 
2. Hazard Communication, e.g. classifying harmful chemicals 
3. Scaffolding, e.g. required resistance and maximum weight numbers 
4. Respiratory Protection, e.g. emergency procedures and respiratory/filter equipment
standards 
5. Lockout/Tagout, e.g. controlling hazardous energy such as oil and gas 
6. Powered Industrial Trucks, e.g. safety requirements for fire trucks 
7. Ladders, e.g. standards for how much weight a ladder can sustain 
8. Electrical, Wiring Methods, e.g. procedures for how to circuit to reduce electromagnetic
interference 
9. Machine Guarding, e.g. clarifying that guillotine cutters, shears, power presses, and
other machines require point of operation guarding 
10. Electrical, General Requirements, e.g. not placing conductors or equipment in damp or
wet locations 

However, health and safety concerns should not be limited to physical harm. In a 2019
report conducted by the International Labour Organization (ILO), an emphasis was placed on
the rise of “psychosocial risks” and work-related stress and mental health concerns. Factors
such as job insecurity, high demands, effort-reward imbalance, and low autonomy, were all
found to contribute to health-related behavioral risks, including sedentary lifestyles, heavy
alcohol consumption, increased cigarette smoking, and eating disorders.  

3. Whistle blowing or Social Media Rants  

The widespread nature of social media has made employees conduct online a factor in their
employment status. The question of the ethics of firing or punishing employees for their online
posts is complicated. However, the line is usually drawn when an employee’s online behavior is
considered to be disloyal to their employer. This means that a Face book post complaining
about work is not punishable on its own but can be punishable if it does something to reduce
business. 
In the same vein, business owners must be able to respect and not penalize employees who are
deemed whistleblowers to either regulatory authorities or on social media. This means that
employees should be encouraged, and cannot be penalized, for raising awareness of workplace
violations online. For example, a Yelp employee published an article on the blogging website
Medium, outlining what she claimed as the awful working conditions she was experiencing at
the online review company. She was then fired for violating Yelp’s terms of conduct. The
ambiguity of her case, and whether her post was justifiable, or malicious and disloyal conduct,
shows the importance of implementing clear social media policies within an organization. In
order to avoid this risk of ambiguity, a company should stipulate which online behaviors
constitute an infringement. 

4. Ethics in Accounting Practices  

Any organization must maintain accurate bookkeeping practices. “Cooking the books”, and
otherwise conducting unethical accounting practices, is a serious concern for organizations,
especially in publicly traded companies. 
An infamous example of this was the 2001 scandal with American oil giant Enron, which was
exposed for inaccurately reporting its financial statements for years, with its accounting firm
Arthur Andersen signing off on statements despite them being incorrect. The deception
affected stockholder prices, and public shareholders lost over $25 billion because of this ethics
violation. Both companies eventually went out of business, and although the accounting firm
only had a small portion of its employees working with Enron, the firm’s closure resulted in
85,000 jobs lost. 
In response to this case, as well as other major corporate scandals, the U.S. Federal
Government established the Sarbanes-Oxley Act in 2002, which mandates new financial
reporting requirements meant to protect consumers and shareholders. Even small privately
held companies must keep accurate financial records to pay appropriate taxes and employee
profit-sharing, or to attract business partners and investments.  

5. Nondisclosure and Corporate Espionage  

Many employers are at risk of current and former employees stealing information, including
client data used by organizations in direct competition with the company. When intellectual
property is stolen, or private client information is illegally distributed, this constitutes corporate
espionage. Companies may put in place mandatory nondisclosure agreements, stipulating strict
financial penalties in case of violation, in order to discourage these types of ethics violations. 

6. Technology and Privacy Practices  

Under the same umbrella as nondisclosure agreements, the developments in technological

security capability pose privacy concerns for clients and employees alike. Employers now have
the ability to monitor employee activity on their computers and other company-provided
devices, and while electronic surveillance is meant to ensure efficiency and productivity, it often
comes dangerously close to privacy violation.  
According to a 2019 survey conducted by the American Management Association, 66% of
organizations were found to monitor internet connections, with 45% tracking content,
keystrokes, and time spent on the keyboard, and 43% storing and reviewing computer files as
well as monitoring employee emails. The key to using technological surveillance in an ethical
manner is transparency. According to the same survey, 84% of those companies tell their
employees that they are reviewing computer activity. In order to ensure employee surveillance
does not turn into an ethical issue for your business, both employees and employers should
remain conscious of the actual benefits of being monitored, and whether it is a useful way of
developing a record of their job performance.
 

Avoiding ethical issues in business always starts with top management. Providing clearly written
policies and processes that ensure those policies are both acknowledged and adhered to, can
ensure transparency and ethical business practices are applied.  
In order to effectively detect and, most importantly, deter ethical issues in business from
surfacing in your organization, there are several everyday efforts you can take. Be sure to
communicate and enforce a robust code of ethics when making decisions and ask the same of
your employees. Remain aware of the discrimination laws that exist in your region.
Stay informed on the rules that impact your industry, and ensures your organization is acting in
compliance with those regulations. Collaborate with accountants, maintaining transparency
and honesty in your financial reports. Be present in your company, making sure your
organization and employees alike are always doing the right and ethical thing.