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«Published Annually Vol. 6, No. 1 ISBN 978-0-979-7593-3-8 CONFERENCE PROCEEDINGS Sawyer School of Business, Suffolk University, Boston, Massachusetts ...»

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The report released by Transparency International which is based on input from 13 different experts and business surveys indicates that the global financial crisis took a toll on people‟ s views of corruption in government. China came in at 78th and India at 87th out of the 178 territories ranked in Transparency International‟ s 2010 Corruption Perceptions Index (CPI), a measure of domestic, public sector corruption. (1 being least corrupt) These results signal that significantly greater efforts must go into strengthening governance across the globe. With the livelihoods of so many at stake, governments‟ commitments to anti-corruption, transparency and accountability must speak through their actions.

In India, corruption is growing in the form of bribes, evasion of tax and exchange controls, fraud and cheating etc. It is the upshot of the link between Bureaucracy, business, politics and criminals. These days, bribe has become the most common practice for getting things done.

This brings us to Mary Parker Follet (1868-1933), who defined management as "the art of getting things done through people." This is a most value free definition where there is no obligation on the part of any one to be ethical. To a larger extent even there is no obligation on business to give customers what s/he desires as long as the business can make more profit. In this view there is no consideration of ethics except due to social pressures. The outcome of such an approach is visible everywhere. We have institutionalised corruption on a global scale. There is manipulation of accounts, fudging of economic and financial data and increasing dissatisfaction in the society.

Modh (2005), Ethical management: Text and Cases in Business Ethics and Corporate Governance, Macmillan India, New Delhi http://www.transparency.org/about_us A more elaborate definition of management by George B Terry describes management as a process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish the objectives by the use of people and resources. Management theorists and academicians doing work in this area have directed their concerns to individuals in the corporate workplace.

Questions about the rights, responsibilities, and ethical decision making of managers and employees attract attention of these ethicists. Here, theories about the relationship between the individual and the organisation are offered, as explanations about people in business do not always do what is legally or morally right. Such theoretical works have recommended areas of organisational development and changes in the structures with an eye to understand what kind of conduct is most ethical among those who manage others on the job. The issue to be debated is the differences between personal morality and business morality.

In Aristotelian approach to ethics, the individual is seen being embedded in a community and the ultimate importance for one is happiness, and happiness is sole measure of success, both individually and collectively. But we can see that this is not being met within the current framework of management thinking. There is little affection between individuals as customers and individuals as part of business organizations and between business communities and non-business communities.

The new definition of management removes people as a resource from the definition of management and tries to put more emphasis on ethical action.

There is a need to integrate ethics in the basic teachings of management. Just as a vision and mission statement lays down the foundation for business strategies in an organization and shows the path to follow, a review is necessary at this stage to understand and redefine the management discipline and its impact. A new definition should provide a vision to future business leaders.

–  –  –

The management discipline has already experimented with various approaches. Each existing theory consists of networks of concepts and assumptions regarding not only the goal of the organization but also the behaviors and motivation of organization members.

Mckeon R (1941), Translation of the Basic Works of Aristotle, Random House, New York.

Penrose (1959). The Theory of the growth of the Firm, New York, Sharpe.

Jenson M C (1983). Organisation Theory and methodology. Accounting Review, 56, 319-38 The theory of organization in Neo-classical economics was constructed to investigate the way in which the prices and the allocation of resources among different uses are determined and is part of the wider theory of value. In this context the appropriate model of the organization describes the forces that determine the prices and quantities produced of a particular product by the individual organization. The organization is represented by a production function, which captures the underlying technology used to employ the forces of labor and capital for the purpose of generating goods and services.

An important assumption of Neoclassical and traditional theories of the organization is that of economic Darwinism. The basic argument is that the environment rewards with survival, those organizations, which select strategies, which happened to be optimal. Organizations which deviate from optimal behavior will tend towards extinction.

2. The New Industrial Economics Theory:

In contrast to Neoclassical economic theory which followed an empirical tradition resent developments in industrial economics focus on formal theoretical analysis of the structure and behavior of organizations. There is strong business strategy component to the New Industrial Economics theory, including market strategy and internal organizations.

In this theory the organization is viewed as a player with rational and intelligent decisions. The actions taken by organizations will be intended to maximize their pay-offs. The profit makers are assumed to be rational and are subject to no uncertainty, i.e., that the environment can be predicted and managers have unlimited information processing ability.

3. The Behavioral Theory of the Organization:

This model rejects the motivational and cognitive assumptions underlying the rationality of "Economic Man" and instead seeks to build inductive theory relying upon observations of overt behaviour. The focus of the behavioural theory is to predict price, output and resources allocation decisions.

Simon (1957) attacked the traditional microeconomics view that the goal pursued by an organization is essentially synonymous with the profit maximizing goal of the entrepreneurs. Instead, he argued organizations should be viewed as collections of individuals with multiple goals, characterized by "Bounded Rationality", behavioral rules "Satisfying" the organization's attempt to achieve satisfactory levels of profits rather than to maximize profits.

4. The Resource Based view of the organization:

The managerial approach has challenged the motivational assumptions underlying the neo-classical theory of the organization. The origin of this approach was contained in the work of Berle and Mens (1932) who addressed the problems associated with the separation of ownership from control, in the large publicly held organizations. In this approach the assumptions of profit maximizing behavior is rejected to answer the call for greater "realism" in the treatment of managerial motivation. In this approach Tirole J (1988). The Theory of Industrial Organisation. Cambridge, Mass.: MIT Press Cyert R M and Pottinger G (1979). Towards a better microeconomic theory, Philosophy of Science, 46, 204-22.

Cyert, R.M and March, J G (1963). A behavioural Theory of the Firm. Englewood liffs, NJ: Prentice Hall, Pg.19 Simon (1957). Administrative Behaviour. New York: McMillan

Conference papers © Knowledge Globalization Institute, Pune, India, 2012

Penrose (1959) conceptualizes the organization “as a collection of productive resources". Her view provides the foundation for what has been termed as the “resources based view of the organization". This view implies that an organization‟ s distinctive competence is based on the specialized resources, assets and skills it possesses. The theory of organizations expands to make best use of their best preexisting skills and resources.

5. Transactional Theory of organization:

From this perspective, the organization form develops on the basis of completing necessary transactions. In effect, markets and organizations are alternative instruments of governance for completing a set of contracts. This framework assumes that two basic characteristics of decision-maker are opportunism (defined to mean, self-interest seeking behavior with guile) and bounded rationality. The transaction theory considers the organization as a governance structure, which is crafted to economize on transaction cost.

6. Humanist Theory of Organization

The Neo-classical and Marxist economists look at human beings as mere economic units who are fundamentally selfish and they pursue their selfish interests in a rational way. In this world-view, maximum material gains are the supreme goal of all activities.

Humanist approach believes that socio-cultural factors play an important role in the growth of an organization.

This paper presents a value based approach to the functioning of organizations, which may be called “Ethical Action Theory of Organization”.

–  –  –

Ethics is moral philosophy in action. The world is created by action and is meant for action. There is no life, no future without action. We make our destiny or mar it, or escape the world only through action. Even if we want to rise above the world of action, we can do so only through action.

Action is a creative urge behind every active intellect, which ultimately fulfils itself in the creation of things and beings. Each one of us has our own „individual being', which makes what we are. If we are to live as truly dynamic men in the world, we can only do so by being faithful to our true nature, following the path of ethical action.

Ethical Action

Indian philosophy has been sorting out issues of ethical action for more than 5000 years. According to Mimamsa, ethical action is the supreme governing force of the universe. It is very obvious that the world survives because of ethical action done by all.

There is a view that ethical potency or the force or power of merit and demerit controls the universe and produces, for the agent of action, what he desires and what his action deserves.

Berle, A.A and Mens, G (1932). The Modern Corporation and Private property. New York Williamson O E (1985). The Economic Institutions of capitalism, New York: Free Press Thengadi (1998). Third way, Bangalore: Sahitya Sindhu Prakashan Bokare M G (1993). Hindu Economics, New Delhi: Janaki Prakashan Chinmayananda (1992), Commentary on the Holy Gita, Central Chinmaya Mission Trust, Mumbai Raju P T (1985), Structural Depths of Indian Thought, South Asian Publishers, New Delhi.

Bhatt G P (1962), Epistemology of the Mimansa School, Chowkhambha, banaras.

Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Mimamsa lays down the idea of Dharma (duty, right action, merit) and its social ethics. It is in Mimansa that question such as

following are asked:

–  –  –

Ethical action can be explained as a social, organizational, national or personal activity into which an individual is ready to function entirely in a spirit of service and dedication. Ethical action can be conceived as being instrumental to the attainment of some good or the avoidance of some evil. The idea of ethical action, in general, is instinctive in man and not acquired.

Ethical action deals with obligatory deeds and avoidance of prohibited deeds. These are „the Categorical Imperatives‟. Ethical actions are essential not only for outward activities but also for the inner disposition of the mind. Since only we know our thoughts, ethical action signifies emphasis on the importance of goodwill in conduct. The goodwill must be more than a mere wish; it needs to be followed by appropriate action.

Ethical action is not an instrumental value but an intrinsic value or as an end in itself. The path of ethical action leads to prosperity, success, expansions and sound policy. Unethical actions lead an individual to a realm of confusion and sorrows.

Several works on ethical action are not content with pointing out what is ethical action; they also try to formulate the norm of conduct, as if it were an eternally existing pattern of righteousness. The concept of right as the means to the good is introduced here. It recognizes an ideal and rules are formulated according to this ideal.

–  –  –

1. Special emphasis laid on the ascetic principle in the moral training as a whole.

2. Codes are not mere theoretical guides but are practical.

The stability of the society is dependent on the idea of ethical action implanted in man. This is the mainstay of any society, through which both the individual and the society live in accord and security. Ethical action does not merely keep man in harmony with his environment; it also enables him thereby to attend his own ends in life.

–  –  –

The new definition of management has been evolved over a period of 10 years while interacting with management students

and people working in organizations. It was clear that the new definition should include following concepts:

1. Need for ethical action

2. People constitute the organization and they are not resources

3. Use of resources by people in organization

4. Use of Technology to run a business

5. Joy of running a business and being a part of it

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