BBA Resolving Ethical Dilemma Study Material Notes

BBA Resolving Ethical Dilemma Study Material Notes: Values and attitudes Difference Types of Values Factors in Value Formation Benefits of Professional Codes Values and behavior Value Systems of Indian Managers Values Based on Indian Psycho Philosophical Thought Corporate Governance Code of Corporate Governance Objective Types Questions ( Most Important Notes for BBA I Semester Students )

MCom I Semester Accounts Holding Companies Study Material Notes

Resolving Ethical Dilemma

People have to resolve ethical dilemmas that they face because actions cannot be postponed for an indefinite period in certain situations. Rushworth Kidder has suggested nine steps for dealing with an ethical dilemma which are as follows:20

1 Define the problem/moral issue correctly.

2. Determine the people who will be affected by the decision and your role.

3. Analyse how events happened.

4. Test for right versus wrong issues: is it illegal? How will you resolve the things if you stood on the other side?

5. Test right versus right paradigms.

6. Apply three approaches to resolve the dilemma. First is end-based thinking, that is, do whatever proceeds the greatest good for the greatest number. The second is rule-based thinking, that is, follow rules. The third is care-based thinking, that is, do to others what you would like them to do to you.

7. Investigate if there is any other way out of the situation.

8. Make decisions and take action

9. Revisit and reflect on the decision.

Resolving Ethical Dilemma

Values

Values that a person has one of the major forces shaping his behaviour. Therefore, the values are the core of ethical or unethical behaviour. Values are convictions and a framework of philosophy of an individual on the basis of which he judges what is good or bad, desirable or undesirable, ethical or unethical. Rokeach, a noted socio-psychologist, has defined values as “global beliefs that guide actions and judgements across a variety of situations”.21 He further says:

1 Part of Culture. Values are elements of culture, and culture is the con Every society has its own culture and people in tha other meaningful symbols to shape human behaviour in the society. as its own culture and people in that society adhere to cultural requirements.

2. Learned Response. Human behaviour represents learned phenomen animals, human beings have to learn almost everything about from ex have to learn almost everything about from experience how to be numan. This is because human beings live in a society having certain cultura describe to behave in a particular way. Cultural field represents a set of stimuli to an individual and also a set of responses appropriate to those stimuli. The appropriate to those stimuli. The individual either 15 directly rewarded for adopting those responses (alternatively punished for not adopune or indirectly associated with other stimulus situations that are rewarding. Through his Process, the individuals are encultured or socialised, that is, the responses of a set on culture become his own set of response tendencies. Cultural items learned early in the me tend to resist change more strongly than those learned late in life. This fact is very important from management point of view.

3. Inculcated. Values are inculcated and are passed through generation to generation by specific groups and institutions. Such transmission starts from the family from where the socialisation process starts. Apart from family, educational, religious, and ethnic institutions also transmit cultural values from one generation to another.

4. Social Phenomenon. Values are a social phenomenon, that is, cultural habits are shared by aggregates of people living in organised society. An individual’s way of thinking and behaving is not culture, rather group behaviour constitutes culture. Group is developed and reinforced through social pressure upon those who interact with one another.

5. Gratifying Responses. Values exist to meet the biological and other needs of the individuals in the society. Thus, elements in the culture become extinguished when they no longer are gratifying to members of the society. The society rewards behaviors which are gratifying for its members.

6. Adaptive Process. Culture is adaptive, either through a dialectical process or evolutionary process. Dialectical or sharply discontinuous change occurs when the value system of a culture becomes associated with the gratification of only one group or class in the environment. In such a case, other classes of the society reject the logic of the value system and replace it with a new value system, such as through revolution or other methods. In the evolutionary process, the change occurs slowly as a gradual process, but not through revolution

Values have both content and intensity attributes. The content attiribute says that a mode of conduct or end-state of existence is important. The intensity attribute implies how important it is. When we rank an individual’s values in terms of their intensity, we obtain that individual’s value system. Thus, value system of an individual contains his various values arranged in a hierarchy. This system is identified by the relative importance he assigns to different values like pleasure, freedom, honesty, etc.

Resolving Ethical Dilemma

Values and Attitudes: Difference

Some researchers see values as consisting of large sets of related attitudes. For examnle and Alzen have included three components in attitudes-informational (ideas, beliefs and values, and information). emotional (feelings of likes and dislikes or positive and negative), and behavioural (tendency to behave). Thus, they have taken values as a part of attitudes. However, some differences exist between values and attitudes. Attitudes are specific and related to distinct objects, people, or ideas; values are more general and are not related to any object or situation. In addition to being more general than attitudes. values often contain statements of goodness or badness associated with the attitudes which people hold. Values are, then, beliefs about which attitudes we should have or how we should behave. To convert a belief (belief is concerned with ‘what is known about the world: it centres on ‘what it is’) into value, value ingredient (judgement of goodness/badness) is needed. With the result, all beliefs are neither attitudes nor values. A person may have numerous beliefs, many attitudes, but only few values.

Thus, values and attitudes differ. Table 5.1 presents difference between values and attitudes.

Resolving Ethical Dilemma

TYPES OF VALUES

Researchers on cultural aspect of human behaviour have classified personal values in different ways. Allport et al. have classified personal values into six categories. Graves has classified personal values into seven categories while England has classified these into two categories. Rokeach has classified personal values into two major categories with each category having eighteen values. A brief description of different classification is presented below. Allport et al’s Value Classification. Allport et al have classified personal values into six categories: economic, theoretic, political, social, aesthetic, and religious based on the orientation of people towads certain things.24

1 Economic. People having values of economic orientation attach importance to what is useful. They are concerned with the practical affairs of the work.

2. Theoretically. People having values of theoretic orientation involve themselves in the use of rational, critical, and empirical processes. They strive to discover truth.

Resolving Ethical Dilemma

FACTORS IN VALUE FORMATION

Values of people have their roots in numerous aspects of contemporary society. In particular, there are five sources of value formation in any society. These are value-forming activities of various social institutions, values of an organisation. peers and organisation, work and career, and professionali organisation, peers and colleagues in the work and career, and professionalisation and professional code of conduct. Let us see how each of these affects ethical behaviour.

1 Value-forming Institutions. The life and development of a society are both bascu and produce values. Therefore, there can be various institutions in the society which inculcate values in an individual. In particular, there are four major institutions which provide the basic sources of values for persons and organisations: family, school, State. and religion. Value systems are constructed over a life-time of experience in which we value-shaping influences of these institutions predominate. A key characteristic of an wiese basic value-forming sources is their interrelatedness. The values fostered by each reinice the values of the others, and together they exert many influences on the value patterns exhibited both by the individuals and organisations.

The basic process of value formation by these institutions is that they prescribe what is good or bad for an individual. Good behaviour is rewarded and bad behaviour is punished. This recurs in the daily routine of the individual and he learns a particular behaviour which is rewarded and reinforced. Since an organisation is an agglomeration of individuals, its values are the collective values of individuals.

2. Organisational Values. Apart from value-forming institutions of the society, organisations, where the individuals work, also shape their values though in a lesser degree. An organisation has its own values which are reflected in the form of collective values of individuals who join it. However, since various organisational processes are designed mostly by managers at comparatively higher levels, organisational values are more in tune with the values of these managers. An individual may subscribe those organisational values easily which match with his own values. Where the organisational values do not match with the individual values, he may either leave the organisation or he may adjust himself to the values of the organisation. This happens in the form of a slow process and the individual finds these values acceptable over the period of time. Thus, his value system changes to conform to organisational values.

3. Peers and Colleagues. An individual gets clue of behaviour from his peers and colleagues. He develops and applies beliefs, attitudes, and values derived from the groups of peers and colleagues with whom he is associated. An individual in a work group tends to conform to the group’s norms as long as he values the friendship and approval of his associates or fears the possibility that they will cut him from rights, privileges, and benefits they can offer. In the case of values, the individual feels an intimate involvement with a number of people, a nation, a society, or a business organisation, or a work group. Values strengthen protect, and solidify a given group, and while departure from values may invoke no immediate penalty. a sense of estrangement may follow. Therefore, the individual tries to follow that group norm of behaviour.

4. Work and Career. Work consists of the tasks or responsibilities associated with a particular job or position in an organisation. Essentially, work is human energy directed at the achievement of a desired end. In organisations, this work is organised, directed a to individuals willing to become employees through a more or less permanent organisation. An individual’s experience over a period of time constitutes

This career is within an occupation, and in an occupational career. his career. Generally, this career is within an occupation, and progressive series of jobs, positions, or stages of development. the individual follows a related, progressive series of jobs, positions, or starWork and career create special values that give unity, cohesion, and meaning to persons and groups. Therefore, each work will have its own values and persons performing the work will follow those values. For example, in an organisation, sales people, accountants, and engineers will have different values according to their specialities.

5. Professional Codes. Professional codes are an increasing source of ethical norms for managers in business organisations. There are three types of codes available in an organisation. First is the so-called company creeds or philosophies which usually cover those basic philosophies and behaviours that govern the business. Most of the companies have such sets, either expressly or otherwise. Sometimes, these documents are prepared to build the company’s image by showing the company’s concern for ethical behaviour in the society. Second, a code is found in company’s operational policies which set up guides to action that have an ethical content. Such policy guidelines may be for various activities such as recruitment and selection, selling, handling customer complaints, etc. Third, since people belong to various professions, they are also governed by code of conduct framed by their associations. Such codes have been devised by various professional bodies like All India Management Association, Institute of Company Secretaries of India, Institute of Chartered Accountants of India, Institute of Cost and Works Accountants of India, and so on. These codes are consonant with customs, mores, beliefs, social values, public laws, and generally desirable behaviour. The enforcement of these codes is by various sanctions such as fines or even the expulsion of deviant members. However, in the case of management codes, such sanction is not very effective because of lack of enforcement body and also because majority of managers are not the members of the association.

Resolving Ethical Dilemma

Benefits of Professional Codes

Professional codes serve a number of purposes by specifying behaviour that is rem the protection and continuity of the professional group as a whole. Prescription of be serves as a clue to what type of response is expected in a given situation. Thus with the functioning of a professional group are served in the following groups associated with the functioning of a profess manner:

1 Customers. Customers dealing with the organisation following some codes may derive benefit as they are sure that no undesirable transactions will be conducted. This also gives them a fair amount of confidence in dealing with the organisation concerned. Thus, they are relieved of unnecessary anxiety.

2. Employees. Employees of the organisation derive benefit by the codes because these provide guidelines for their behaviour. They can know easily what is expected of them. They can distinguish very easily what is ethical or unethical and can avoid unethical behaviour. In fact, many times employees engage themselves in unethical behaviour because they are not able to distinguish between ethical and unethical behaviour.

3. Organisation. The organisation can derive benefit from professional codes as it requires less control of employees’ behaviour because these may serve as regulatory measure for its members. Moreover, the codes may serve as basis for maintaining external relations also.

4. Industry. The industry may derive benefit from professional codes as these provide basis for fair trade practices resulting in healthy competition among its various constituents. This results in the growth of the industry in most socially acceptable way.

5. Society. The ultimate benefit of professional codes goes to society. In fact, the ethical environment of managers is a part of their social environment. The social cause is served better if all professionals follow certain specified behavior.

Resolving Ethical Dilemma

VALUES AND BEHAVIOUR

The behavior of people is influenced by the values which they hold, particularly in terms of those stimuli which have some value orientations. In the organizational context. understanding the influence of individuals’ value systems on their behavior is important. Values influence the behaviour of individuals in the following manner:

1 Values influence an individual’s perception about the problems he faces and consequently the decisions he makes to overcome those problems, for example, the value system of top management influences choice of organizational goals and strategies adopted to achieve those goals.

2. Values influence the way in which an individual looks at other individuals and groups of individuals, that is, interpersonal relationships. Values become the basis of such interpersonal interactions.

3. Individuals judge organizational success as well as its achievement on the basis of their value systems. Thus, for some individuals, organizational success may be in the form of high-profit earning irrespective of the means adopted whereas, this may be a mean thing for other individuals.

4. Individuals set limits for the determination of what is ethical or unethical behavior for themselves as well as for others.

5 Values determine the extent to which individuals accept organizational pressures and goals. If these do not match with the values held by them, they thwart the organizational pressures and goals, and even leave the organization.

A significant finding of one study is that there is no difference in goal values of those who are formally exposed to some management education programs and those who are not exposed to such programs.28 The author observes that”…socio-psychological factors such as one’s parental background, the contents of one’s experience determined by age and nature of group role (decision making of their respective departments), seem to go with occupational goal values.” The quality and content of our management education system have to be looked upon from this point of view. At present, it seems that they offer more in terms of techniques rather than the transmission of values. Perhaps, a new look may be required to approach this problem because the education of country emphasises the inculcation of certain value systems. Second, the organisational climate does not have impact.

Resolving Ethical Dilemma

Values-Based on Indian Psycho-philosophical

Thought Throughout the world, there is growing importance of spirituality at workplace. Spirituality at workplace is not defined in religious sense but it recognises that people have an inner life that nourishes and is nourished by meaningful work that takes place in the context of community.29 It puts emphasis on treating all people in an organisation as equal irrespective of their position in organisational hierarchy. Concept of spiritual capital is being put into practice. Spiritual capital puts emphasis on de-egoization which implies that one’s ego should not come in the way of his working. These characteristics exist in Indian psychophilosophical thought. Therefore, managers need to inculcate and use values based on indian psycho-philosophical thought for the continued effectiveness of their organisations. Chakraborty has done a pioneering work on Indian psycho-philosophical thought. contained in ancient works, to derive insights for developing managerial effectiveness in the present context. His basic idea is to rely on education versus training, values versus skills, principles ersus policies and wisdom versus knowledge to develop managerial effectiveness. His model of managerial effectiveness is based on seven ancient Indian thoughts: concept of self and reality, disidentification, theory of Gunas (qualities), theory of Sanskars (values). doctrine of Karma (action), theory and method of work, and giving model of motivation.30 With regard to values and ethics rooted in Indian thought, Chakraborty has presented several ideas listed below:

1 The concept of self in human being has to embrace the spiritual dimension beyond the physical, social, and economic dimensions.

2. The creative energies of human beings are derived from and rooted in Supreme Creative Intelligence.

3. Managerial decision-making requires the interplay of both analytic and holistic faculties.

4. The final resolution of managerial conflicts lies in de-egoization of self.

5. The key to cooperation and teamwork lies in realization that the same Atman (soul) dwells in all

6. The quality of managerial decision-making can be improved through an understanding and internalization of the doctrine of Karma.

7. Motivational strategies should be based on ‘giving’ model rather than the ‘needling’ model of human beings.

8. Ability to develop effective leadership styles requires an understanding of three qualities of human beings: Sattwa (righteousness), Rajas (selfishness), and Tamas (laziness)

9. All managerial decisions are subjective in the ultimate analysis and the effectiveness of such decisions depends critically on the purity of mind of the decision-maker.

All the above propositions have very high relevance in Indian business scenarios of today, particularly in terms of inculcating values and ethics.

Resolving Ethical Dilemma

Developing Organisational Values for Ethical Behaviour

Often there is a sweeping generalisation that, with few exceptions, Indian politicians, bureaucrats, and businessmen indulge in unethical practices in their dealings. In politics, we hear scams and scams; in bureacracy, we hear bribes and bribes; and in business, we hear underhand dealings. We hear that black money is about 50 per cent of our national income. Some analysts attribute this to the acceptable behaviour in a society at a particular point of time, or justify it in terms of the rapid transition of a developing society where social mechanisms become obsolete. However, an organisation should not go for unethical practices on the plea that others are doing that. A better theme is that “honesty pays in the long run.” In fact, many companies have changed their values over the period of time from practising unethical behaviour for short-term profit to ethical behaviour for long-term profit: many traditional practices of taking advantages of shortages have changed into developing competitive advantage in the face of increasing competition. In this context, Sumantra Ghoshal has observed that:

Resolving Ethical Dilemma

Corporate Governance

Corporate governance is a newly introduced system for managing a company in the best interest of all its stakeholders though in the context of state administration, the concept of governance is quite old, where it is referred to as the system of directing and controlling the activities of a state, particularly in princely states and empires. We may find the concept of state governance even in the writings of Kautilya.

The term “governance as applied in state government has been derived from Latin origin that suggests the notion of ‘steering’. The sense of steering a society can be contrasted with the traditional top-down’ approach of governments ‘driving’ society or the distinction between ‘power in’ to contrast to governments ‘power over’.

Incorporate sector, however, the concept of governance cannot be applied in the same form in which governance used to be applied in princely states because these states were sovereign and had right to frame governance rules and enforce them. Companies do not enjoy such sovereignty but they function within the legal framework of the country concerned. For example, Indian companies function according to the provisions of the Companies Act, 1956 and directions of other bodies constituted by the government in this Regard government to regulate the functioning of those companies whose shares are listed any stock exchange in India or abroad. Corporate governance is a system by which companies are directed and controlled based on code of good corporate practices. However, Since corporate governance has entered management field only recently and legal framework governing corporate sector varies from country to country, corporate governance contents and, consequently, its definition lack unanimity. For example, Adrian Cadbury, Chairman of Cadbury, has defined corporate governance as follows:

If we have a look at these definitions of corporate governance, we find that the definition given by Cadbury is more oriented towards social responsibility of organization while the definition given by Shleifer and Vishny puts emphasis on enhancing shareholder value (the concept discussed in Chapter 29). To some extent, there is a conflict between these two definitions. World Bank has put emphasis on the aspects that should be taken into account in managing organisations. Our definition: corporate governance is a system by which companies are directed and controlled based on code for good corporate management practices.

Resolving Ethical Dilemma

Code of Corporate Governance

For practicing corporate governance in organizations, code of corporate governance is required. Code of corporate governance is just like any other professional code and prescribes the practices that the organisations should follow to achieve their objectives. In Indian cotext, code of corporate governance is required because the company laws which prescribe how a company can be managed, only prescribe procedural matters and the penal provisions if any offence is committed in the form of non-conformity to these procedures. These do not prescribe good corporate management practices. Code of corporate governance prescribes such practices.

Contents of a code of corporate governance may differ from country to country but, in general, a code of corporate governance contents the composition of board of directors, disclosure of information, and management practices.

Composition of Board of Directors. We have seen in Chapter 3 that board of directors of a company involves in both strategic and legal functions. Therefore, the composition of board of directors should be in accordance with company laws and other prescriptions. In India. the Companies Act has prescribed the composition of board of directors. Board members are classified as full-time directors or executive directors and part-time directors. Full-time directors devote their full time in managing the company. Part-time directors do not devote their full time but only participate in the board meetings or meetings of committees constituted by the board. In order to make board of directors more independent, that is, free from the influence of promoters of a company, SEBI has prescribed that all those companies whose shares are listed on any stock exchange must have at least 50 per cent independent directors. An independent director is a person who does not have any significant direct interest, except the compensation he receives by providing the service, in the company at the time of joining the company as a director. Just like the provisions of the Companies Act, it is a mandatory provision.

Disclosure of Information. Disclosure of information is the supply of information of financial nature or other nature relevant to all types of stakeholders of the company through annual reports, accounts, and other sources. While the Companies Act provides the format for providing such information perodically, SEBI has made provisions that all companies listed on the stock exchange will provide all such information which is likely to affect the share prices. Such information relates to financial performance, mergers and acquisitions, opening of a new unit/plant/office, declaration of dividend, and other relevant information. In this regard, SEBI has made two provisions. First, all companies will prepare, submit, and publicise their quarterly results (ending June, September, December, and March) besides annual results. These results will be communicated to the stock exchange/s concerned on the day or on immediate next working day (in the case of holiday) on which the results are finalised. These results will be published in at least two newspapers, one local newspaper and one national newspaper. Second, if there is any item related to the above is on the agenda of any meeting of the board of directors or any of its committee, this has to be communicated immediately to the stock exchange/s indicating the nature of item and the date on which the board/committee will meet.

Management Practices. Management practices include functions-planning, organising. staffing, directing, and controlling-relevant to business functions-production/operations, marketing, finance, and personnel as well as to stakeholders-shareholders, customers, suppliers, financial institutions, government, and society. Management practices as suggested by corporate governance should have fairness, transparency, and accountability. Fairness in management practices refers to equitable treatment to stakeholders, that is, giving them honestly what is due to them. Transparency refers to the extent organisational decisions are being verifiable by others. Verification of decisions is done by others on the basis of consistency that an organisation adopts in making decisions on the similar issues and in the similar conditions. Accountability refers to the obligation that an organisation has towards others. Thus, if an organisation is not able to meet its obligation, it cannot take the plea that the work was entrusted to a particular person but he could not do it. The organisation, or even a manager of the organisation, will remain accountable. Fairness, transparency, and accountability taken together, build trustworthiness of the organisation which refers to the level of security that the organisation may feel towards others and the extent to which the organisation is viewed by others as fair, transparent, and accountable.

Corporate governance has been applied in many countries and international institutions. Many countries have formulated code of corporate governance. In India, though no such code has been formulated as yet, Confederation of Indian Industry (CI), an association of a number of companies and regional chambers of commerce has suggested a code of corporate governance (given in Exhibit 5.6).

Resolving Ethical Dilemma

Case: Lifebuoy Swasthya Chetna

Hindustan Lever Limited (HLL) is a premier fast-moving consumer goods (FMCG) company operating in India. Its various products have been categorised into three broad groups-home and personal care, food and beverages, and industrial and agricultural. Lifebuoy is the brand name of toilet soap manufactured and marketed by HLL. This soap is positioned as a means for improving health and hygiene.

In order to increase awareness of health and hygiene in rural India, HLL launched a five-year Lifebuoy Swasthya Chetna (LSC) programme in 2002 in eight states across India. The objective of this programme was to educate around 200 million people in rural areas about the importance of health and hygiene practices. The programme aimed to debunk the misconception that visibly clean is safe clean’. It spread awareness about germs and their adverse impact on health, and how proper health and hygiene practices, such as bathing and washing hands with soap could prevent diseases like diarrhea, the second largest cause of death among children in India.

The LSC programme was implemented in various phases. In initial phase, HLL executives interacted with school children and other influencers like medical practitioners and panchayat members. People were educated about health and hygiene practices through lectures, demonstrations, use of visual aids, and quizzes. The programme used media vehicles like cinema vans, wall paintings, weekly markets, fairs, and festivals. The programme was later extended to parents and other adults. The messages on health and hygiene were reinforced through regular contact programmes. Finally, children and parents were recruited as volunteers to start health clubs that would help sustain the health and hygiene awareness. At each stage, LSC programme involved local community in the programme so that the beneficiaries saw this as their own programme and felt a sense of ownership.

For making LSC programme successful, HLL had committed Rs. 240 million to be spent over a period of five years. By the end of 2006, HLL had covered around 27,000 villages across the country. According to the company, LSC programme was not a philanthropic activity, but a marketing programme with a social benefit. HLL sought to grow the Lifebuoy brand in India by attracting those consumers who never used soap. In the process, the company sought to bring about a behavioural change by convincing people to use soaps more frequently, thus, creating more users for its brands.

On April 7, 2006, on the occasion of World Health Day. the Department of Posts of Government of India released a special Lifebuoy Swasthya Chetna Postal Cover, making Lifebuoy the India’s first brand to be featured on a postal cover. The special cover was released in recognition of the work done by HLL to increase awareness of health and hygiene in rural India.

Resolving Ethical Dilemma

QUESTIONS

1 Comment on the social responsiveness of HLL that is reflected in the Lifebuoy Swasthya Chetna program.

2. In what way, will this program be beneficial to society?

Resolving Ethical Dilemma