Lecture Business and society: Stakeholders, ethics, public policy (14/e): Chapter 4 - Anne Lawrence, James Weber

Chapter 4 - Ethics and ethical reasoning. The goals of this chapter are: Defining ethics and business ethics, evaluating why businesses should be ethical, knowing why ethical problems occur in business, identifying managerial values as influencing ethical decision making, recognizing how people’s spirituality influences their ethical behavior, understanding stages of moral reasoning, analyzing ethical problems using generally accepted ethics theories.

Chapter 4

Ethics and Ethical Reasoning

Ch 4: Key Learning Objectives

 Defining ethics and business ethics

 Evaluating why businesses should be ethical

 Knowing why ethical problems occur in business

 Identifying managerial values as influencing ethical

decision making

 Recognizing how people’s spirituality influences their

ethical behavior

 Understanding stages of moral reasoning

 Analyzing ethical problems using generally accepted

ethics theories

The Meaning of Ethics

 Ethics

 A conception of right and wrong conduct

 Tells us whether our behavior is moral or immoral

 Deals with fundamental human relationships—how we think

and behave toward others and want them to think and behave toward us

 These experiences create a concept of ethics,

morality, and socially acceptable behavior in each

person

 Acts as a moral compass to guide an individual when ethical

dilemmas arise

Ethical Relativism

 Concept which holds that ethical behavior should be

defined by various periods in time in history, a society’s

traditions, the special circumstances of the moment, or

personal opinion

 The meaning given to ethics would be relative to time, place,

circumstance, and the person/s involved

 There would be no universal ethical standards on which

people around the globe could agree

Observations of Unethical Behavior at Work

Figure 4.1

Five Key Reasons Business

Should Be Ethical

 To meet demands of business stakeholders

 About three-fourths of employees surveyed in 2007 believe their

firms are considering the environment, employee well-being, and the interests of society and the community.

 Meeting demands of stakeholders is good business

 To enhance business performance

 Research shows linkage between ethically responsible

behavior and favorable corporate financial performance

 Imparts trust, promoting positive alliances among

business partners

Five Key Reasons Business

Should Be Ethical

 To comply with legal requirements

 Two legal requirements provide direction for companies

interested in being more ethical in their business operations

 U.S Corporate Sentencing Guidelines

 Sarbanes-Oxley Act of 2002

 Although they apply only to U.S.-based firms, these legal

requirements also provide a model for firms that operate outside the United States

U.S Corporate Sentencing Guidelines

 Establish standards and procedures to reduce criminal

conduct

 Assign high-level officer(s) responsibility for compliance

 Not assign discretionary authority to “risky” individuals

 Effectively communicate standards and procedures through

training

 Take reasonable steps to ensure compliance—monitor and

audit systems, maintain and publicize reporting systems

 Enforce standards and procedures through disciplinary

mechanisms

 Following detection of offense, respond appropriately and

prevent reoccurrence

Sarbanes-Oxley Act of 2002

 Born from the ethics scandals at Enron, WorldCom, Tyco

 Seeks to ensure that firms maintain high ethical standards

in how they conduct and monitor business operations

 Requires executives to vouch for the accuracy of a firm’s

financial reports

 Requires executives to pay back bonuses based on

earnings that are later proved fraudulent

 Established strict rules fro auditing firms

 In 2006 and 2007 regulation loosening occurred when the

SEC provided more relaxed guidelines to parts of the

Sarbanes-Oxley Act

 To prevent or minimize harm

 Overriding principle that business should

“do no harm”

 Examples include not harming society with toxic

waste, protecting business from unethical employees and unethical competitors

 To promote personal morality

 Knowing one works in a supportive ethical climate

contributes to sense of psychological security

 People want to work for companies that do the right

thing

Five Key Reasons Business

Should Be Ethical

Why Ethical Problems

Occur in Business

 Four Primary Reasons

 Personal gain and selfish interest

 Competitive pressure on profits

 Conflicts of interest

 Cross-cultural contradictions

Why Ethical Problems Occur in Business

Figure 4.3

Core Elements of Ethical Character:

Managers’ Values

 Managers are key to whether a company and its

employees will act ethically or unethically

 The values held my managers will serve as models for

others who work at the company

 Differences in ethical stances of U.S versus European

managers and employees

 Younger generation of managers more concerned about

ethics/social responsibility

 A company’s CSR performance is a major factor when selecting

a new employer for today’s graduating MBAs

Spirituality in the Workplace

 Personal belief in a supreme being, religious

organization, power of nature or some other life-guiding

force

 Organizations have responded to the increased attention

to spirituality and religion at work by attempting to

accommodate their employees

 Opponents of spirituality at work point to the myriad of

implementation issues as grounds for keeping spirituality out of the workplace

 Issues include which religion should be promoted, and need for

recognizing diversity of religious beliefs

Stages of Moral Development

 From childhood to mature adulthood people move up

in their moral reasoning

 Earliest stages of reasoning are ego-centered

 Most developed stages are principle-centered

 Most managers make decisions based on criteria in

levels 3 and 4

 Company executives’ reasoning has wide implications

both inside and outside the organization

Stages of Moral Development and Ethical Reasoning

Figure 4.4

Analyzing Ethical Dilemmas

in Business

 Business managers and employees need a set of

decision guidelines that will shape their thinking when

on-the-job ethics issues occur

 These guidelines should help them

 Identify and analyze the nature of an ethical problem, and

 Decide which course of action is likely to produce an ethical

result

Four Methods of Ethical Reasoning

 Virtues

 Values and character are critical determining factors

 Utilitarian

 Compares benefits and costs of a decision, policy or action

 Costs and benefits can be economic, social or human

Four Methods of Ethical Reasoning

Figure 4.5

Applying Ethical Reasoning

to Business Activities

 Can use the virtues, utility, rights, and justice

framework as a tool to analyze real business ethics

dilemmas

 Once the ethical analysis is complete, the decision

maker should ask the question: Do all of the above

ethics approaches lead to the same decision?

 If all the answers are “Yes”, the proposed action is ethical

 If all the answers are “No”, the action is not ethical and needs

to be reconsidered

 If “Yes” and “No” answers are mixed, you must decide which

takes priority