Ethics and Business Law Archives

Attribution theory by Fritz Heider – A Comprehensive Guide

Have you ever wondered what causes people to behave in a certain way and have responses that are uniquely different from others? Attribution theory by Fritz Heider is specifically used to explain this phenomenon. Austrian Psychologist Fritz Heider in his seminal work “The Psychology of Interpersonal Relations” formed the framework for psychological processes that influence human perception. Behavior as Heider believes was an output of disposition (traits, motives, attitudes) or External pressures like social pressure, peer pressure, and acceptance. Heider was among the first to establish that we tend to overvalue dispositional behavior over external behavior which formed the very base for studies of correspondence bias.

Fritz Heider was an Austrian psychologist who is best known for his contributions to the field of attribution theory. Attribution theory by Fritz Heider is concerned with how individuals make sense of the events and situations that they encounter in their lives. It deals with how people explain the causes of their own behavior and the behavior of others, and how these explanations shape their beliefs and attitudes.

Heider’s work on attribution theory began in the 1940s and 1950s, and he is credited with being one of the pioneers of this field. He argued that people have a natural tendency to attribute cause-and-effect relationships to the events and behaviors that they observe. This is known as causal attribution.

Attribution theory by Fritz Heider: Explanation in Layman’s terms

Attribution theory is a way of understanding how people make sense of the events and situations that they encounter in their lives. It deals with how people explain the causes of their own behavior and the behavior of others, and how these explanations shape their beliefs and attitudes.

Fritz Heider was an Austrian psychologist who is credited with being one of the pioneers of this field. According to Heider, people have a natural tendency to attribute cause-and-effect relationships to the events and behaviors that they observe. This is known as causal attribution.

There are two types of causal attribution:

Internal attribution: Internal attribution refers to the idea that a person’s behavior is caused by their own personal characteristics, such as their personality, abilities, or intentions.

External attribution: On the other hand, refers to the idea that a person’s behavior is caused by external factors, such as the situation or the environment.

For example, if someone sees a coworker being rude to a customer, they might attribute the behavior to the coworker’s personality (internal attribution) or to the customer’s behavior (external attribution).

Heider also proposed the concept of correspondent inference theory, which is concerned with how people infer the intentions and dispositions of others based on their behavior. According to this theory, people are more likely to attribute a person’s behavior to their internal characteristics (such as their intentions or personality) when the behavior is voluntary and when there are no external factors that could have caused the behavior.

Heider’s work on attribution theory has had a significant impact on the field of psychology, and his ideas have been widely studied and elaborated upon by other researchers. Attribution theory by Fritz Heider has been used to understand a wide range of phenomena, including how people form impressions of others, how they cope with failure, and how they make decisions. It has also been applied to a variety of fields, including education, marketing, and social psychology.

What are the various elements of Attribution theory by Fritz Heider?

If an observer thinks another person can control their own behavior, they have a high degree of confidence in the assessment that the cause lies internally. As a result, it is generally agreed that an individual has control over their own behaviors, which arise from within.

Behaviors that an observer attributes to external factors are those for which they have a reasonable explanation based on the nature of the situation. Therefore, actions that are triggered by factors external to the actor are not considered to be under the actor’s control.

These observations of human behavior and its attribution to internal and external factors are largely dependent on three factors:

Distinctiveness or Uniqueness
Consensus
Consistency

A person’s uniqueness is measured by how their behavior changes depending on the context. If the same behavior occurs repeatedly, it is likely to have an internal cause; otherwise, it is likely to be the result of environmental influences.

When people reach a consensus, they agree that they would have responded similarly had they been in a similar situation. It is said to be externally driven if everyone responds in the same way; otherwise, it is said to be internally driven.

When something is consistent, it shows a regular pattern of being that way. If consistency is high, internal factors are blamed; otherwise, external ones are blamed.

Explain in detail about internal attribution and external attribution with examples

Internal attribution refers to the idea that a person’s behavior is caused by their own personal characteristics, such as their personality, abilities, or intentions. This type of attribution suggests that the person is responsible for their own actions and that their behavior reflects their inherent qualities or dispositions.

For example, if a student gets a low grade on a test, they might attribute the poor performance to their own lack of effort or ability. In this case, the student is making an internal attribution for the cause of their poor grade.

External attribution, on the other hand, refers to the idea that a person’s behavior is caused by external factors, such as the situation or the environment. This type of attribution suggests that the person is not entirely responsible for their behavior and that other factors, outside of their control, may have contributed to the behavior.

For example, if a student gets a low grade on a test, they might attribute the poor performance to factors such as the difficulty of the test, the lack of time to study, or the distractions in the testing environment. In this case, the student is making an external attribution for the cause of their poor grade.

How is the attribution theory by Fritz Heider used in the understanding of human psychology?

Attribution theory by Fritz Heider is used to understand how people make sense of the events and situations that they encounter in their lives. It helps to explain how people explain the causes of their own behavior and the behavior of others, and how these explanations shape their beliefs and attitudes.

One of the key ways in which attribution theory is used in understanding human psychology is in the study of how people form impressions of others. According to attribution theory, people are constantly trying to make sense of the behavior of others by attributing causes to their actions. For example, if someone sees a coworker being rude to a customer, they might attribute the behavior to the coworker’s personality (internal attribution) or to the customer’s behavior (external attribution).

Attribution theory by Fritz Heider is also used to understand how people cope with failure. When people experience failure, they may attribute the cause of the failure to internal factors, such as their own lack of ability or effort, or to external factors, such as bad luck or the difficulty of the task. Attribution theory can help to explain why some people may be more resilient in the face of failure, while others may be more likely to become discouraged and give up.

In addition, the attribution theory by Fritz Heider is used in the study of decision-making. When people are faced with a choice, they may use attribution theory to help them understand the potential causes and consequences of their options. For example, if someone is trying to decide whether to invest in a particular stock, they might consider the internal factors (such as the company’s financial health) and external factors (such as the state of the economy) that could affect the stock’s performance.

Overall, attribution theory, as proposed by Fritz Heider, is a useful framework for understanding how people make sense of the world around them and how they form beliefs and attitudes about themselves and others. It has been applied to a wide range of fields and has had a significant impact on the study of human psychology.

Use of attribution theory by Fritz Heider used in leadership

Attribution theory by Fritz Heider can be used to understand how leaders make sense of the events and situations that they encounter in their roles. It can help to explain how leaders explain the causes of their own behavior and the behavior of their subordinates, and how these explanations shape their beliefs and attitudes about leadership.

One way in which attribution theory can be used in leadership is in the study of how leaders form impressions of their subordinates. According to attribution theory by Fritz Heider, leaders are constantly trying to make sense of the behavior of their subordinates by attributing causes to their actions. For example, if a leader sees an employee making mistakes, they might attribute the behavior to the employee’s lack of ability or effort (internal attribution) or to external factors, such as a lack of training or support (external attribution).

Attribution theory by Fritz Heider can also be used to understand how leaders cope with failure. When leaders experience failure, they may attribute the cause of the failure to internal factors, such as their own lack of ability or effort, or to external factors, such as bad luck or the difficulty of the task. Attribution theory can help to explain why some leaders may be more resilient in the face of failure, while others may be more likely to become discouraged and give up.

In addition, attribution theory can be used to understand how leaders make decisions. When leaders are faced with a choice, they may use attribution theory to help them understand the potential causes and consequences of their options. For example, if a leader is trying to decide whether to implement a new policy, they might consider the internal factors (such as the support of their team) and external factors (such as the needs of the organization) that could affect the success of the policy.

Overall, attribution theory is a useful framework for understanding how leaders make sense of the world around them and how they form beliefs and attitudes about their own leadership and the leadership of others. It can be applied to a wide range of leadership situations and can provide insight into the decision-making processes of leaders.

Use of attribution theory by Fritz Heider in marketing

Attribution theory by Fritz Heider can be used to understand how consumers make sense of the marketing messages and advertisements that they encounter. It can help to explain how consumers explain the causes of their own behavior and the behavior of others, and how these explanations shape their beliefs and attitudes about a product or brand.

One way in which attribution theory can be used in marketing is in the study of how consumers form impressions of a brand or product. According to attribution theory, consumers are constantly trying to make sense of the marketing messages that they encounter by attributing causes to the information that they receive. For example, if a consumer sees an advertisement for a new car, they might attribute the claims made in the advertisement to the quality of the car (internal attribution) or to the persuasive skills of the advertiser (external attribution).

Attribution theory by Fritz Heider can also be used to understand how consumers cope with negative information about a brand or product. When consumers encounter negative information, they may attribute the cause of the problem to internal factors, such as the quality of the product, or to external factors, such as bad luck or the actions of others. Attribution theory can help to explain why some consumers may be more resilient in the face of negative information, while others may be more likely to avoid the brand or product.

In addition, attribution theory can be used to understand how consumers make decisions about which products or brands to purchase. When consumers are faced with a choice, they may use attribution theory to help them understand the potential causes and consequences of their options. For example, if a consumer is trying to decide whether to purchase a particular brand of car, they might consider the internal factors (such as the reputation of the brand) and external factors (such as the price of the car) that could affect their decision.

Overall, attribution theory is a way of understanding how people make sense of the world around them and how they form beliefs and attitudes about themselves and others. It has been applied to a wide range of fields, including psychology, education, marketing, and social psychology.

What is the attribution theory of distinctiveness?

Attribution theory of distinctiveness is a concept within attribution theory by Fritz Heider that suggests that people are more likely to attribute the behavior of others to their internal characteristics (such as their personality or intentions) when the behavior is unusual or distinct in some way. This theory is based on the idea that people are more likely to notice and remember behaviors that are unusual or stand out in some way, and are therefore more likely to attribute these behaviors to the person’s inherent qualities or dispositions.

For example, if a student consistently gets high grades in all of their classes but suddenly gets a low grade in a particular class, their classmates may be more likely to attribute the low grade to the student’s inherent abilities or effort (internal attribution) rather than to external factors such as the difficulty of the class or the student’s workload. This is because the low grade is unusual or distinct compared to the student’s usual pattern of high grades.

Attribution theory of distinctiveness can be used to understand how people form impressions of others and how they explain the behavior of others. It suggests that people are more likely to attribute unusual or distinct behaviors to the internal characteristics of the person displaying the behavior, while more typical or consistent behaviors may be attributed to external factors. This theory can be applied to a wide range of situations, including social interactions, decision-making, and leadership.

What is the attribution theory of consensus?

Attribution theory of consensus is a concept within attribution theory by Fritz Heider that suggests that people are more likely to attribute the behavior of others to external factors (such as the situation or the environment) when the behavior is similar to the behavior of others. This theory is based on the idea that people are more likely to assume that the behavior of others is influenced by external factors when they see others behaving in a similar way.

For example, if a student consistently gets low grades in a particular class, their classmates may be more likely to attribute the low grades to external factors such as the difficulty of the class or the workload of the students (external attribution) rather than to the internal characteristics of the student, such as their ability or effort. This is because the student’s low grades are similar to the grades of other students in the class.

The attribution theory of consensus can be used to understand how people form impressions of others and how they explain the behavior of others. It suggests that people are more likely to attribute similar behaviors to external factors, while unusual or distinct behaviors may be attributed to the internal characteristics of the person displaying the behavior. This theory can be applied to a wide range of situations, including social interactions, decision-making, and leadership.

Samrat Saha

Samrat is a Delhi based MBA from Indian Institute of Management. He is a Strategy, AI and a Marketing Enthusiast and passionately writes about core and emerging topics on Management studies. Reach out his LinkedIn for a discussion or follow his Quora Page

Why is ethics important in business? – 16 Reasons and a Comprehensive Overview

Why ethics is important in business is a billion-dollar question. From corporate scams to loss of employee trust, ethics and integrity play an important role in creating the image of an organization. Public perception of ethical organizations is much better than relatively unethical companies, thereby enhancing their overall value proposition. Millions of Ethics in business is the application of ethical principles and values to business behavior. These principles and values include honesty, integrity, fairness, and respect for the law, as well as for the rights and interests of stakeholders, such as customers, employees, and the community.

The importance of ethics in business cannot be overstated. Not only do ethical practices contribute to the overall well-being of society, but they also have a direct impact on the success and sustainability of a business.

Here are some key reasons why ethics is important in business:

Ethics important in business: Reason 1: Building trust with stakeholders

Ethical behavior is essential for building trust with stakeholders, including customers, employees, shareholders, suppliers, and the community. When a business behaves ethically, it demonstrates its commitment to doing what is right and acting in the best interests of all stakeholders. This can lead to increased loyalty, satisfaction, and support from these stakeholders, which can ultimately lead to better business outcomes.

A study by the Ethics Resource Center found that companies with strong ethical cultures had significantly lower rates of misconduct than those with weaker ethical cultures. The study also found that companies with strong ethical cultures had higher levels of employee engagement, customer satisfaction, and shareholder value.
https://www.ethics.org/global-business-ethics-survey/

Ethics Important In Business: Reason 2: Enhancing reputation

A strong ethical reputation is a valuable asset for any business. Consumers, investors, and employees are more likely to do business with and work for a company that is known for its ethical practices. On the other hand, a company that engages in unethical behavior is likely to suffer damage to its reputation, which can lead to lost business and a decline in shareholder value.

Ethics Important In Business Reason 3: Complying with laws and regulations

Ethical behavior helps businesses comply with laws and regulations, which can protect them from legal consequences and damage to their reputation. In addition, ethical practices can help a business avoid the negative consequences of unethical behavior, such as fines, legal action, and loss of market share.

Ethics Important In Business: Reason 4: Enhancing reputation and promoting long-term success

Ethical behavior is essential for building a sustainable business that can thrive in the long term. Unethical practices can lead to short-term gains, but they can also create long-term risks and problems that can undermine a business’s success. By contrast, ethical practices can lead to increased efficiency, innovation, and customer satisfaction, which can contribute to a company’s long-term success.

A survey conducted by the Reputation Institute found that consumers are more likely to purchase from and recommend companies that have strong ethical reputations. In addition, the survey found that companies with strong ethical reputations tend to have higher stock prices and stronger financial performance.
https://www.reptrak.com/blog/2022-pharma-report/

Ethics Important In Business Reason 5: Creating a positive work environment

Creating a positive work environment: Ethical behavior helps create a positive work environment in which employees feel valued and supported. This can lead to increased motivation, productivity, and job satisfaction, which can ultimately lead to better business outcomes.

Ethics Important In Business Reason 6: Improving employee behavior

Improving employee behavior: Ethical practices can help improve employee behavior by setting clear expectations and creating a culture of integrity. This can lead to increased accountability and trust among employees, which can enhance teamwork and collaboration.

Ethics Important In Business Reason 7: Facilitating employee growth

Ethical behavior can also facilitate employee growth by creating a positive work environment that encourages learning and development. When employees feel supported and valued, they are more likely to be motivated to learn and grow within the company. This can lead to increased retention and productivity, as well as better business outcomes.

In addition, ethical practices can help businesses attract and retain top talent. Many job seekers are attracted to companies that prioritize ethics and are more likely to stay with a company that values integrity and fairness.

Overall, ethics is an essential part of any business and has a direct impact on employee behavior, growth, and retention. By prioritizing ethics, businesses can create a positive work environment that promotes learning, development, and long-term success.

A study by the Global Business Ethics Survey found that companies with strong ethical cultures have lower levels of turnover, higher levels of employee satisfaction, and better financial performance than those with weaker ethical cultures.

Ethics Important In Business Reason 8: Prevent Criminal Offenses of Omission:

Ethics in business can also help prevent criminal offenses of omission, which occur when a person or company fails to act when they have a legal obligation to do so. For example, a company may have a legal obligation to report fraudulent activity within the organization, but if they fail to do so, they could be committing a criminal offense of omission.

By prioritizing ethics, businesses can create a culture of integrity that promotes transparency and honesty. This can help prevent criminal offenses of omission by encouraging employees to report wrongdoing and by ensuring that the company takes appropriate action when such incidents are reported.

Ethics Important In Business Reason 9: Easier compliance with laws and regulations

In addition, ethical practices can help businesses comply with laws and regulations, which can prevent criminal offenses of omission. For example, if a company fails to follow safety regulations, it could be putting its employees and customers at risk and could potentially face legal consequences for its failure to act. By adhering to ethical principles and following the law, businesses can help prevent criminal offenses of omission and protect themselves from legal consequences.

Overall, ethics in business is essential for preventing criminal offenses of omission and for promoting compliance with laws and regulations. By prioritizing ethics, businesses can create a culture of integrity and build trust with stakeholders, which can ultimately lead to better business outcomes.

Ethics Important In Business Reason 10: Identify and manage values associated with quality management, strategy, human resources, and diversity:

In the context of quality management, ethical practices can help businesses identify and prioritize the values that are important for delivering high-quality products and services. This may include values such as customer satisfaction, continuous improvement, and excellence. By adhering to these values, businesses can create a culture of quality that is focused on meeting the needs and expectations of customers.

In the context of strategic management, ethics can help businesses identify and prioritize the values that are important for achieving their long-term goals and objectives. This may include values such as innovation, sustainability, and social responsibility. By aligning their strategies with these values, businesses can create a culture of innovation and sustainability that is focused on creating value for all stakeholders.

In the context of diversity management, ethics can help businesses identify and prioritize the values that are important for creating a diverse and inclusive work environment. This may include values such as equality, respect, and fairness. By adhering to these values, businesses can create a culture of diversity and inclusion that is focused on creating opportunities for all employees to succeed.

Overall, business ethics can help identify and manage the values that are important for quality management, strategic management, and diversity management. By prioritizing ethics, businesses can create a culture of integrity and build trust with stakeholders, which can ultimately lead to better business outcomes.

A case study of the Volkswagen emissions scandal illustrates the importance of ethical behavior in the automotive industry. Volkswagen was found to have cheated on emissions tests, leading to significant fines and damage to the company’s reputation. The scandal also led to the resignation of the company’s CEO and other top executives.
https://www.simplimba.com/business-ethics-a-comprehensive-guide/

**Why is ethics important in business?: Volkswagen Emission Scandal**

Ethics Important In Business Reason 11: Building a strong public image:

Business ethics is essential for building a strong and positive public image of an organization. When a business behaves ethically, it demonstrates its commitment to doing what is right and acting in the best interests of all stakeholders. This can lead to increased loyalty, satisfaction, and support from stakeholders, which can ultimately lead to better business outcomes.

Ethics Important In Business Reason 12: Improves organization culture:

Business ethics is an important factor in strengthening organizational culture. An organizational culture that values ethics and integrity can create a positive and productive work environment that is focused on doing what is right and acting in the best interests of all stakeholders.

Ethical practices can help create a culture of transparency, honesty, and fairness that promotes trust and respect among employees. This can lead to increased accountability, teamwork, and collaboration, which can ultimately contribute to better business outcomes.

In addition, ethical practices can help businesses comply with laws and regulations, which can create a culture of compliance and legal responsibility. This can help protect the company from legal consequences and damage to its reputation.

Ethics Important In Business Reason 13: Manage Societal responsibilities:

Business ethics is important for improving society in several ways. First, ethical practices can help establish government agencies, unions, laws, and regulations that are focused on protecting the rights and interests of all stakeholders. For example, ethical business practices can help ensure that companies are complying with laws and regulations related to worker safety, environmental protection, and consumer protection.

Second, ethical practices can help businesses contribute to the overall well-being of society by promoting social responsibility and sustainability. For example, businesses that prioritize ethical practices may be more likely to engage in philanthropic activities and support initiatives that benefit the community.

Ethics Important In Business Reason 14: Better Crisis Management

Business ethics is important for helping an organization maintain ethical values during times of crisis. In times of crisis, it can be tempting for businesses to prioritize short-term goals and profits over ethical considerations. However, maintaining ethical values during a crisis is essential for building and preserving trust with stakeholders, as well as for protecting the long-term sustainability and success of the organization.

There are several ways in which business ethics can help an organization maintain ethical values during times of crisis:

Setting a positive example: By behaving ethically during a crisis, an organization can set a positive example for others to follow. This can help maintain trust and confidence in the organization and demonstrate its commitment to doing what is right.
Protecting stakeholders: By prioritizing the interests of stakeholders during a crisis, an organization can help protect the well-being of its customers, employees, and the community. This can help maintain trust and loyalty from stakeholders and preserve the long-term sustainability of the organization.
Communicating transparently: By being transparent and honest in its communication during a crisis, an organization can help maintain trust with stakeholders and demonstrate its commitment to ethical values.
Making ethical decisions: By considering the ethical implications of its decisions during a crisis, an organization can help ensure that it is acting in the best interests of all stakeholders and protecting its long-term sustainability.

Ethics Important in business: Crisis management

Overall, business ethics is an essential part of maintaining ethical values during times of crisis. By prioritizing ethics, an organization can set a positive example, protect stakeholders, communicate transparently, and make ethical decisions, which can ultimately help preserve its long-term sustainability and success.

Ethics Important In Business Reason 15: Benchmark for Employee behavior:

Business ethics can help employees behave according to the ethical values that are preferred by the top management of an organization. By setting clear expectations and creating a culture of integrity, businesses can encourage employees to adhere to ethical values and standards of behavior.

There are several ways in which businesses can promote ethical behavior among employees:

Establishing a code of ethics: A code of ethics is a set of principles and values that guide the behavior of an organization and its employees. By establishing a code of ethics and communicating it to employees, a business can set clear expectations for ethical behavior.
Providing ethical training: Ethical training can help employees understand the ethical values and standards of behavior that are expected of them within the organization. This can include training on topics such as honesty, integrity, fairness, and respect for the law and the rights of others.
Leading by example: Top management can set a positive example for ethical behavior by demonstrating integrity and ethical values in their own actions. This can help create a culture of ethics within the organization and encourage employees to follow suit.
Encouraging reporting of ethical concerns: By encouraging employees to report ethical concerns and taking appropriate action when such concerns are raised, a business can demonstrate its commitment to ethical values and create a culture of transparency and accountability.

Overall, business ethics is an important factor in promoting ethical behavior among employees. By establishing a code of ethics, providing ethical training, leading by example, and encouraging the reporting of ethical concerns, businesses can encourage employees to behave according to the ethical values preferred by the organization.

Ethics Important In Business Reason 16: Ethics as a legal instrument:

It is true that ethics and the law often intersect, and in many cases, ethical practices are required by law. For example, laws and regulations related to worker safety, environmental protection, and consumer protection are often based on ethical principles and values, such as the obligation to protect the well-being of others.

In addition, many businesses have codes of ethics or conduct that outline the ethical values and standards of behavior expected of employees. These codes may be based on industry standards, professional codes of ethics, or the values of the organization itself. In some cases, violations of these codes of ethics may be grounds for legal action or other consequences.

Overall, ethics and the law are closely related, and in many cases, ethical practices are required by law. By adhering to ethical principles and following the law, businesses can protect themselves from legal consequences and damage to their reputation and can demonstrate their commitment to doing what is right and acting in the best interests of all stakeholders.

A case study of the Enron scandal demonstrates the consequences of unethical business practices. Enron, once a highly successful energy company, engaged in a range of unethical practices, including hiding debt and manipulating financial statements. The company’s unethical behavior ultimately led to its collapse and the loss of billions of dollars for investors and employees.
https://www.simplimba.com/business-ethics-a-comprehensive-guide/

Why is ethics important in business?: Enron scandal: Source Wikimedia

Finally, ethical practices can help businesses build trust with stakeholders, which can ultimately contribute to the overall stability and prosperity of society. When businesses behave ethically, they demonstrate their commitment to doing what is right and acting in the best interests of all stakeholders. This can lead to increased loyalty, satisfaction, and support from stakeholders, which can ultimately contribute to the overall well-being of society.

Overall, business ethics is an important factor in improving society. By prioritizing ethics, businesses can establish government agencies, unions, laws, and regulations that protect the rights and interests of all stakeholders, contribute to the overall well-being of society, and build trust with stakeholders. There should be no question of why ethics is important in business. It is the source of survival for any business.

Samrat Saha

Business Ethics: Definition, Importance, & Examples: A Comprehensive Guide

What is Business Ethics?

Business Ethics is a set are set of universally accepted business practices that an organization follows in its strategy and operations. It forms an important part of the strategy of the organization as it has been found that organizations behaving ethically perform better in the long run. The ethics in an organization is often defined by the culture, its employees, and the geographical boundaries it operates.

Corporate ethics and business ethics are often used interchangeably. Business ethics applies to almost entities that are treated as businesses including government, non-profits, and profit-seeking organizations. However, corporate ethics extend mostly to profit-seeking organizations. Having said that underlying principles for both of the concepts are almost the same.

What is Managerial Ethics?

Managerial ethics is a part of business ethics. It is a set of principles and guidelines ordered by the upper management for the managers of a business to help them make better and unbiased decisions. While compiling these ethical principles, everything is considered, including compensation, benefits package, community involvement, corporate giving, and more.

These ethics for business help the employees to differentiate right from wrong in an organization. This doesn’t necessarily mean obeying the laws set by society. Ethical behavior goes much beyond that. A simple difference between ethics and managerial ethics is that ethics are for an individual while managerial ethics are for the entire organization to follow.

What is Corporate Governance?

Corporate governance means controlling, directing, and evaluating the actions of an organization. This structure is typically specified to give the participants of an organization certain rights and responsibilities. Controlling the power among an organization’s participants results in monitoring performance among employees. Corporate governance helps organizational goals be achieved in the desired manner.

Corporate governance captures the economic decisions of a company and has landed in the spotlight because it helps to improve the socioeconomic health of the company and society. However, there are various types of corporate governance such as covering everything from financial transparency to profitability.

These business ethics help the employees to differentiate right from wrong in an organization. This doesn’t necessarily mean obeying the laws set by society. Ethical behavior goes much beyond that. A simple difference between ethics and managerial ethics is that ethics are for an individual while managerial ethics are for the entire organization to follow.

Definitions of Business Ethics

Ethics is the practice of moral judgment. It is the determination of what is right and wrong, good and bad, in relation to one’s own personal beliefs and opinions. It can be applied to both personal and professional life and can determine business success or failure.

There are three main principles that underpin ethics: beneficence, non-maleficence, and justice. Beneficence refers to doing good for others, non-maleficence means not causing harm, and justice means imparting equal treatment to all parties. Each of these principles forms the basis of a number of ethics codes that businesses should adhere to in order to ensure successful business practices.

Businesses must always consider the impact their decisions have on those around them. For example, if business plans to reduce its environmental footprint but doing so may result in job losses, it is necessary to weigh up the impacts of its actions carefully before making any decisions. Similarly, businesses must take into account the feelings and rights of consumers when making decisions that affect their purchasing power or how they are marketed to.

According to Shleifer and Vishny, ‘Corporate governance deals with the ways in
which suppliers of finance to corporations assure themselves of getting a return on their investment.’
An article from Financial Times has defined corporate governance as ‘the relationship of a company to its shareholders or, more broadly, as its relationship to society’.
According to J. Wolfensohn, ‘Corporate governance is about promoting corporate fairness, transparency, and accountability.’

What is the Importance of Business Ethics?

Importance of Business Ethics 1: Build up a reputation

An organization that follows ethical practices in its business can build up a decent reputation in the market for itself. When a company aligns its business with ethics and practices legal activity, it eventually gains a good public image which leads to more referrals. To get the company a reputation, a company needs to provide quality products and efficient services to its customers. This implies a better brand image which results in higher sales.

Importance Of Business Ethics 2: Better working conditions

A healthy and safe environment to work in will definitely help a company become more ethical. One needs to make sure that a strict code of conduct is followed religiously. Some management from the company must be taken into consideration like revising the employment standards from time to time, prohibiting discrimination, encouraging following rules, working ethically, and providing insurance, benefits, etc.

Importance Of Business Ethics 3: Attract more customers

For any business, the most important part is its customers. And to maintain those incoming customers or even gain new ones, a company must focus on the needs of a customer. A company that follows business ethics will ensure that there is a routine discussion on the management and policies, make the products affordable or cost-friendly for all, and provide better quality offerings. This will not only increase an influx of customers but will also gain customer loyalty. Another important thing under business ethics is to treat your customers’ feedback and complaints with utmost seriousness.

Importance Of Business Ethics 4: Higher staff retention

A company with strong principles and morals will naturally have a happy staff. To retain this staff, an organization must try to maintain positive employee interaction, give better pay, fixed working hours, career enhancement, fair treatment, and much more. There must not be any competition among the employees or that may result in a toxic environment for others as well. The company must be honest with its employees and appreciate them for their talent and dedication to their job.

Importance Of Business Ethics 5: Less legal issues

To provide lesser legal problems, a company with strong ethical behavior will hardly have to do anything. Compliance with the law will ultimately result in fewer such issues. To ensure fair practices, keep a check on the activities of your employees, ensure rules and guidelines are followed and encourage people to avoid unfair and illegal practices. A company must never take the quality of material used for granted, must always look after their employee’s health, and care about the environment. This way it will be safe from penalties that could cost the company its reputation and social status.

Importance Of Business Ethics 6: Draw more investors

Investors tend to trust those organizations that have a robust ethical system for their company. They expect fair practices, better returns, and a share in important discussions regarding the business to make sure that their funds are being used wisely. They also expect transparency from the company. When choosing a company to finance, investors, look for the reputation of the company, its history with legal issues, and its employment status. So a business with ethics as its priority is much more likely to be preferred by the investors.

Implications of Business Ethics on its Success

Ethics is the practice of making choices that are in the best interest of others. It is an important part of business, as it is the foundation on which all other actions must stand. Unfortunately, many businesses ignore or neglect their ethical obligations, and this can have far-reaching consequences.

Let us analyze the topic from the lens of 7 Famous Business Ethics Case Studies which bled great organizations not only monetarily but also from the perspectives of shareholder and customer trust

ENRON CASE 2001:

Enron is a well-known corporate scandal, with consequences that the average person can easily identify.

Enron used irregular accounting, which made it impossible for analysts to understand how the company was making money. The SEC investigated and found that Enron hid billions of dollars in liabilities through companies it controlled.

As the Crisis unfolded, Enron’s Share Price Fell from $90.56 to only $1. They had to file for what was then the largest Chapter 11 bankruptcy in history.

Volkswagen Emission Gate 2015:

Volkswagen began its emissions scandal in September of 2015 when the US Environmental Protection Agency accused the company of cheating emissions tests

The results of the Nitrogen emissions released by VW cars were found to be shorting EU law. When the cars were presented to an EPA or emissions testing facility that was not equipped with its own technology for detecting defeat devices, they would turn off the full pollution controls and comply with regulations.

The emissions scandal has led to investigations across the world, with recent estimates suggesting that as many as 11 million cars globally were affected.

British Petroleum Deepwater Horizon 2010:

Following the BP oil spill of 2010, shares in BP collapsed.

The Deepwater Horizon oil rig exploded in the Gulf of Mexico, causing 4.9 million barrels of oil to spill into the ocean. The initial disaster was only fixed months later when BP found a solution that worked.

BP has been forced to pay billions in compensation since the crisis and its effects have been devastating for local ecosystems, wildlife, and locals.

Uber’s “Bro” Culture 2017

In recent years, there have been multiple accusations of sexual harassment and questions over Uber’s “stop-at-nothing” approach to expansion. The latter allegedly saw it using illegal technology to avoid law enforcement while stealing drivers from competitors and spying on users.

Uber, a transportation service provider, was accused of having ‘sexist jokes’ and going to a brothel in Seoul. This scandal led to their CEO’s resignation in June 2017. Though some were not proven, the allegations affected the company’s share price, which was traded privately at the time.

Uber has been investing in its image, including hiring Dara Khosrowshahi as CEO and taking it public. In May 2019, Uber was valued at $69.7 billion and listed at $45 a share.

Apple’s Batterygate 2017

Apple’s biggest scandal in recent years is surely the “Batterygate”.

When an iPhone user in a Reddit thread reported that they were having issues with their device, the post led to a lot of media coverage. Some commenters called out the software update as a deliberate attempt to force upgrades by deliberately slowing down iPhones as they age. Tim Cook later released a statement confirming that the software was designed to improve performance and prevent unexpected shutdowns. In response to negative press, Apple offered a battery replacement gift for those who experienced sluggishness from the initial software updates.

Valeant Pharmaceuticals 2015

Congressional representatives questioned Valeant, the company that raised the price of two drugs, about the scandal. Bernie Sanders and other congressmen asked them to explain why they increased the price of these drugs

One of Valeant’s strategy implementations was acquiring small pharmaceutical companies and raising the prices of their drugs. States were also looming about Valeant controlling a chain of pharmacies called Philidor, which hurt their market. The scandal got deepened in October when it was suspected that Valeant had been abusing this position to inflate the size of its order book and report higher profits.

Equifax Data Breach 2015

Equifax is one of the three credit agencies

In September of 2017, the company announced that it had a major breach. They noticed that this breach could affect many of their US consumers plus many more around the world. This data theft included names, social security numbers, and other personal information that businesses typically need to confirm identities. Many people who are affected by this breach could become victims of identity theft in the future.

These unethical decisions have serious implications for businesses, both short-term and long-term. For example, Volkswagen’s cheating may have caused shortages of cars on the market, which led to higher prices and reduced efficiency (at minimum). Similarly, Sears’ error may have driven customers elsewhere.

Finally, Volkswagen’s flawed systems caused negative repercussions that extend far beyond its own financial interests. All of this puts the company at an unfair disadvantage in the marketplace. The problems discussed above are only an example of the damage that can result from unethical decisions by business leaders. However, these examples highlight why leadership is so vital in constructing ethical cultures within companies.

The Implications can be summarized as follows:

Fall in share Prices: Whenever a scandal hits the market, the immediate reaction is a steep fall in share prices. In many cases, the senior executives come up with a statement but eventually, it does a lot of damage to the shareholder confidence.
Shifting of Customers to alternatives: Customers prefer ethical organizations. With such a scandal, they generally gravitate towards alternatives or substitutes
Loss of Business: For Organizations like Enron, the scandal and the fraud meant the entire loss of business. For other organizations like Volkswagen, they had serious fall in market shares
Government Fines: Government generally imposes serious fines. These fines may look small for the businesses these companies represent, but they give signals to the market which leads to higher losses. In exceptional cases, the government has imposed fines to the tune of billions of dollars
Loss of Customer Trust: In modern-day business ethics, everything eventually boils down to customer trust. Ethical issues not only lead to loss of trust of the customer but the entire stakeholders like suppliers, shareholders, and employees. The loss of trust creates a vicious ecosystem where the entire business finds it very difficult to operate

Emotional Implications of Unethical Behavior

Ethical behavior is the best way to guarantee a successful business. The concept of business ethics is in place to make sure that everyone’s rights are respected and that individuals behave in an ethical manner. What does this mean for businesses? First, it means that all business decisions must be made with an understanding of ethics. Second, it insists on high moral standards and ethical behavior from employees, partners, and directors. Finally, it teaches businesses how to conduct themselves ethically when making decisions about their own future.

The purpose of business ethics is to protect people and society as a whole. Ethics play an important role in our daily lives by dictating how we should treat others, what behaviors are acceptable and what actions will result in consequences. Businesses need to adhere to the same principles in order to be successful. Ethical behavior sets the tone for company culture and allows employees to feel appreciated and trusted. Poor ethical practices can damage relationships, reduce productivity and even lead to lawsuits.

Why do organizations have a policy of ethical behavior?

Organizations have necessitated having a policy of ethical behavior due to the following reasons. Business ethics help companies gain the trust of their customers, investors, shareholders, etc, it also helps a company make better decisions that are socially acceptable and includes the major stakeholders to take part and present their opinions as well. Business ethics also enhances employee productivity. If the job doesn’t interfere with their morals, they should be encouraged to work harder and earn more profits and later their work should be appreciated.

Unethical business practices can cause severe consequences like higher risks, fraudulently, etc. so instead work ethically to ensure a safe and successful business. Encourage all staff members to work as a team and not compete against each other as this is against business ethics and can create some chaos within the workspace. Strong ethical morale will help a business create long-term partnership(s) that may help it in the long run. if the company works under a set of rules and principles, it lowers the chances of risks and penalties.

Moreover, an organization that functions on principles will always stay in the good books of the community which will help it earn the loyalty of its stakeholders, increase its sales, and whatnot.

Samrat Saha

Kantian Model of Ethics: Formulation, Application, & Examples: A Comprehensive Overview

What is the Kantian model of ethics?

The Kantian model of ethics was developed by a German philosopher, Immanuel Kant. The model is a deontological model because it focuses on the duties of a rational rather than the ends or consequences.

According to Kant, no matter what you feel about a certain action or situation to fall under the right or wrong category, it will be considered right if it respects his categorical imperatives and wrong if it fails to respect the same. His categorical imperative is universal principles that identify moral from immoral. These principles apply to every human being irrespective of their opinion or thoughts about their situations.

What are Kant’s categorical imperatives?

Kant’s categorical imperatives are the rules that are universally applicable in every situation. Not only universal but these rules are unconditional as well. They apply to every human being regardless of their personal goals and interests.

Hypothetical imperatives are different from categorical imperatives as they apply according to the desires of people. But categorical imperatives bind rational beings to their moral duties. Kant’s categorical imperatives can be further categorized into three formulations. Let’s discuss them one by one.

Categorical imperatives are principles that allow for ethical decision-making within a particular situation but do not require general considerations of the person or their well-being. For example, one might apply the categorical imperative of loyalty to a friend in order to maintain amicable relationships. Such imperatives arise from deeper thoughts about a person and their role within society, rather than from specifics about what our friend may have done in the past.

This CU perspective on imperatives is unique in that it allows for abstraction. Abstract considerations can be applied across many contexts without falling into relativism or subjectivism. It is because of this feature that categorical imperatives are often seen as stronger principles than other ethical theories.

This contrasted with utilitarianism, which favors specific actions based on how they will affect specific people or groups. Utilitarianism also has difficulties accounting for abstractions, as each individual case must be weighed carefully. This led to the development of deontological ethics, which takes abstract ideas like loyalty and justice seriously and tries to derive general rules from them.

What are the 4 Formulations of Kantian Ethics?

Whether you’re a Kantian moral philosopher or philosopher in general, reading Emmanuel Kant’s categorical imperative can be daunting. The entire premise of Kantian is based on moral imperatives that drive a basic human being. The roots of Kantian Ethics can be found in the background of all major religions which drives human beings to behave in the most moral ways possible. The Eight Fold Path in Buddhism has also direct correlations which allow human beings to attain Nirvana

Kantian Model of Ethics: Formulation 1: Universalizability

“Act as though the maxim of your action were by your will to become a universal law of nature.”
Immanuel Kant

The first formulation of Kant’s categorical imperatives, Universalizability is also known as the principle of the law of nature. It states that one should act as though their actions will become a universal law of nature. According to Kant, If an act is morally correct, it must apply to everyone irrespective of their goals. But this law is applicable only in similar situations.

For example, someone who is in need of money borrows it or takes a loan and promises to return it. but he or she never returns it and decides to steal it by breaking their promise. On the other hand, there is a poor homeless family who is in desperate need of money and they borrow it on the promise of returning it. But due to their poverty, it is not possible for them to return it and thus they break their promise. These situations are similar but the morals aren’t.

Kantian Model of Ethics: Formulation 2: Humanity as an end in itself

“So act as to treat humanity, whether in your own person or in that of any other, in every case as an end and never as merely a means.”
Immanuel Kant

His second formulation is also known as the principle of ends. According to Kant, rational beings should not treat other human beings merely as a means to an end rather than an end in itself. This means one should treat fellow human beings with respect and value rather than manipulating them to fulfill their own desires and pleasures. They shouldn’t be used to accomplish a purpose but respected.

Kant believes that due to the ability to reason, rational beings have an intrinsic value. He also claims that reason motivates mortality, meaning we respect reason as the motive in all people.

Kantian Model of Ethics: Formulation 3: Formula of autonomy

“Act as though the maxim of your action were by your will to become a universal law of nature.”
Immanuel Kant

The formula of autonomy or principle of autonomy is the third formulation of Kant’s categorical imperatives. It states that one shouldn’t look up to others to guide him about right and wrong but rather decide for oneself by making a rational choice by reasoning which simply means do not follow others blindly and end up doing something which is morally wrong. Instead, use your own rational will to discover right from wrong and take actions that can be universalized. Kant also claims that people must follow categorical imperatives because of their rational will and not to fulfill their own desires or motive.

Kantian Model of Ethics: Formulation 4: Kingdom of Ends

People are obligated to act on maxims that would be accepted as a law in a multi-agent community that aims to maximize happiness given the principle of utility. Actions that aim to provide value to society should not be taken into account when approaching this spirit of goodwill.

Applications of the Kantian model of ethics

Kantian Model of Ethics: Application 1: Medical ethics

Humans possess the ability to think and reason which makes the basis of morality. Kant believed that the ability of humans to reason makes them remarkable. He also believed that all humans deserve respect and dignity. Margaret L. asserted that according to Kantian ethics a medical professional shall be glad if someone used their practices or if they used their own practices on other patients even if they are the patient themselves. She also argued that according to Kant, every patient should be well informed about their treatments and consent must be taken beforehand.

Medical research must be motivated out of respect for the patient and their values even if it risks them stopping their treatment. Jeremy Sugarman argued that Kant’s formula of autonomy suggests that people should be treated for their own goals rather than for the benefit of society.

Kantian Model of Ethics: Application 2: Abortion

Susan Feldman suggested according to Kantian ethics abortion is totally a woman’s decision of her free will. Women are in full control over what happens to their bodies hence their choice shall be respected. Carl Cohen asserted that even though fetuses aren’t rational, they still must be treated as an end in themselves just as a mother is treated as a rationale for her decision about abortion.

Kantian Model of Ethics: Application 3: Animal ethics

Kant believed that animals aren’t rational. They don’t have any moral rights, so we as humans don’t have any duties towards them but this doesn’t give us the right to be cruel to them. Because of their behavior towards other human beings. If one person treats animals harshly then they may paint a picture of harming others, even humans as an acceptable act.

Tom Regan rejected this Kantian model of Ethics on the basis that animals in fact do have moral thinking and they are self-conscious. they do make decisions about their life and should be treated as an end. He added that if Kant believes that animals lack rational thinking and reasoning, then there are certain humans as well who can’t make a moral judgment. Then they don’t have any worth either.

Kantian Model of Ethics: Application 4: Lying

According to the Kantian model of ethics, lying is against the categorical imperatives, so it is universally wrong. That is, wrong in every circumstance. Kant suggested one must not do the wrong to prevent a potential wrong even if the circumstances make it look like that. And even if that causes harmful consequences, you won’t be blamed as one was keeping true to his duty For example, you can’t lie to a murderer to save a victim’s life because you are not aware of the consequences it may cause.

Examples of Kantian Model of Ethics

Kantian Model of Ethics is absolutist and too rigid. There in lies the criticism for the model in a society that is practically riddled with vices and immoral behavior.

Kantian Model of Ethics: Example 1: Hide a Criminal

If you are protecting an innocent man from a criminal and if a criminal man comes to your door looking for the person, it becomes your responsibility to tell the criminal that he is with you.

Kantian Model Of Ethics: Example 2: Fire an Employee

If an outperforming employee has stolen a very insignificant amount from the treasury, it becomes imperative that you throw the person out as the Kantian Model of Ethics keeps a strong belief system against the principle of lying and stealing

Kantian Model Of Ethics: Example 3: Abortion

As discussed previously and according to Kant, that females should have a right to decide about the baby she is nurturing. Women are in full control over what happens to their bodies hence their choice shall be respected.

Samrat Saha