BUSINESS ETHICS & PROFESSIONAL VALUES

By DEBARPAN BOSE 2017

BUSINESS ETHICS & PROFESSIONAL VALUES

 Ethics is the study of right and wrong, correct & incorrect, proper & improper.  Ethics: ETHOS (Character)  Ethics – Personal & Business  Personal ethics is the foundation of business ethics.  A person who is ethical in personal level, is assumed to be ethical in business level.  Ethics is the function of culture, content, context and time.  Ethical competency: The ability to make ethical decisions and sound ethical choices.  Ethics by nature is personal, subjective and judgemental.  A person who is ethical in personal level it is assumed that he is ethical in business level also.  For doing something wrong we need to know what is right.  Professional values  Values are universal, ethics are not. Morality is the study of ethics. Do you the statement? Morality can be defined as the standards that an individual or group has about what is right or wrong, or good or evil. It is generally used to describe a sociological phenomenon, namely, the existence in a society of rules and standards of conduct. Every society has a morality, because this constitutes the basis for mutually beneficial interactions. Without such fundamental rules that distinguish good and evil acts, such as do not lie, do not steal etc., stable communities would simply degenerate into chaos and confusion. Moralities tend to be specific to the times and societies to which they relate to. Such the moralities of the average American would be quite different from that of Indians. Again, the moralities of Americans in the 1930s would have been quite different from what they are today. Morality is function of ethics and ethics is a function of time. HOW DOES MORAL STANDARD DEFER FROM NON MORAL STANDARD? MORAL STANDARDS vs NON MORAL (OR CONVENTIONAL) STANDARDS: Standards refer to set rules or norms of right and wrong under different decision making situations. In some cases, right may connote goodness or virtue and wrong to evil and vice. Yet in other situations right or wrong may not relate to good and evil as such. For instance, if we consider the following two sets of decision rules in specific situations, the matter becomes clear.

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SET 1 Do not harm other people. Do not lie to other people. Do not steal what belongs to others.

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SET 2 Do not eat with your mouth open. Do not chew gum in class. Do not wear socks that do not match.

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BUSINESS ETHICS & PROFESSIONAL VALUES

MORAL VS NON MORAL STANDARDS ARE DISTINGUISHED: 1. Moral standard deal with matters that are more serious ie, those issues which can significantly benefit or harm human beings. 2. Moral standards by concept are more acceptable and should be preferred to other values including self-interest. 3. Moral standards remain valid and cannot be changed/ established by decisions of authority figures or authoritative bodies. 4. Moral standard by nature are universal, whereas non moral standard are more situation specific. 5. Moral standards are based on impartial considerations unlike non moral standards. 6. Moral standards are more associated with special emotions and special situations, particularly they are true when these standards are violated and may involve feelings of guilt, fear, shame etc.

CASE STUDY: 01 You are the invigilator in an institute where one of your relative is appearing for a public examination. During the exam, you suddenly find that he is using unfair means. You are aware that if you report this incident to the authorities his career will be affected and not doing it would be a compromise on your professional conduct. Given the situation you are in and after knowing the consequences what would you do and why?

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BUSINESS ETHICS & PROFESSIONAL VALUES

 FRIEDMAN: “The business (purpose/objective) of business (organization) is to do business (profit), let public be damned.”  Ethics is a luxury; it is the imperative of big business houses only.  To be ethical is costly. Small businesses need not maintain ethics.

DEFINE BUSINESS ETHICS: Business ethics is the study of business situations, activities and decisions where issues of right and wrong are addressed. Business ethics is based on the principle of integrity and fairness and concentrates on the benefits to stakeholders both internal and external. Stakeholders include those individuals and groups without which the organization does not have an existence. It includes stakeholders, creditors, dealers, vendors, government and society. Business ethics can be studied at three distinct levels, namely, the systemic, corporate and individual levels. 

Systemic issues in business ethics are ethical questions raised about the economic, political, legal and other institutional framework within which businesses operate. These might include questions about the morality of free market capitalism or labour legislations etc.

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Corporate issues in business ethics are ethical questions raised about a particular organization. These include about the morality of the activities, policies, practices or organizational st of an individual company taken as a whole, e.g., equal opportunity in employment.

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Individual issues in business ethics are ethical questions raised about a particular individual within a company.

WHY SHOULD BUSINESS ACT ETHICALLY? Fernando A. C. (2009) has given the following reasons why businesses should act ethically: 1. To protect its own interest. 2. To protect the interests of business community as a whole, so that the public can have trust in it. 3. To keep commitment to society and act ethically. 4. To meet stakeholders’ expectation. 5. To prevent harm to the general public. 6. To build trust with key stakeholder groups. 7. To protect themselves from abuse by unethical employees and corporations. 8. To protect their own reputation. 9. To protect their own employees. 10. To create an environment in which workers can act in ways consistent with their values.

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BUSINESS ETHICS & PROFESSIONAL VALUES

 VALUES: important, cherish, utility  Opposite – Disvalue  E.g. of Value: Truth, Honesty, Beauty, Hard work, Sincerity, Loyalty  Value System: Hierarchy of values  Different people rank values in different order  Ultimate aim of life is to achieve truth, beauty (internal & external) & goodness  VALUE CRISIS: Universal values are absent.  Universal values VALUES & ETHICS: Values are personal in nature (e.g. a belief in providing customer satisfaction and being a good paymaster), while ethics is generalized value system (e.g. avoiding discrimination in recruitment and adopting fair business practices). Business ethics can provide the general guidelines within which management can operate. Values, however, offer alternatives to choose from. For example, philanthropy as a business policy is optional. An entrepreneur may or may not possess this value and still remain within the limits of business ethics. It is values, therefore, that vary among managers in an organization and such a variance may be a source of conflict at the time of business strategy formulation and implementation. Modification of values is frequently required for business strategy implementation. A particular business strategy, say of expansion may create value requirements such as stress on efficiency, risk taking attitude, etc. implementation may be sub optimal if the existing values do not conform to these requirements. In such cases, modification of values is necessary. But what was said of corporate culture is true for values too, they are difficult, if not impossible, to change. A judicious use of politics and power, redeg of corporate culture, and making systematic changes in organizations can help to modify values gradually.

ETHICS & RELIGION: Ethics is different from religion though all religions claim to preach high moral standards generally, they do not address all types of problems people confront today. For instance, cybercrimes and environment related issues are totally new in the context of most religions.

VIRTUE ETHICS: Virtue ethics refers to normative ethical theories which emphasises on the virtues of mind and character. The virtue ethicists discuss the nature and definition of virtues and other related issues, e.g.; it seeks to questions such as: (a) (b) (c)

How are virtues acquired? Can these virtues be applied to real life context? Are virtues rooted in universal human nature, etc.?

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BUSINESS ETHICS & PROFESSIONAL VALUES

The list of virtues is broad; that in reality may enable an individual to perform their human function. The nature of virtues can be divided on the basis of (a)

Moral virtues

(b) Intellectual virtues

Moral virtues include: 1. Courage 2. Truthfulness 3. Wittiness 4. Friendliness Intellectual virtue, on the other hand include:

5. Modesty 6. Liberality 7. Magnanimity

1. Intelligence 4. Good sense 2. Power of reasoning 5. Craftsmanship etc. 3. Wisdom Virtue ethics has a number of contemporary applications: A. B. C.

In the field of social and political philosophy In the field of Education; e.g.: punctuality, obedience, attentiveness In the field of Healthcare and medical ethics

APPLICABILITY OF GOLDEN RULE OF ETHICS: If you respect others, others will respect you.

THE RELATIONSHIP OF ETHICS & LAW: “Where law ends; ethics begins”

SITUATION 1: ILLEGAL BUT ETHICAL 

This occurs when the law itself may be considered to be immoral. For instance, the Dandi March undertaken by the Father of the Nation was not legal in of the pre independence legal framework, yet by no stretch of imagination can it be considered as unethical.

SITUATION 2: LEGAL BUT UNETHICAL 

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As per employment contract, an employee may be dismissed without asg any reason on a month’s notice, yet to exercise this clause randomly would be considered by most as unethical. ments often make outrages claims which are defended by provisos in the fine print. While it may be legal to do so, the deceptive intent is clear and as such may be considered as unethical.

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BUSINESS ETHICS & PROFESSIONAL VALUES

WHY THE LAW IS NOT ENOUGH (WHEN ETHICS MATTER MORE THAN LAW?) 1. Not every aspect of business can be codified into law. There will always remain areas of decision making which have a moral dimension, but no law may be present to deal with that particular issue. (For instance taking credit for someone else’s work, making unreasonable demands on subordinates or unjustly reprimanding n employee are all issues which have a moral dimension but are very difficult to legislate on) 2. Laws are both very time consuming to bring into force as well as implement. It takes a considerable time to any legislation. Obtaining remedy under the law is also a lengthy process. Yet emergent issues in the business world such as cybercrime require quick recognition and solution. Ethical codes for self-regulation in this sense can be worked out faster than legislation. 3. The law itself, in many, cases in built up based on ethical considerations. 4. Where the law is not absolutely clear or requires interpretation (whether by judges, s of judges or juries) it is very common to settle matters in these grey areas based on ethical principles. 5. In the day and age of 24 hours’ news media, social networking and trial by media, many corporates have lost their goodwill and customer loyalty for having acted in ways that were considered by society to be unethical, even if they had vindicated at the court. The above give credence to the saying, “the law cannot protect everything in society, but ethics can.”

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BUSINESS ETHICS & PROFESSIONAL VALUES

CODE OF CONDUCT: 1. Integrity is the cornerstone of all ethical values. A business manager should be morally upright. It is the characteristic that distinguish a professional manager from a corrupt one. 2. Managers should be fair, just and sincere both in character and behaviour. They should be free of deceit and untruthfulness. 3. PRINCIPLE OF EQUALITY: A manager should look to treat all aspects of an issue in a fair and unprejudiced manner. 4. Though a manager is paid to serve the interests of the stockholders of the company, public is not less important. 5. ABILITY: (Responsibility for all actions) Business managers are responsible for all their actions and are able to all stakeholders – stockholders, creditors, employees, consumers, government and the society at large. 6. Goods business managers should be transparent and set standards for others to follow. They should be frank and open. Their actions should be available for public scrutiny.

ETHICS COMMITTEE: To instil ethical values establishment of ethics committee can be considered to be extremely important. A board level ethics committee may be constituted to monitor how ethically the company is carrying out its business and whether the ethics policy of the company is able to meet the accepted level of ethical behaviour. Ethics committee may take the following roles to ensure ethical behaviour in the organization: 1. 2. 3. 4.

Provide advice from time to time on specific ethical issues. Ethical issues involved in board level policy and strategy decisions. To make sure that training is given on code of ethics to employees at all levels. ing report and managing subsequent action following breaches of ethics policy or allegations of misconduct. 5. Ensuring that measures are taken to reinforce the ethical culture in the organization.

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BUSINESS ETHICS & PROFESSIONAL VALUES

THEORIES OF ETHICS: TELEOLOGICAL THEORIES: According to the teleological theories, the rightness of an action is determined by amount of good outcome they produced. The word Teleological is derived from the Greek word ‘Telos’ which refers to ‘an end’. Actions are justified by virtue of the end that they produce. Thus according to teleologists, goodness of an action is fundamental to their theories which are defined by the concepts of rightness obligations & duties. According to utilitariasm the obligation or duty in any situation is to perform an action that would provide in the greatest possible balance of good over evil. The strength of teleological theory lying a fact that it is very much inconformity with the benefit of moral reasoning. Hence, utilitarism is able to explain why actions such as lying or stealing, killing, breaking a promise are wrong and their opposites are considered to be right. However, weakness of teleological theory is the fact that it prevents us from keeping promises or abiding by other absolute moral standards. If it is justifying that violation of the standard could be a greater utility. UTILITARIANISM THEORY: It is a normative ethical theory that places focus on right and wrong action; solely based on choosing one action over another action and such it moves beyond the scope of one’s interests and takes it to the interest of other people. Bentham introduced the principle of utility by 1. 2. 3. 4. 5.

Recognizing the fundamental role of pain and pleasure in human life. Approve or disapprove an action based on the amount of pain and pleasure it brings. Equates good with pleasure and evil with pain. Asserts that both pleasure and pain are capable of quantification and hence measurement. Both pain and pleasure are temporary.

John Stuart Mill adjusted the more adhonistic tendency in Bentham’s philosophy by emphasizing on the following. 1. It is not the quantity of pleasure but the quality of happiness i.e., central to utilitarianism. 2. Calculation of pleasure and pain is different. Hence, they cannot be quantified. 3. Utilitarianism refers to the greatest happiness principle, i.e., it seems to promote the capability to achieve happiness for the greatest amount of people. This principle of utility is directly applied to each alternative act in a situation of choice. The right act is defined as the one which brings the best results. When the principle of utility is applicable to each alternative act in a situation of choice or to general rules, the concept differs. The former is called ACT UTILITARIANISM and the later one is called RULE UTILITARIANISM. E.g.: Suppose you want to end a regional war by forwarding children whose fathers are enemy soldiers and therefore the hideouts of the fathers are revealed. RULE UTILITARIANISM: This principle of utility is used to determine the validity of the rules of conduct or moral principles. A rule like promise keeping is established by looking at the consequences of a world in which people

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BUSINESS ETHICS & PROFESSIONAL VALUES

break promises at will, where promises were binding. Right and wrong actions are therefore determined based on accepting the rules or breaking the rules. E.g.: Slavery in Greece might be considered right, if it led to an overall achievement of cultivated happiness at the expense of some mistreated individuals. THE ESSENCE OF DEONTOLOGICAL THEORIES: Deontological theories, in contrast to Teleological theories such as Utilitarianism, deny that consequences are relevant to determining what we ought to do. Deontologists typically hold that certain actions are right not because of some benefit to ourselves or to others but because of the nature of these actions or the rules which they follow: 1. Duties of Fidelity: To keep promises both explicit and implicit, to tell the truth. 2. Duties of Reparation: To compensate people for injury that we have wrongfully inflicted on them. 3. Duties of Gratitude: To return favours that others do for us. 4. Duties of Justice: To ensure that goods are distributed according to people merit. 5. Duties of Beneficence: To do whatever we can to improve the conditions of others. 6. Duties of Self-improvement: To improve our own condition with respect to virtue and intelligence. 7. Duties of Non-maleficence: To avoid injury to others. The most important strength of Deontological theory is that they make sense of actions and decisions, whose consequences seem irrelevant in a given point of time. So, a man who is about to lose his job would not compromise on personal values and moral standards irrespective of the fact that it might diminish overall utility. DEONTOLOGICAL THEORIES: Deontological theories also benefit from the way they analyse. The role of motives in evaluating actions. Two people who donate large amounts of money to charity generate the same amount of good or utility even if one does it out of genuine concern for society and the other to impress friends and associates. Deontologists hold that the rightness of actions wholly or in part depend on the motives for which they have performed and not under consequences. The most important strength of deontology theory is that they make sense of action and decisions whose consequences seem irrelevant in a given point of time. So a man who is about to lose his job would not compromise on personal values and moral standards irrespective of the fact that it might diminish overall utility. Deontological theories also benefit from the way they analyse the role of motives in evaluating actions. Two people who donate large amount of money to charity, generate the same amount of good or utility, even if one does it out of generic concern for society and the other to impress friends and associates. Deontologist generally hold that the rightness of action wholly or part depends on the motives for which they are performed and not on their consequences. However, the main weakness of the deontological theory is due to the failure to resolve our personal problems and personal conflicts. Society judge individuals more by outcomes and results and less by motives since motives remain unknown and therefore deontological theory fails miserably to impress in this context.

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BUSINESS ETHICS & PROFESSIONAL VALUES

CORPORATE SOCIAL RESPONSIBILITY (CSR) 

Managerial concept: 

The objective of business is to earn profit.

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Long run survival sustainable business.

PERSONAL SOCIAL RESPONSIVENESS (PSR) CONCEPT: The concept of PSR precedes the concept of CSR as social responsibility of business is not feasible unless organizations are employing personal level social responsiveness. CSR MEANING & DEFINITION: A very common definition of CSR in the business and social context can be stated as follows: ‘The concept that an enterprise is able for its impact on relevant stakeholders, and the continuing commitment by business to behave fairly and responsibly and contribute towards sustainable development to improve the quality of life of the local community as well as the society at large. In other words, CSR refers to ensuring the success of business by inclusion of social and environmental considerations into companies’ operation. Hence, CSR is a contribution to business philosophy. The essence of CSR comprises of philanthropic, corporate, ethical, environmental, legal as well as economic responsibility. An alternative concept that is synonymous to CSR is known as Triple Bottom Line which takes into consideration people, plant and profit. In India however, the evolution of CSR refers to changes overtime in cultural norms of corporation engagement and the way businesses manage to develop positive impact on communities, culture, societies and the environment at large. ECONOMIC AND LEGAL COMPONENTS OF CSR:

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BUSINESS ETHICS & PROFESSIONAL VALUES

THE PYRAMID OF CSR:

CASE STUDY: 02 Edward was an inspection engineer at GM Ltd. He found that the design of the exhaust system was unsafe as it could lead to deformation of the company. A series of accidents could be attributed to this leakage confirmed his findings. He was willing to testify publicly. When the consumer movement picked up the issue, Edward was pushed to a very innocuous position in the company. But the public outcry became violent. Edward had to be reinstated to his position, and he continued to perform his inspection function without any fear or favour. Finally, GM Ltd had to recall 7 million cars with this defective exhaust system. Analyze the major issues in above case study and what lessons can a whistle blower learn from Edward.   

OSHA MODEL – Quality of work life SUN PHARMA #2011 Expired Medicines – CASE STUDY MC DONALDS – Corporate Irresponsible Behaviour – CASE STUDY

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BUSINESS ETHICS & PROFESSIONAL VALUES

 When Company is in good position, being ethical is easy.  Once real taste of ethics is enjoyed, it is difficult to leave it when company is not in good shape. INTEGRATING ETHICS IN ORGANIZATION & CREATING ETHICAL FITNESS: It is evident that there is no point in investing time in implementing ethics unless ethical compliances is integrated into the organizational system. Organizations need to realize that effective ethics and compliance programmes at all levels especially at the top need to be focused and emphasized on. Employees at each level contribute toward the development and success of a company’s ethics and compliance programme. Integrating ethics & compliance at each level helps to ensure the message from the top which makes down to the lower levels. The tone of the organization is set at the top level and therefore, a strong commitment and understanding of ethics and compliance must be instilled in top level executives and managers. Ethics and compliance need to be built into the corporate culture as culture determines “the way things are done within an organization.’ The top level must communicate frequently and demonstrate to their staffs. The company’s commitment to ethics and compliances as well as build it into day to day activities. Moreover, the top level managers must adopt an act on the values and messages which they communicate to be considered in ethical commitment. It may further be noted that it may often seen when the top level idealizes ethical commitment, the middle level fails to comply. The top level manager therefore need to assist middle level managers in understanding the role that they play in reinforcing ethical conduct in an organization.

CASE STUDY: 03 You are currently employed in middle level management of a large MNC. You have an experience of 8 years in your present organization and you are paid a salary of Rs. 60,000.00 per month. You have applied to another company and have got selected. The company even considered a hike of Rs. 20,000.00 per month to which you have verbally accepted the offer. Your current employer in the meantime senses something wrong and offers you a promotion which entitles you to a similar hike in salary which you would be getting in the new organization. You face a situation of ethical dilemma. What would your final decision be? your answer with reasoned judgement.

GREATNESS

Virtue

TO

EFFECTIVENESS

Not a virtue, but outcome of virtue

 All great people are not effective, but effective people are great in their ways.  Long term effectiveness, Profit – Measure of growth, success  SAMSUNG / NOKIA CASE STUDY, HMT/ TITAN CASE STUDY (Unbeatable vs market segmentation)

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BUSINESS ETHICS & PROFESSIONAL VALUES

AUROBINDO’S TEACHING IN THE AREAS OF ETHICS: Theory of ethics, psychology and metaphysics (interior ethics) are built on the fundamental aspect, that is truth. According to Sri Aurobindo, the ethical being escapes from all worldly formulas and finds its principles in its own eternal nature which is an essential character of the growth of evolving mind even though it may seem to be that in its earthly history, but there is a reflection in man of the divine.’ Morality signs religion; all seeks the development of the whole man through society. Law is for man’s development and morality is a means to an end. Kant has stated ‘moral law is a categorical imperative’, which means that imposition of moral law on man does not take into the fact that man is a dynamic being whose laws of practical life should also change according to its growth. The ultimate end according to moral philosophy of Sri Aurobindo is realization of God. Automatically the criteria of good and right can thus be established. It is essential and indispensable if we grow conscious of the divine reality and live life accordingly. This principle has also been agreed upon by Indian sages. It is the inner meaning of ethics of self-realization as Sri Aurobindo points out that man, world and God are all forms of the same Reality. Good is all that helps the individual and evil is that which breaks up increasing perfection. The concepts of good and evil of Sri Aurobindo’s ethics are dynamic since their aim is progressive and evolve with time. The temporality of all forms of moral conduct is compatible with the eternity of moral ideas. Sri Aurobindo considers duty to be performed for the sake of God. The Bhagavad Gita does not teach disinterested performance, but the following of divine life and to take refuge in the supreme being. Hence, the preaching of Vivekananda, Ramakrishna is imperfect consonants with this teaching. Like the Gita, Sri Aurobindo strongly emphasizes the value of Karma and considers work to be performed not for society; nor even for duty but for God. POSITIVE ETHICS: According to Sri Aurobindo’s ethics, there is no regression but spontaneous growth. The real benefits lie in positive growth towards the realization of the divine sale since as man advances in this path the hurdles automatically disappear in due course of time. FREEDOM OF WILL: Rebirth is a moral necessity; is not advocated by Sri Aurobindo, rather he emphasizes on faith or free will, makes great differences to man’s action. The freedom of the will is the foundation of ethics. This idea is in like that of the Gita. Moreover, this idea bridges the gulf between man and nature, between freedom of the will and faith. There is a will or force in this world which determines the result of all action as part of the greater whole and there is a will that determines the thoughts and personal choice. The teachings of ethics deal with: 1. 2. 3. 4. 5. 6. 7.

Ethics of self-realization Transcends of ethics into spirituality The indispensability of ethics and the progress of ethical being The spiral nature of moral evolution The doctrine of ive resistance Political morality Nonviolence, as a means to an end since aggression is unjust

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BUSINESS ETHICS & PROFESSIONAL VALUES

CASE STUDY: 04 You work in a company where you head a project that is approved by the Ministry of Forest & Environment. The colleagues are very cordial and efficient, but at the same time they give too much importance to whistleblowing at times which made the quality of Interpersonal relations deteriorate. Hence, the overall work culture of the organization tends to suffer. Your employer is aware of the problem, but fails to solve it. You are the member of the Ethics Committee and therefore you have been asked to propose a solution to the problem for the benefit of the entire organization at large. Discuss how will you approach the above situation.

1. Clear statement that employees who are aware of possible wrong doing within the organisation have a responsibility to disclose that information to appropriate parties inside the organization. 2. The designation of the specific individuals or groups outside the chair of command as complaint recipients. 3. A guarantee that employees who in good faith disclose perceived wrong doing to the designated parties inside the organization will be protected from adverse employment consequences, and 4. The establishment of a fair and impartial investigative process.

CASE STUDY: 05 Robert is an employee working at a middle management level of a MNC. He draws a moderate salary and is happy with his life since he is not over ambitious. However, destiny creates problems in his life as his aged father is diagnosed with cancer. Treatment would cost him a fortune as ing the family as well as continuing his father’s treatment would rather be difficult. In a situation like this, the approach is the local medicine shop to take medicine on credit which he is going to repay later. Unfortunately, however the owner of the shop refused to accept his proposal. He also therefore requested the long any manager to sanction him a loan or advance against salary for undertaking the treatment and meeting the expenditure for buying the medicine that he would require for his father’s Treatment. This proposal also was turned down by the company on the ground that such loans are not sanctioned to employees for any reason whatsoever according to past records. Out of shearer helplessness and frustration Robert decides to break open the doors of the shop and steal the medicine. It was not difficult for the local police to identify the guilty and arrest him on charges of theft. Analyse the above case and sum up your views on the offence of Robert, the nature of crime, his motive and ultimately the outcome to the above situation based on Teleological and Deontological ethical approaches.

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