Business and society ethics sustainability and stakeholder management 9e chapter 7

Chapter Outline• The Public’s Opinion of Business Ethics • Business Ethics: Meaning, Types, Approaches • Ethics, Economics and Law - A Venn Model • Three Models of Management Ethics?. T

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Chapter 7

Business Ethics Fundamentals

Learning Outcomes

1 Describe how the public regards business ethics.

2 Define business ethics and appreciate the complexities of making

ethical judgments.

3 Explain the conventional approach to business ethics

Differentiate it from the principles approach and ethical tests

Chapter Outline

• The Public’s Opinion of Business Ethics

• Business Ethics: Meaning, Types, Approaches

• Ethics, Economics and Law - A Venn Model

• Three Models of Management Ethics?

• Making Moral Management Actionable

• Developing Moral Judgment

• Elements of Moral Judgment

• Summary

Business Ethics Scandals

• The public’s interest in business ethics is at

an all-time high, spurred by scandals.

• The Enron scandal impacted business so

greatly it is called “ The Enron Effect ” But then followed more scandals:

• Worldcom, Worldcom Tyco, Tyco Arthur Andersen

• And then the Wall Street financial scandals:

• AIG, AIG Bear Stearns, Bear Stearns Lehman Bros, Lehman Bros Fannie Mae, Fannie Mae

Freddie Mac

Freddie Mac, and Bernie Madoff

• Business will never be the same.

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The Public’s Opinion

of Business Ethics (1 of 2)

• The public’s view of business ethics has

never been very high

• Anecdotal evidence suggests that many

people see business ethics as an oxymoron, and think that there’s only a fine line

between a business executive and a crook.

• A Gallup poll taken in December, 2012,

revealed that only 21 % of the public thought business executives had high or very high

ethics

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The Public’s Opinion

of Business Ethics (2 of 2)

National Business Ethics Survey Findings -

slightly, from 49% to 45%.

rise from 63% to 65%.

increased sharply, to 22% experienced retaliation.

with weak ethics cultures increased to almost record levels

Are the Media Reporting Business

Ethics More Vigorously?

• It is sometimes difficult to tell whether business

ethics have really deteriorated or whether the media is doing a more thorough job of

reporting ethics violations

• There is no doubt that news media outlets are

reporting ethical problems more frequently and fervently

• The media had a field day with the Bernie

Madoff Ponzi scheme which defrauded

thousands of investors out of $50 billion

• Investigate reporting on ethics has been shown

on 60 Minutes, 20/20, Dateline NBC, Rock

Center and Frontline

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Is Society Changing?

Former U.S Treasury Secretary, Michael

Blumenthal-

• “People in business have not suddenly become

immoral What has changed are the contexts in which corporate decisions are made, the

demands that are being made on business, and the nature of what is considered proper

corporate conduct.”

•History shows that a good number of what are now called unethical practices were at one time

considered acceptable.

•Or it may be that those practices never were

acceptable to the public, but because they were not known, it seemed they were tolerated

Business Ethics Today versus Earlier

Business Ethics:

Meaning, Types, Approaches (1 of 2)

Ethics – is the discipline that deals with moral duty and obligation

Moral Conduct - relates to principles of right, wrong, and fairness in behavior

Business Ethics -

•Is concerned with morality and fairness in

behavior, actions, and practices that take place within a business context

•Is the study of practices in organizations and is a quest to determine whether these practices are acceptable or not

-•Focuses on what ought or should be occurring.

•Demands a more meaningful moral anchor than

just “everyone is doing it.”

text

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Three Major Approaches

Ethical Tests Approach

-•Based on short, practical questions to guide

ethical decision making and behavior and practices

The Conventional Approach

-•An ethical principle based on the idea that the individual

should seek to maximize his or her own self interests as a

legitimate factor

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Sources of Ethical Norms

Ethics and the Law

• The law and ethics can overlap in many

respects.

• The law is a reflection of what society thinks

are minimal standards of conduct and

behavior.

• Research of illegal corporate behavior

focuses on two questions:

1 What leads firms to behave illegally?

2 What are the consequences of engaging

in illegal behavior?

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Making Ethical Judgments

The Danger of Ethical Relativism

conventional approach to business ethics is:

Ethical Relativism -

• One picks and chooses which source of

norms one wishes to use based on what will justify current actions or maximize

freedom.

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Ethics, Economics, and Law –

A Venn Model

Three Models of Management Ethics

Immoral Management -

•An approach devoid of ethical principles and an active opposition to what is ethical.

•The operating strategy of immoral management is

focused on exploiting opportunities for corporate or personal gain.

Moral Management -

•Conforms to highest standards of ethical behavior or professional standards of conduct.

Amoral Management –

•Different in nature from the others, it has two kinds:

• Intentional: Does not consider ethical factors.

• Unintentional: Casual or careless about ethical factors.

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Characteristics of Immoral

Managers-These Managers:

• Intentionally do wrong

• Are Self-centered and self-absorbedSelf-centered

• Care only about self or organization’s profits or Care only about self

success

• Actively oppose what is right, fair, or justActively oppose what is right

• Exhibit no concern for stakeholders

• Are the “bad guys”

•An ethics course probably would not help them

Examples of Immoral Management

-• Stealing petty cash

• Cheating on expense reports

• Taking credit for another’s accomplishments

• Lying on time sheets

• Coming into work hungover

• Telling a demeaning joke

• Taking office supplies for personal use

• Showing preferential treatment toward certain

employees

• Rewarding employees who display wrong behaviors

• Harassing a fellow employee

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Characteristics of Moral Managers

These Managers:

•Conform to the highest standards of ethical

behavior or professional standards of conduct

•Their goal is to succeed within the confines of sound ethical precepts

•Demonstrate high integrity in thinking, speaking and doing

•Follow both the letter and the spirit of the law

•Possess an acute moral sense and moral

maturity

•Moral managers are the “good guys”

Habits of Moral Leaders

-1 They have a passion to do right

2 They are morally proactive

3 They consider all stakeholders

4 They have a strong ethical character

5 They have an obsession with fairness

6 They undertake principled decision-

making.

7 They integrate ethics wisdom with

management wisdom.

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Positive Ethical Behaviors

of Moral Leaders

-• Giving proper credit where it is due

• Being straightforward and honest with other

employees

• Treating all employees equally

• Being a responsible steward of company assets

• Resisting pressure to act unethically

• Recognizing and rewarding ethical behavior of

others

• Talking about the importance of ethics and

compliance on a regular basis

Characteristics of Amoral Managers-

Intentionally Amoral Managers

•Don’t think ethics and business should “mix.”

•Business and ethics exist in separate spheres.

•A vanishing breed.

Unintentionally Amoral Managers

•Don’t consider the ethical dimension of decision-

making.

•Don’t “think ethically.”

•Have no “ethics buds.”

•Well-intentioned, but morally casual or unconscious.

•Ethical gears are in neutral.

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Two Hypotheses Regarding

Moral Management Models

Population hypothesis

•The distribution of the three models

approximate a normal curve, with the amoral group occupying the large middle part of the

curve and the moral and immoral categories

occupying the tails.

Individual hypothesis

•Within the individual manager, these three

models may operate at various times and under various circumstances.

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Three Models of Management

Morality and Emphases on CSR

Moral Management Models And Acceptance

or Rejection of Stakeholder Thinking

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Making Moral Management

Actionable -

• The characteristics of immoral, moral and

amoral management provide benchmarks for

recognize the need to move from the immoral

or amoral ethic to the moral ethic

condition that can easily be disguised as an

innocent, practical, bottom-line philosophy But

it is the bane of the management profession

• Most managers are not “bad guys,” but

managerial decision-making cannot be ethically

must be discarded and the process of

developing moral judgment begun

Kohlberg’s Model

of Moral Development

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Why Managers and Employees

Behave Ethically

Ethics of Care as Alternative to Kohlberg

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Recognize their own needs

and needs of others

Establish connections and participate in social life

Level 2

Level 3

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External Sources of a Person’s Values

Sources Internal to the Organization

Norms prevalent in business include

-•Respect for the authority structure

•Loyalty to bosses and the organization

•Conformity to principles and practices

•Performance counts above all else

•Results count above all else

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Elements of Moral Judgment