Subject - Ethics and value

Module 2 – Managerial Ethics

Topics of Managerial Ethics

 Categories of management morality

 Ethical Problems-Dilemma at Work-Sources and Resolutions

 Overview of Creative Accounting-Its role in business

scandals

 Corporate Ethical Leadership

 Whistle Blowing.
Categories of Managerial Morality

1. Moral management

2. Amoral management

3. Immoral management
 1. Moral management
Managers aim to maximize profits within the confines of ethical values and principles. They conform to
professional and legal standards of conduct.

Some examples of absolute moral principles include:

Don't kill.
Speak the truth.
Be careful with what you say and do to others.
Respect the property of others.
Treat people in need or distress as we would want to be treated if our situation were reversed.

Examples of relative moral principles are:

It is morally wrong to spend money on a luxury item.
It is morally right to care for our planet and preserve it for future generations.
2. Amoral management

This type of management ethics lies between moral and immoral management ethics.

Managers respond to personal and legal ethics only if they are required to do so;

otherwise there is lack of ethical perception and awareness.

Examples -

Engaging in bribery, kickbacks, or other forms of corruption to secure business

contracts, permits , Illegally avoiding paying taxes by manipulating financial records

Amoral Management
There are two types of amoral management:

(a) Intentional: Managers deliberately avoid ethical practices in business decisions

because they think ethics should be followed in non-business activities.

(b) Unintentional: Managers do not deliberately avoid ethical practices but

unintentionally they make decisions whose moral implications are not taken into
consideration
 3. Immoral management

It implies lack of ethical practices followed by managers. Managers want to maximize

profits even if it is at the cost of legal standards or concern for employees.

Examples -

Creating a hostile work environment through harassment, bullying, or discrimination

based on race, gender, religion, or other , Neglecting employee safety, disregarding
workplace health regulations, or failing to provide necessary protective measures
 Moral Amoral Immoral

Ethical Norms Decisions and actions Beliefs that decision and Decisions and actions are
conforms to legal , actions lie outside moral in opposition to ethical
professional and social and lacks ethical problems
norms awareness

Motives Enlightened Self Interest Well intentional , self- Selfish

interested – basically
selfish

Goals Personal Profit as per law Personal profit is the Personal profit at any cost
and ethical standards motivator

Orientation to law & Law is important for Following Law in minimum Laws are barriers that must
Strategy decisions , as a guideline for decision be broken
making
Ethical Dilemmas

• An ethical dilemma takes place in a decision-making context where any of the

available options requires the agent to violate or compromise on their ethical

standards.
•Conflicting Values: The individual must choose between two or more conflicting ethical principles or

values. For example, honesty vs. loyalty, or fairness vs. compassion.

•Significant Consequences: The decision typically has significant consequences for the individual

and others affected by the choice.

•No Clear Right or Wrong: There is no obvious or universally accepted solution to the dilemma. Each

option has its own set of ethical justifications and potential negative outcomes.

•Moral Discomfort: The person making the decision often experiences moral discomfort or distress

because any choice will compromise some ethical principle.

•Workplace Loyalty vs. Whistleblowing: An employee discovers that their company is engaging in illegal

activities. Reporting the wrongdoing might lead to the company's downfall and job losses, but staying silent

means condoning unethical behavior.

•Truth vs. Harm: A doctor knows a patient has a terminal illness. Should the doctor be completely honest

about the prognosis, which might cause distress, or withhold some information to protect the patient’s

emotional well-being?

•Resource Allocation: A hospital has only one ventilator left and two critically ill patients who need it.

Deciding who gets the ventilator involves making a choice between who has a better chance of recovery or

who deserves it more based on other criteria.

•Privacy vs. Security: A government wants to implement surveillance measures to enhance national

security, but these measures infringe on citizens' privacy. Balancing the need for security with the right to

privacy creates a moral conflict.

 Majors Issues in Handling Business Ethics

Harming Someone
Compensation &
while Benefitting Equal Opportunity Labor Cost Privacy
Skills
Others

Fiduciary
responsibilities Misuse of Philosophy of
Product Safety Corruption Intellectual
towards Business
Shareholders Property

Fair Hiring &

Relations Between Creative Opportunity for Fair Working
Justified
Companies Accounting New skills Conditions
Termination

Leadership Issues
Resolutions
These steps are outlined as:

 Identify the ethical principles that apply to the situation at hand.

 Collect additional information necessary to examine the ethical dilemma in
 question.
 Identify the relevant ethical values and/or rules that apply to the ethical problem.
 Identify any potential conflicts of interest and the people who are likely to benefit
 from such conflict.
 Identify appropriate ethical rules and rank order them in terms of importance.
 Determine the consequences of applying different ethical rules or ranking these
 rules differently.
Creative Accounting
• Creative accounting consists of accounting practices that follow required laws and regulations,

but deviate from what those standards intend to accomplish. Creative accounting capitalizes on

loopholes in the accounting standards to falsely portray a better image of the company.

• Creative accounting, which generally involves the preparation of financial statements with the

intention of misleading readers of those statements, is prima facie a form of lying.

• Creative accounting, also called aggressive accounting, is the manipulation of financial numbers,

usually within the letter of the law and accounting standards, but very much against their spirit and

certainly not providing the “true and fair” view of a company.

Types of Creative Accounting

Lowering Masking
Overestimating Delaying
Depreciation Contingent
Revenues Expenses
Charges Liabilities

Undervaluing
Inventory Concealing Bad Misstating
pension
Manipulations News Assets
liabilities

Inadequate Manipulating Booking Less

Disclosures Sales Figure Expenses
The Satyam accounting scandal was a major corporate fraud in India involving Satyam Computer Services, a large
IT services company. Here's a simple breakdown of what happened:
1.Falsified Financial Statements: The company's founder and chairman, Ramalinga Raju, confessed in 2009 that
he had been falsifying the company’s financial statements for years. This means he lied about how much money
the company was making.
2.Inflated Profits: Raju inflated (exaggerated) the profits and revenues of Satyam. He showed fake profits that
didn't actually exist to make the company look more successful and attract more investors.
3.Fake Bank Balances: The company also reported fake cash balances. They claimed to have money in the bank
that wasn’t there. This gave a false impression of financial health.
4.Acquisitions to Cover Up Fraud: To cover up the fake accounts and missing money, Raju tried to acquire two
companies, Maytas Properties and Maytas Infra, which were owned by his family. This plan failed and drew
further scrutiny.
5.Confession and Consequences: Raju’s confession led to a huge scandal, causing the company’s stock price to
plummet and leading to significant financial losses for shareholders. The Indian government stepped in, and the
company’s board was replaced. Raju and other key executives were arrested and faced legal consequences.
6.Aftermath: The scandal shook investor confidence in India’s corporate governance. Satyam was eventually
sold to Tech Mahindra and rebranded as Mahindra Satyam, which later merged with Tech Mahindra.
In short, the Satyam scandal was about company leaders lying about their financial health to make the company
look better than it was, leading to huge losses when the truth came out.
 Corporate Ethical Leadership

Corporate ethical leadership refers to the role of top-level executives and

managers in setting ethical standards, promoting a culture of integrity, and

making decisions that align with ethical principles within an organization.

Integrity:
Leaders exhibit honesty and strong moral principles.
They ensure that their actions are consistent with their words and values.

Fairness:
Ethical leaders treat all stakeholders—employees, customers, suppliers, and the
Community fairly and equitably.
They strive for justice in decision-making and resource allocation.

Transparency:
Decisions and actions are made openly and are easily understood.
Ethical leaders provide clear and accurate information to stakeholders.
Accountability:
Leaders take responsibility for their actions and the actions of their
organization.
They hold themselves and their teams accountable for ethical behavior.

Respect for Others:

Ethical leaders show respect for the rights and dignity of all individuals.
They foster an inclusive and supportive organizational culture.

Commitment to the Greater Good:

Decisions are made with consideration of their impact on society and the
environment.
Ethical leaders prioritize sustainable and socially responsible practices.
Importance of Corporate Ethical Leadership
Leading by Setting Ethical Ethical Decision
Example Standards Making

Ethical
Encouraging Ethical
Leadership
Ethical Culture Communication
Development

Managing
Monitoring and
Ethical
Enforcement
Challenges
Whistle Blowing

• Whistle blowing basically is done by an employee where he

finds that the ethical rules are broken knowingly or
unknowingly and an imminent danger for the company,
consumers or the public. When an employee is working in an
organization is part of the group where the decisions are
made and executed.
 Types of
Whistle
Blowing

Internal External Government Personal Corporate

Internal Whistleblowing:
Description: Reporting misconduct within the organization to internal authorities, such as a supervisor,
human resources, or an internal ethics committee. Example: An employee reports fraudulent activities
to the company’s internal audit department.

External Whistleblowing:
Description: Reporting misconduct to external authorities or the public, such as government agencies,
the media, or non-profit organizations. Example: An employee reports environmental violations to the
Environmental Protection Agency (EPA) or leaks information to a journalist.

Personal Whistleblowing:
Description: The whistleblower reports issues that directly affect their own well-being, such as
harassment, discrimination, or unsafe working conditions. Example: An employee files a complaint about
workplace sexual harassment with their HR department.
Impersonal Whistleblowing:
Description: The whistleblower reports issues that affect others or the organization as a whole, rather than
themselves personally. Example: An employee reports widespread financial fraud that affects the company’s
shareholders and customers.

Open Whistleblowing:
Description: The whistleblower’s identity is known, and they openly report the misconduct without trying to hide
their involvement.
Example: A public announcement by an employee about safety violations in a press conference.

Anonymous Whistleblowing:
Description: The whistleblower’s identity is kept secret to protect them from retaliation. They report misconduct
through anonymous channels. Example: An anonymous tip sent to a regulatory agency about illegal dumping of
hazardous waste.