Define Ethics

Ethics. Its not an easy word to define. Almost everyone wants to live an ethical life, but knowing
what that means is not as simple as it sounds! That's where the phrase “ethical dilemma” comes
from. In some situations, there are two contrasting ideas that may seem ethical, but it is hard to
determine which is actually the right course of action. Some common ethical dilemmas have little
consequence: for example, is it right to tell a fib when someone asks you if they look fat or if
their bad tasting dinner is delicious? The ethical dilemma there: which is more ethical, lying or
being unkind? Other ethical dilemmas become a big more complex: for example, is it right to
steal from the rich to give to the poor? Is it right to fight wars in the name of a good cause, even
if innocent people are injured? The answers to these ethical questions depend on your definition
of ethics!

Dictionary Definition of Ethics

The dictionary defines ethics as:

1. the study of standards of conduct and moral judgment; moral philosophy

2. a treatise on this study
3. the system or code of morals of a particular person, religion, group, profession, etc.

According to this definition, ethics can be one of two things: it can be something that you study
and think about, or it can be a code that you follow and live by. Of course, in the real world,
ethics is often both. Philosophers who think about ethics usually try to live by an ethical code,
while the people who set up a code of ethics often study and think while they are doing so.
Of course, knowing that the definition of ethics is a code of morals doesn't really help to define
what is ethical, does it? The moral code itself has to provide that definition. So, the question
"define ethical" becomes synonymous with the question "define moral."

The 9 Theories of Ethics

Because of the difficulty in defining ethics, which we've already begun to see, philosophers have
given a lot of thought to this question. Since they haven't been able to come up with a clear
answer either, they've provided 9 theories of ethics that can be used to determine the ethical
course of action in a given situation:

1. Consequentionalism: An action is ethical, or not, depending on the consequences of the

action
2. Values Clarification: Your ethics should be determined based on your internal values, and
not what anyone else thinks
3. Utilitarianism: The action that has the best result for the most people is the ethical action
4. Moral Absolutism: An action is always moral or immoral, regardless of the circumstances
5. Situation Ethics: The ethical nature of an action is dependent on the situation, and
decisions must be made out of love and helpfulness in the particular moment.
6. Ethical Realism: The ethical choice is the choice that is the lesser of two evils
7. Ethical Hierarcicalism: There are many possible choices on the continuum of ethical
choices, and we must choose the choice that benefits the greater good
8. Principle Ethics: The ethical decision should be based on an underlying set of logical
principles
9. Cognitive Moral Development: Ethical dilemmas should be solved using critical thinking
Organizational Ethics is the ethics of an organization, and it is how an organization ethically
responds to an internal or external stimulus. Organizational ethics is interdependent with the
organizational culture. Although, it is akin to both organizational behavior (OB) and business
ethics on the micro and macro levels, organizational ethics is neither OB, nor is it solely
business ethics (which includes corporate governance and corporate ethics). Organizational
ethics express the values of an organization to its employees and/or other entities irrespective of
governmental and/or regulatory laws.

Basic elements of an ethical organization

There are at least four elements which exist in organizations that make ethical behavior
conducive within an organization. The four elements necessary to quantify an organization's
ethics are: 1) written code of ethics and standards; 2) ethics training to executives, managers, and
employees; 3) availability for advice on ethical situations (i.e, advice lines or offices); and 4)
systems for confidential reporting.
Good leaders strive to create a better and more ethical organization. Restoring an ethical climate
in organization is critical, as it is a key component in solving the many other organizational
development and ethical behavior issues facing the organization.

Importance of Ethics in Organisation

From debates over drug-testing to analyses of scandals on Wall Street, attention to ethics in
business organizations has never been greater. Yet, much of the attention given to ethics in the
workplace overlooks some critical aspects of organizational ethics.

When talking about ethics in organizations, one has to be aware that there are two ways of
approaching the subject--the "individualistic approach" and what might be called the "communal
approach." Each approach incorporates a different view of moral responsibility and a different
view of the kinds of ethical principles that should be used to resolve ethical problems.

More often than not, discussions about ethics in organizations reflect only the "individualistic
approach" to moral responsibility. According to this approach, every person in an organization is
morally responsible for his or her own behavior, and any efforts to change that behavior should
focus on the individual.

But there is another way of understanding responsibility, which is reflected in the "communal
approach." Here individuals are viewed not in isolation, but as members of communities that are
partially responsible for the behavior of their members. So, to understand and change an
individual's behavior we need to understand and try to change the communities to which they
belong.

Any adequate understanding of, and effective solutions to, ethical problems arising in
organizations requires that we take both approaches into account. Recent changes in the way we
approach the "problem of the alcoholic" serve as a good example of the interdependence of
individual and communal approaches to problems. Not so long ago, many people viewed an
alcoholic as an individual with problems. Treatment focused on helping the individual deal with
his or her problem. Today, however, the alcoholic is often seen as part of a dysfunctional family
system that reinforces alcoholic behavior. In many cases, the behavior of the alcoholic requires
that we change the entire family situation.
These two approaches also lead to different ways of evaluating moral behavior. Once again, most
discussions of ethical issues in the workplace take an individualistic approach. They focus on
promoting the good of the individual: individual rights, such as the right to freedom of
expression or the right to privacy, are held paramount. The communal approach, on the other
hand, would have us focus on the common good, enjoining us to consider ways in which actions
or policies promote or prohibit social justice or ways in which they bring harm or benefits to the
entire community.

When we draw upon the insights of both approaches we increase our understanding of the ethical
values at stake in moral issues and increase the options available to us for resolving these issues.
The debate over drug-testing, for example, is often confined to an approach that focuses on
individual rights. Advocates of drug-testing argue that every employer has a right to run the
workplace as he or she so chooses, while opponents of drug-testing argue that drug-testing
violates the employee's right to privacy and due process. By ignoring the communal aspects of
drug abuse, both sides neglect some possible solutions to the problem of drug use in the
workplace. The communal approach would ask us to consider questions which look beyond the
interests of the individual to the interests of the community: What kinds of drug policies will
promote the good of the community, the good of both the employer and the employee?

Using the two approaches to dealing with ethical problems in organizations will often result in a
greater understanding of these problems. There are times, however, when our willingness to
consider both the good of the individual and the good of the community leaves us in a dilemma,
and we are forced to choose between competing moral claims. Affirmative Action Programs, for
example, bring concerns over individual justice into conflict with concerns over social justice.
When women and minorities are given preferential treatment over white males, individuals are
not treated equally, which is unjust. On the other hand, when we consider what these programs
are trying to accomplish, a more just society, and also acknowledge that minorities and women
continue to be shut out of positions, (especially in top management), then these programs are, in
fact, indispensable for achieving social justice. Dropping preferential treatment programs might
put an end to the injustice of treating individuals unequally, but to do so would maintain an
unjust society. In this case, many argue that a communal approach, which stresses the common
good, should take moral priority over the good of the individual.

When facing such dilemmas, the weights we assign to certain values will sometimes lead us to
choose those organizational policies or actions that will promote the common good. At other
times, our values will lead us to choose those policies or actions that will protect the interests and
rights of the individual. But perhaps the greatest challenge in discussions of ethics in
organizations is to find ways in which organizations can be designed to promote the interests of
both

The Importance of Ethics In Any Business Organization

It is an important aspect of any organization, regardless of how large or small, to have proper ethics. With
the problems of the economy and the extremely high market competition, many businesses have started
ignoring their ethics in order to stay on top with the competition.This is sad, and needs to be addressed.
This article will explain the importance of business ethics and the best advice on how a business can
maintain the use of their current ethical standards, while still remaining competitive.

It is important to the success of a business that those who are in a leadership position set the pace for the
others. Management personnel should be taught that their ethical behavior determines the ethical
behavior of the other employees in the company. Most importantly, if the owner of the business uses the
utmost applications of business ethics, those that he employs will follow the same ethical behavior.

Every person should be made aware of the company's specific ethics that are used, not only in the very
beginning, but also on a regular basis. They should also be made aware of the wrong ethical behaviors.
These are the ones that should be avoided at all costs. You should make all your employees, at every
level, EXACTLY what your business' ethical code is. You should remind all employees of these sets of
ethical rules, as well as how crucial it is that they be followed.

There are three main factors that you need to consider when creating an ethical code for your business.
First, you should have open communication with members of management and also the employees. In
order to promote confidence in each other and the company, and also to have a level of comfort and trust,
communication must be open so that employees at all levels can discuss any issues that make come up
regarding the code of ethics.

Second, there should be a team designed strictly for the purpose of watching the ethical actions of all the
employees within the company. They should have specific procedures to identify incidences of unethical
behaviors. They should also have specific procedures that are designed to deal with the issues of ethical
misconduct.

Finally, when creating your business' ethical code, you should have a vision that is clearly explained. All
aspects of the ethical rules should be detailed. This is the foundation for the entire ethical code that you
design for your business. It is vital to the ultimate success and implementation of the entire set of ethical
principles for your business.

Although you may have an ethical enforcement team, it is still vital for you, as the business' owner, to be
the final determinative force. Ultimately, your employees will mimic what you do and how you behave. If
you act unethical, your employees will follow suit, merely out of loyalty to you, even if they know it is not
right

APPROACHES TO ETHICAL DECISION-MAKING

Philosophers have studied and written about ethics for thousands of years. The moral philosophies or
ethical "theories" that have been developed form the foundation for ethics in business. Table 1 shows
some of the major ethical philosophies that are applied to business ethics. Each of the ethical philosophies
is briefly considered in this section.

Table 1
Approaches to Ethics in Business
Adapted from: Ferrell, Fraedrich, and Ferrell, 2002, p. 57.

Teleological Actions are judged as ethical or unethical based on their results.

Actions are judged as ethical or unethical based on the consequences to

Egoism
one's self. Actions that maximize self-interest are preferred.

Actions are judged as ethical or unethical based on the consequences to

Utilitarianism "others." Actions that maximize the "good" (create the greatest good for the
greatest number) are preferred.

Deontological Actions are judged as ethical or unethical based on the inherent rights of
 individual and the intentions of the actor. Individuals are to be treated as
means and not ends. It is the action itself that must be judged and not its
consequences.

Actions are judged as ethical or unethical based on the fairness shown to

Justice those affected. Fairness may be determined by distributive, procedural,
and/or interactional means.

Actions are judged as ethical or unethical based on subjective factors that

Relativism may vary from individual to individual, group to group, and culture to
culture.

Fig. 1, A behavioral model Of ethical/unethical decision making.

FACTORS AFFECTING ETHICAL DECISION-MAKING

In general, there are three types of influences on ethical decision-making in business: (1) individual
difference factors, (2) situational (organizational) factors, and (3) issue-related factors.
INDIVIDUAL DIFFERENCE FACTORS.

Individual difference factors are personal factors about an individual that may influence their sensitivity
to ethical issues, their judgment about such issues, and their related behavior. Research has identified
many personal characteristics that impact ethical decision-making. The individual difference factor that
has received the most research support is "cognitive moral development."

This framework, developed by Lawrence Kohlberg in the 1960s and extended by Kohlberg and other
researchers in the subsequent years, helps to explain why different people make different evaluations
when confronted with the same ethical issue. It posits that an individual's level of "moral development"
affects their ethical issue recognition, judgment, behavioral intentions, and behavior.

According to the theory, individuals' level of moral development passes through stages as they mature.
Theoretically, there are three major levels of development. The lowest level of moral development is
termed the "pre-conventional" level. At the two stages of this level, the individual typically will evaluate
ethical issues in light of a desire to avoid punishment and/or seek personal reward. The pre-conventional
level of moral development is usually associated with small children or adolescents.

The middle level of development is called the "conventional" level. At the stages of the conventional level,
the individual assesses ethical issues on the basis of the fairness to others and a desire to conform to
societal rules and expectations. Thus, the individual looks outside him or herself to determine right and
wrong. According to Kohlberg, most adults operate at the conventional level of moral reasoning.

The highest stage of moral development is the "principled" level. The principled level, the individual is
likely to apply principles (which may be utilitarian, deontological, or justice) to ethical issues in an
attempt to resolve them. According to Kohlberg, a principled person looks inside him or herself and is less
likely to be influenced by situational (organizational) expectations.

The cognitive moral development framework is relevant to business ethics because it offers a powerful
explanation of individual differences in ethical reasoning. Individuals at different levels of moral
development are likely to think differently about ethical issues and resolve them differently.

SITUATIONAL (ORGANIZATIONAL) FACTORS.

Individuals' ethical issue recognition, judgment, and behavior are affected by contextual factors. In the
business ethics context, the organizational factors that affect ethical decision-making include the work
group, the supervisor, organizational policies and procedures, organizational codes of conduct, and the
overall organizational culture. Each of these factors, individually and collectively, can cause individuals to
reach different conclusions about ethical issues than they would have on their own. This section looks at
one of these organizational factors, codes of conduct, in more detail.
Codes of conduct are formal policies, procedures, and enforcement mechanisms that spell out the moral
and ethical expectations of the organization. A key part of organizational codes of conduct are written
ethics codes. Ethics codes are statements of the norms and beliefs of an organization. These norms and
beliefs are generally proposed, discussed, and defined by the senior executives in the firm. Whatever
process is used for their determination, the norms and beliefs are then disseminated throughout the firm.

An example of a code item would be, "Employees of this company will not accept personal gifts with a
monetary value over $25 in total from any business friend or associate, and they are expected to pay their
full share of the costs for meals or other entertainment (concerts, the theater, sporting events, etc.) that
have a value above $25 per person." Hosmer points out that the norms in an ethical code are generally
expressed as a series of negative statements, for it is easier to list the things a person should not do than to
be precise about the things a person should.

Almost all large companies and many small companies have ethics codes. However, in and of themselves
ethics codes are unlikely to influence individuals to be more ethical in the conduct of business. To be
effective, ethics codes must be part of a value system that permeates the culture of the organization.
Executives must display genuine commitment to the ideals expressed in the written code—if their
behavior is inconsistent with the formal code, the code's effectiveness will be reduced considerably.

At a minimum, the code of conduct must be specific to the ethical issues confronted in the particular
industry or company. It should be the subject of ethics training that focuses on actual dilemmas likely to
be faced by employees in the organization. The conduct code must contain communication mechanisms
for the dissemination of the organizational ethical standards and for the reporting of perceived
wrongdoing within the organization by employees.

Organizations must also ensure that perceived ethical violations are adequately investigated and that
wrongdoing is punished. Research suggests that unless ethical behavior is rewarded and unethical
behavior punished, that written codes of conduct are unlikely to be effective.

ISSUE-RELATED FACTORS.

Conceptual research by Thomas Jones in the 1990s and subsequent empirical studies suggest that ethical
issues in business must have a certain level of "moral intensity" before they will trigger ethical decision-
making processes. Thus, individual and situational factors are unlikely to influence decision-making for
issues considered by the individual to be minor.

Certain characteristics of issues determine their moral intensity. In general, the research suggests that
issues with more serious consequences are more likely to reach the threshold level of intensity. Likewise,
issues that are deemed by a societal consensus to be ethical or unethical are more likely to trigger ethical
decision-making processes.
In summary, business ethics is an exceedingly complicated area, one that has contemporary significance
for all business practitioners. There are, however, guidelines in place for effective ethical decision making.
These all have their positive and negative sides, but taken together, they may assist the businessperson to
steer toward the most ethical decision possible under a particular set of circumstances.

Q-1 What are the ethical issues faced by organizations in

today’s environment? What will be your suggestion for
Eliminating the evil of corruption in an organization?
Introduction:
Ethics, social responsibility of business and corporate governance have become hot issues in
the wake of a series scandal reported from all over the world. This subject needs special
attention because multinationals operate in a large number of countries with varying standards
of moral behavior and multicultural perceptions about what is right and what is wrong. Their
workface also consists of high diversity with individuals having different values and beliefs. The
is important also as economic programs of developed and developing countries cannot only be
faster but also will be long lasting if built on strong moral foundation.
What is ethics?
‘Ethics is the discipline that examines the moral standards practiced by an individual or a
corporate or a society.’ It is a function of one’s consciousness. It is therefore beyond the
boundaries of law. Some activities may be legal but may not be ethical, although law represents
the moral code or standards

practices by a society or country to resolve conflicts and allow freedom to achieve their
uniqueness, pursue their goals and live in peace. It represents the practiced value system.
While ethics, in general, is concerned with concepts of right and wrong for societal purposes .its
practical essential is best expressed by the seven sins of Mahatma Gandhi, which are as under:
 Politics without Principles
 Wealth without work
 Pleasure without Conscience
 Knowledge without Character
 Commerce without Morality
 Science without humanity
 Worship without sacrifice
Ethical issues faced by Organizations:
Some of the common unethical practices business resort to
include:
Manipulation of stock markets: In India manipulation of
stock market is not uncommon. There are several investigations and a few brokerage firms and
individuals have been prosecuted. MNCs generally avoid manipulation of capital markets.
Lobbying: This is a tool of public relations. Japanese more
than other countries spend millions of dollars in the US every

year to bend rules in award of contracts or to get sensitive

information or restricted equipment.
Fudging of Accounts and Balance Sheet: It is very common in developing countries like India
and Indonesia to manipulate accounts to avoid taxes or manipulate share price before public
issue. Eg: Enron, world.com, water cooper and Satyam.
Product Piracy: Lax enforcement of intellectual property
rights has resulted in large-scale piracy of music and picture videos, software, fake drugs and
other intellectual property capital in China, India, Latin America and Eastern Europe. It is
estimated that 30,000 shops in Shangai alone sell pirated videos.
Surrogate and Deceptive Advertising: There are many
ethical issues in advertising, including violation of cultural norms and nudity, apart from false
information to customers. Eg: cake and Pepsi.
Discrimination in selection, competition and promotion:In
spite of equality laws in different countries companions still practice same bias in selection and
other management process on the basis of gender, colour, and race and show ethnocentrism.
Sexual harassment at workplace is a growing trend.

Suggestions to eradicate corruption:

1. Institution of strong ethical structure based on social
values and professional requirements.
2. Institution and execution of sound process of business.
3. Promote a clear understanding of ethical behavior and its
advantages in individual and business growth.
4. Strong action against unethical behavior.
5. Speedy disposal of unethical behavior cases.
6. Sound appraisal system.
7. Planning and execution of a clearly defined award and
reward system based on professional ethics.
8.
Transparency in working.

Ethical issues arising from the nature of markets

- The 18th Century economist Adam Smith demonstrated how in a free market the self interest of
producers and consumers will produce an outcome desirable to all concerned
- But the market can also lead to inequality of income, wealth and market power:

• Monopoly suppliers can exploit consumers

• Monopsony buyers can exploit supply firms
• World wide inequality of income can result in unethical practices such as the child labour

Ethical issues and society - examples

• Involvement in the community

• Honesty, truthfulness and fairness in marketing
• Use of animals in product testing
• Agricultural practices e.g. intensive faming
• The degree of safety built into product design
• Donation to good causes
 • The extent to which a business accepts its alleged responsibilities for mishaps, spillages and
• leaks
• The selling of addictive products e.g. tobacco
• Involvement in the arms trade
• Trading with repressive regimes

Ethical issues arising from internal and industry practices - examples

• Treatment of customers - e.g. honouring the spirit as well as the letter of the law in respect to
warranties and after sales service
• The number and proportion of women and ethnic minority people in senior positions
• The organisation’s loyalty to employees when it is in difficult economic conditions
• Employment of disabled people
• Working conditions and treatment of workers
• Bribes to secure contracts
• Child labour in the developing world
• Business practices of supply firms

Unethical practices in marketing - examples

• Pricing lack of clarity in pricing

• Dumping – selling at a loss to increase market share and destroy competition in order to
subsequently raise prices
• Price fixing cartels
• Encouraging people to claim prizes when they phoning premium rate numbers
• “Bait and switch” selling - attracting customers and then subjecting them to high pressure
selling techniques to switch to an more expensive alternative
• High pressure selling - especially in relation to groups such as the elderly
• Counterfeit goods and brand piracy
• Copying the style of packaging in an attempt to mislead consumers
• Deceptive advertising
• Irresponsible issue of credit cards and the irresponsible raising of credit limits
• Unethical practices in market research and competitor intelligence

Unethical practices relating to products - examples

• Selling goods abroad which are banned at home

• Omitting to provide information on side effects
• Unsafe products
• Built in obsolescence
• Wasteful and unnecessary packaging
• Deception on size and content
• Inaccurate and incomplete testing of products
• Treatment of animals in product testing

Ethics and the supply chain

- It would be hypocritical to claim to be a ethical firm if it turned a blind to unethical practices by

suppliers in the supply chain. In particular:

• The use of child labour and forced labour

• Production in sweatshops
• Violation of the basic rights of workers
• Ignoring of health, safety and environmental standards
An ethical producer has to be concerned with what is practiced by all firms (upstream and
downstream) in the supply chain.

Bribery

This is a key ethical issue in business

• It first needs to be stated that bribery to secure a contract (especially a contract with a public
sector body) is against the law and severe penalties can result
• However, it is sometimes seem (wrongly) as a victimless crime and is often rationalised in
terms of “if we don’t offer a bribery, others will”
• From a moral or ethical perspective it should be approached not in terms of “can we get away”
with it but is it right to offer a bribe to secure a contract

Institute of Business Ethics Suggestions for Good Practice

The Institute recommends that organisations issue statements of ethical practice in respect of:

• Relations with customers

• Relations with shareholders and other investors
• Relations with employees
• Relations with suppliers
• Relations with the government and the local community
• The environment
• Relations with competitors
• Issues relating to international business
• Behaviour in relations to mergers and takeovers
• Ethical issues concerning directors and managers
• Compliance and verification

What is an Ethical code?

- This is a set of principles governing morality and acceptable behaviour

It is likely to cover:

• Personal behaviour e.g. when dealing with customers and suppliers

• Corporate behaviour e.g. when negotiating deals
• Behaviour towards society e.g. when recruiting
• Behaviour towards the environment e.g. when deciding on process

Ethical audit

- This is an audit of all the firms activities

Purpose:

• To check that ethical principles are being pursued

• To check the extent to which actions are consistent with the organisation’s stated ethical
intentions
• And to establish action plans if they are not

Q5. Characteristics of an ethical leader

Here are my weekly tips to help you and your colleagues become more effective and
respected leaders.
1.) High Values Awareness
Values are regularly communicated and discussed to ensure awareness and understanding
throughout the organization.

2.) High Values Accountability

People are evaluated on values-driven practices as well as results—with zero tolerance for
conscious values violations.

3.) Leadership By Example

Leaders earn the right to expect others to do things by doing those things themselves.

4.) Values-Driven Decision Making

Decisions are checked to ensure they are in accord with organizational values BEFORE they are
implemented.

5.) In Sync Policies and Procedures

Rules, policies, and practices are evaluated to ensure they reflect and support organizational
values.

6.) Values-Driven Education

Training and other developmental activities teach people how to demonstrate ethics and apply
organizational values.

7.) Attention To Perceptions

Climate surveys and other perception-collecting activities are important components of
organizational assessment and change strategies.

8.) Steady, Incremental Change

Emphasis is placed on many small improvements rather than quick-fix fads and “programs of the
year.”

9.) Values-Based Selection

The degree to which people subscribe to and practice organizational values is a key criterion in
hiring and promotion decisions.

10.) Encouraged Initiative

People are rewarded for Walking The Talk rather than complaining, pointing fingers, or waiting
for others to take the first step.

Transactional Leadership Vs. Transformational Leadership

Number of Leadership theories evolved on the basis of Trait, Behavioral, Transformational,

Situational, Charisma. Researchers and thinkers made efforts linking some of the theories across
these leadership islands. But each model has its own pros, cons, assumptions & limitations.
Latest researches are conducted on Situational & Transformational leadership styles. Leadership
gurus presented new models as variations to the already existing models. Max Weber,
MacGregor Burns, Bernard M.Bass, Warren Bennis & Nanus are few important researchers in
the area of transformational leadership.
Understanding the difference between transactional and transformational leadership is vital in
getting the whole concept of transformational leadership theory.
As a starting point, let us review our everyday life. In general, a relationship between two people
is based on the level of exchange they have. Exchange need not be money or material; it can be
anything. The more exchange they have the more stronger the relation. Your manager expects
more productivity from you in order to give good rewards. In this way, if something is done to
anyone based on the return then that relation is called as ‘Transactional’ type. In politics, leaders
announces benefits in their agenda in exchange to the vote from the citizens. In business, leaders
announces rewards in turn to the productivity. These relation is all about requirements,
conditions and rewards (or punishment). Leaders who show these kind of relationship are called
‘Transactional Leaders’.
In life, at one point of time, things happen without expectation from other side. Say, mom’s
dedicated service to her kid. Mom doesn’t expect anything from the child and the service she
provides in raising the child is unconditional, dedicated, committed. Mom plays a major role in
shaping up the kid’s future life. This type of relation is called as ‘Transformational’. Leaders do
exist in this world with these behaviors. Transformational Leaders work toward a common goal
with followers; put followers in front and develop them; take followers’ to next level; inspire
followers to transcend their own self-interests in achieving superior results.
Transactional Leader:
approaches followers with an eye to exchanging one thing for another … Burns
pursues a cost benefit, economic exchange to met subordinates current material and psychic
needs in return for “contracted” services rendered by the subordinate …. Bass
Transformational Leader:
“recognizes and exploits an existing need or demand of a potential follower… (and) looks for
potential motives in followers, seeks to satisfy higher needs, and engages the full person of the
follower” … Burns
The leader who recognizes the transactional needs in potential followers “but tends to go
further, seeking to arouse and satisfy higher needs, to engage the full person of the follower …
to a higher level of need according to Maslow’s hierarchy of needs” … Bass
As exactly said by Bass – “the transactional leaders work within the organizational culture as it
exists; the transformational leader changes the organizational culture”.
Following table shows difference of transactional and transformation leadership[1].
Transactional Leadership Transformational Leadership
* Leaders are aware of the link between the effort * Leaders arouse emotions in their followers which
and reward motivates them to act beyond the framework of what
may be described as exchange relations
* Leadership is responsive and its basic
orientation is dealing with present issues * Leadership is proactive and forms new expectations
* Leaders rely on standard forms of inducement, in followers
reward, punishment and sanction to control * Leaders are distinguished by their capacity to
followers inspire and provide individualized consideration,
* Leaders motivate followers by setting goals and intellectual stimulation and idealized influence to
promising rewards for desired performance
* Leadership depends on the leader’s power to
reinforce subordinates for their successful
completion of the bargain.
their followers
* Leaders create learning opportunities for their
followers and stimulate followers to solve problems
* Leaders possess good visioning, rhetorical and
management skills, to develop strong emotional
bonds with followers
* Leaders motivate followers to work for goals that
go beyond self-interest.

Are business ethics or profits more important?

Results so far:

Ethics 75% 605 votes

Total: 810 votes
Profits 25% 205 votes

Ethics vs Profits

Ethics
Watching the bottom line is very important when one is in business but even more important is
keeping a vigilant eye on one’s business ethics. To have business ethics means treating all
stakeholders fairly and to treating people and other businesses fairly is showing them respect.
Putting business ethics first means that employees will be loyal not out of fear but out of respect.
It means a less stressed work environment which in turn means less employee sick days.
Customers are willing to spend a little more if they feel certain that they will be treated fairly and
won’t have to worry about being cheated. Vendors will be more inclined to extend credit to a
company that has a reputation for being above board in its dealings.
Businesses’ that always behave in an ethical manner will spend less on lawyers and won’t need
to spend as much on advertising as their less trustworthy competitors do. For a business to put
profit ahead of ethics is the same as being ‘penny wise but pound foolish’. Sure there is gain
today but at what cost?
Customers can be mislead, vendors can be strong armed, and accounting corners can be cut to
fool the investors but like a house built upon the sand it falls apart eventually. The general person
may seem stupid to some top executives but eventually that customer smartens up and notices
the bait and switch or the inferior merchandise or the out of date product and begins to shop
somewhere else. Oh, the customers may continue to shop at a store that they feel has been less
then honest with them but only for the really good sales, everything else they will buy
somewhere else. No store can exist selling only their ‘come on or loss leader” items.
Vendors that are left hanging or who are threatened with a boycott of their products if price
demands aren’t met may have no choice but to play along but you can be sure they tell other
vendors how they were treated. Companies know that if they gear up production to supply Wal-
Mart then they must sell to Wal-Mart at the price Wal-Mart demands or they will be dropped and
left with a glut of product and no place to sell it. This has caused several companies to have to
move their production out of the U.S. in order to cut their product costs and stay in business.
Certainly profits must not be ignored after all that is why businesses are in business but trying to
realize a profit while ignoring or only paying lip service to the ethics of one’s business will not
work in the long run, even Wal-Mart will eventually succumb to this fact of life. It’s Karma, it
got Enron and one day it will get to Wal-Mart because what does around comes around.

Profits
In a strictly business topic, profit is the driving force of success and growth. One cannot deny
that high revenues signal a strong business, and one CAN deny that without ethics a business
will fail.
For instance, pyramid schemes, which are just a plot to make money from others by giving the
service of making money, serves no purpose and is unethical. However, we
can definitely assume that the inventors of the pyramid schemes are sitting on top of their
"business" making thousands, if not millions, of dollars laughing at the ethical man who cannot
keep his own business afloat selling something with actual worth.
We hope for ethics in this world and that one day our leaders, whether in business, government,
or science, will keep us on the track of good consciousness for a better world, but for this
moment in time in a business field, profit is key.
All of our parents, teachers, and elders told us that working hard and doing good in the world is
the key to success and wealth. They say that with a pure heart, one will one day reap the rewards
they have given out as good deeds, and live a happy life. This is a speculation because one, we
cannot tell the future, and two, it only works in a utopia. Mostly everyone in this world works for
a profit, even people here, on helium, work for a profit (do to the fact the majority do not donate
their revenues). Because everyone works for a profit, the idea that one will go out of his or her
own way to enrich someones else's wealthiness without a clear return in value is considered
"crazy." And its true, because humans find most other humans insignificant and even though
another may show graciousness and generosity, most people will see the generosity with greedy
eyes, not the person behind it.
Therefore by starting and maintaining a business, an enterprise that exchanges goods or services
for wealth, is exactly as its meaning, exchanging goods and services for wealth. Why is it that
fast food chains in America, whose method of manufacturing food and marketing is considered
very unethical due to the fact the food is considered "unhealthy" and it markets to children, are
making billions of dollars. This contrasts the agencies that try to prevent obesity and promote
good living, whose quarterly revenues cannot even match 10% that the big boys are making,
even though they are ethical.
This does not mean that banning ethics is the answer, no, it means that the primary focus of a
growing business is profits and hopefully when one's business is large enough, it can be coupled
with ethics that can change society for the better. A good analogy would be to portray a growing
tree from a seedling. Should the tree try to grow apples for the inhabitants of the forest when it is
young and fragile, or focus on growing big and tall to the point where it can make thousands of
apples for the entire horizon. Therefore I say, profits should be the primary focus, whereas ethics
should be the coupled together later on.

Business ethics can be profitable

Business and ethics almost sounds like an oxymoron. If you read the headlines they often sound
something like "CEO bilks millions", "Executives involved in illegal activity" or "Corporation
harms the environment". Corporations have the reputation of being ruthless and being all about
the profit.
To an extent this is perhaps true because a for-profit company's mission is to return a profit to its
stakeholders. Although to another degree this is a stereotype because it doesn't mean that profits
and ethics can't peacefully co-exist. There are many companies which are successful, profitable
and ethical.
While some companies do engage in these kind of unethical activities in the pursuit of profit, in
the long run you'll often hear of their demise rather than their success. Sure they might attain
some quick short term profits, but this isn't going to sustain them in the long term once those
negative headlines emerge.
What some profit-intense management members fail to consider is that establishing a good
ethical foundation in an organization can actually give the company a competitive advantage and
increase profits. Profits and ethics can live in harmony and one can even enhance the other.
There are many significant advantages to integrating a philosophy of ethics into your business.
While profits are obviously an important consideration there is no good reason ethics can't play a
part in it.
When you set an example of integrity and establish a sound moral compass across your business
this will directly impact success and growth. Here are a few other advantages a strong moral
compass will lead your business to receive, all of which impact profitability.
*Solid Reputation
Businesses that regularly practice good ethics attract consumers. When your business acts in an
ethical fashion it gives your business a positive impression and as a result you'll achieve a good
reputation.
Word of mouth and good press are positive referrals and if your business can receive the stamp
of approval from customers, news and even reviews on the Internet this will increase your
chances to be more profitable.
How often do you search for information online to find out about a product or business? Chances
are if you regularly engage in looking up information you've seen how vocal people are when it
comes to companies they've done business with. All it takes is a few bad reviews on the Internet
outlining unethical practices and this will live on forever in every search engine.
If your company acts ethical, this is the face you'll be showing the world when people look for
information which also will remain visible in search engines for customers to see.

*Good Ethics Lead to a Loyal Following

Customers tend to shy away from businesses that are known to be unethical or recognized for
being less than stellar in their behavior. One bad experience, negative treatment or shady
business deal is all it takes for a customer to be willing drop their loyalty.

In today's competitive environment the companies which act unethical will lose in the long
run. Sure they might make a quick profit through their unscrupulous acts, but this kind of profit
isn't the sustaining kind. Over the long term their dishonesty is going to catch up with them
because they won't be able to retain loyal customers.
If you can establish a loyal customer base you'll be guaranteed ongoing profitability, but if you
can't sustain your customers it is going to cost you in the long run. It is a lot less expensive to
keep returning customers than it is to attract new ones.

Those short term profits won't add up to much if your budget is spent trying to continually attract
new customers because your unethical practices drive existing ones away. Customer loyalty is
definitely more profitable and good ethics is a good way to keep people returning.

*Competitive Advantage

Acting ethically when conducting business gives you a strong competitive advantage. When you
can attract customers based on your good name, reputation and quality product or service this is
very profitable.

If people do a search for your kind of product or service they are going to comparison shop and
if it comes down to a business known to be ethical and one that is not as reliable due to shoddy
ethics, chances are your company will be the one selected.

Even if your prices are a bit higher, people want to pay for quality and honesty because they
know they'll be getting exactly what they have been promised. A business who is known to be
unethical isn't going to have this competitive advantage.

*Attract More Business

It goes without saying that ethical companies attract customers for many of the same reasons
mentioned above. Once you're established as a company which conducts business honestly, takes
a level of corporate social responsibility and forgoes ruthless and cut-throat practices this is of
immediate value to your business.

*Good Reputation for Building Partnerships

Creating strong partnerships with other ethical companies is another advantage to running an
ethical workplace. In today's global economy businesses are often dependent on one another for
sustainability and growth.

When you do business with other ethical companies and forge solid partnerships, this further
increases visibility and establishes yourself as having a solid reputation. If you are associated
with companies who are known for their immoral activities, there is a chance this reputation will
transition to you.

On the other hand if ethical companies recognize you as one who is comprised of good moral
standing and only works with companies who hold similar business philosophies they'll do
business with you. In the long run this further increases your profit margin.

Profits and ethics are not exclusive, in fact with today's competition it is probably now more
important than ever to engage in ethical business practices. Consumers run the market and if they
don't like the way you do business they'll simply turn to one of your competitors. It is in your
best interests to run a morally strong organization
 ********

Can Ethics and a Healthy Bottom Line For Companies Co-Exist?

There's a view that soaring profits and ethics are mutually exclusive concepts, however, the two
can co-exist. The world of business is generally perceived as jungle where the bottom line takes
precedence over all other matters. While it is certainly true that profits are the true measure of
success, commercial ruthlessness doesn't necessarily lead to unethical practices. There
sometimes arises an inevitable conflict in the company between their moral obligations and
improving the bottom lines. But ultimately companies following the path of ethical value system
succeed in long run as sooner or later consumers learn to separate fact from fiction. Hence in
situations such as these referring to morality to help decide what needs to be done should take
precedence.

Nowadays Money and Ethics are seen to be diametrically opposed to each other but it turns out
money and ethics do have much in common. Any corporation large or small ultimately lives by
its reputation. Ethics must sit at the top of the mountain for any successful company that wants
the trust of the consumers and investors. There are very few second acts once the public
perceives the organization flawed by dishonesty or inferior quality. As is very rightly said by
Henry Ford - A business that makes nothing but money is a poor kind of business.

Ethical decision-making gets especially interesting when organizations must reconcile their core
values and show a healthy bottom line which end up in conflict with one another. The company
and its management might get diversified to malpractices. Enron, WorldCom, Satyam, Xerox
and other scandals shook public confidence in ethical value system of organizations. But it must
understood very clearly Relativity applies to physics, not ethics (Albert Einstein)

Profits and ethics are in reality part of the same equation. A corporation that wishes to grow and
increase its financial return to its owners must balance ethics and operations. This is a complex
journey especially during tremendous economic pressures. The drive for success in the
marketplace and to maximize return of capital can lead a company astray with disastrous results.
Successful businesses fail, profitably running businesses suffer from a downfall and some
seemingly effective corporate receive a great fall in their profits and popularity all due to the lack
of business ethics. There are companies that have crossed ethical lines in the pursuit of profit,
and momentarily gained fame and fortune but what was the end result??

Many companies strive for and achieve ethical behavior. Looking at names like Tata group, Ford
India, Rockwell Automation, Infosys Technologies, Hindustan Unilever, ITC, ONGC it is
inferred that Ethics remain being important in business and strong ethical values takes the
business a long way. Ethics are important not only in business but in all aspects of life because it
is an essential part of the foundation on which civilized society is build. A business that lacks
ethical principles is bound to fail sooner or later.

"If you have integrity, nothing else matters. If you don't have integrity, nothing else matters." --
Alan K. Simpson