1 Business Ethics

2 What is ethics? Doing the right thing. Doing the right thing. Doing it the right way. Doing it the right way. Doing it for the right reason. Doing it for the right reason.

3 Business Ethics Planning & Leadership Planning & Leadership Aim at doing the right thing Aim at doing the right thing Organizing Organizing Do it the right way Do it the right way Control Control Do it for the right reason Do it for the right reason

4 Evolution of Business Ethics Business Business Historically not known to be ethical Historically not known to be ethical Profit before any thing else Profit before any thing else Ethics Ethics Religious influence Religious influence Social influence Social influence

5 Why Business is being ethical now? Stricter laws and regulations Stricter laws and regulations Watch dogs Watch dogs Realization that ethics is profitable Realization that ethics is profitable

6 How to enforce Ethics Law Law Industrial and professional codes Industrial and professional codes Internal codes Internal codes Wanting to be ethical Wanting to be ethical

7 Law Words of law and spirit of law Words of law and spirit of law Laws cannot create honesty Laws cannot create honesty Laws cannot cover every thing. Laws cannot cover every thing.

8 Professional Codes Lesser force than law. Lesser force than law. Professional associations e.g. ICAP force their members to follow ethics, or face expulsion. Professional associations e.g. ICAP force their members to follow ethics, or face expulsion. Professionals work for companies and force companies to follow ethics. Professionals work for companies and force companies to follow ethics. Industrial associations also exhort their members to be ethical. Industrial associations also exhort their members to be ethical.

9 Internal Code The most compelling reason for a company to be ethical is its own board. The most compelling reason for a company to be ethical is its own board. A company can become ethical only if its board is willing to face the consequences and pay the price of honesty. A company can become ethical only if its board is willing to face the consequences and pay the price of honesty. Setting up a formal policy on ethics is essential. Setting up a formal policy on ethics is essential. Ethics should be part of every thing that a company does. Doing certain things in name of ethics is not enough. Ethics should be part of every thing that a company does. Doing certain things in name of ethics is not enough.

10 Advantages of BE Improvement in image Improvement in image Higher productivity Higher productivity Access to more and cheaper capital Access to more and cheaper capital Helps society; society helps company Helps society; society helps company Every one is a winner Every one is a winner

11 Impact on Employees If the company is honest, employees tend to be honest as well. This means better work environment, better productivity, higher efficiency. If the company is honest, employees tend to be honest as well. This means better work environment, better productivity, higher efficiency. Honest companies have lesser frauds and thefts. Honest companies have lesser frauds and thefts. Ethical companies attract better quality of staff. Ethical companies attract better quality of staff. Ethical companies are able to retain good staff. Ethical companies are able to retain good staff.

12 Characteristics of an ethical organization Formal code of ethics Formal code of ethics Regular interaction with stakeholders Regular interaction with stakeholders Obsessively fair to all Obsessively fair to all Managers feel responsible individually; do not hide behind collective responsibility charade Managers feel responsible individually; do not hide behind collective responsibility charade Employees see a purpose in their work Employees see a purpose in their work Non-bureaucratic procedures Non-bureaucratic procedures

13 Roots of individual unethical behavior Pressure of work and family life Pressure of work and family life Poor communication between company and employees Poor communication between company and employees Poor leadership of the company Poor leadership of the company Heavy work load; long working hours Heavy work load; long working hours Undue pressure / targets Undue pressure / targets Politics, favoritism Politics, favoritism Personal traits & circumstances Personal traits & circumstances

14 Handling these causes All these causes can be handled by a good management team by: All these causes can be handled by a good management team by: Fairness and equal treatment of all employees Fairness and equal treatment of all employees Reasonable load of work Reasonable load of work Reasonable targets Reasonable targets Good HR practices Good HR practices

15 Aspects of corporate unethical behavior Bribery Bribery Coercion Coercion Conflict of interest: company & others Conflict of interest: company & others Tax evasion Tax evasion Insider trading Insider trading Lack of regard for the society Lack of regard for the society

16 How to enforce ethics in a company? Decide to be ethical Decide to be ethical Ethical decision making as norm for all operations. Ethical decision making as norm for all operations. Draw up a formal Ethics Policy and let it be part of normal operational manuals. Draw up a formal Ethics Policy and let it be part of normal operational manuals.

17 Ethics Policy Avoidance of conflict of interest at all levels Avoidance of conflict of interest at all levels Honesty and integrity Honesty and integrity Fairness in dealing with every one Fairness in dealing with every one Acting in good faith Acting in good faith Compliance with law Compliance with law Encouraging ethical reporting: whistleblowing Encouraging ethical reporting: whistleblowing

18 Pakistani Scene Companies are not willing to be ethical Companies are not willing to be ethical Those that are willing cannot afford to be ethical. Those that are willing cannot afford to be ethical. Those that can afford, are not allowed by the situation. Those that can afford, are not allowed by the situation. One has to bribe even to get one’s rights One has to bribe even to get one’s rights

19 Rectifying the situation Principal causes: Principal causes: Company policies Company policies Unethical industrial climate Unethical industrial climate Rampant corruption in government Rampant corruption in government Solution: Solution: Bigger companies should start; others will follow Bigger companies should start; others will follow Gradually the business climate will change Gradually the business climate will change Once business is honest; government will have to get honest. Once business is honest; government will have to get honest.

20 Thank you