Lecture Business and society - Chapter 7: Business Ethics Fundamentals

Contents: 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

© 2015 Cengage Learning 1

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 approach

4 Analyze economic, legal, and ethical aspects of a decision

by using a Venn Model.

5 Identify and explain three models of management ethics

Give examples of each

6 Describe and discuss Kohlberg’s three levels of developing

moral judgment.

7 Identify and discuss the elements of moral judgment.

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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, Bear Stearns AIG Bear Stearns, Lehman Bros Lehman Bros, Fannie

Mae

Mae, Freddie Mac, and Freddie Mac 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 -

decreased slightly, from 49% to 45%.

the rise from 63% to 65%.

has increased sharply, to 22% experienced

retaliation.

companies with weak ethics cultures increased to © 2015 Cengage Learning 8

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

Actual Business Ethics

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

•Demands a more meaningful moral anchor

than just “everyone is doing it.”

this text © 2015 Cengage Learning 13

Three Major Approaches

to Business Ethics

Conventional Approach

-•Based on how the average person views

business ethics, and on common sense

Principles Approach

-•Based on the use of ethics principles to justify and direct behavior, actions, and policies

Ethical Tests Approach

-•Based on short, practical questions to guide ethical decision making and behavior and

practices

The Conventional Approach

to Business Ethics

The conventional approach to business ethics

involves a comparison of a decision or practice to

prevailing societal norms.

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

• 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

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

Characteristics of Immoral

Managers-These Managers:

• Intentionally do wrong

• Are Self-centered and self-absorbedSelf-centered

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

or 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 © 2015 Cengage Learning 23

•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

7 They integrate ethics wisdom with

management wisdom.© 2015 Cengage Learning 25

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

31

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Making Moral Management

Actionable -

• The characteristics of immoral, moral and

amoral management provide benchmarks

managers 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

management must be discarded and the

process of developing moral judgment

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Kohlberg’s Model

of Moral Development

33

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Why Managers and Employees

Behave Ethically

Ethics of Care as Alternative to Kohlberg

35

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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