Business Ethics Fundamentals

Chapter 7
Prepared by Deborah Baker
Texas Christian University

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Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz
Copyright 2009 by South-Western, a division of Cengage Learning. All rights reserved
 Chapter 7 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.
4. Analyze economic, legal, and ethical aspects by using a
Venn Model.
5. Enumerate and discuss the four important ethics
questions.
6. Identify and explain three models of management ethics.
7. Describe Kohlbergs three levels of developing moral
judgment.
8. Identify and discuss the elements of moral judgment.

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 Chapter 7 Outline

The Publics Opinion of Business Ethics

Business Ethics: What Does It Really Mean?
Ethics, Economics and Law: A Venn Model
Four Important Ethics Questions
Three Models of Management Ethics
Making Moral Management Actionable
Developing Moral Judgment
Elements of Moral Judgment
Summary
Key Terms
Discussion Questions
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 Introduction to Chapter 7

Business Ethics

Publics interest in business ethics has heightened

during the last three decades
Publics interest in business ethics has been spurred
by headline-grabbing scandals
The scandals of the early 2000s, beginning with Enron,
created and defined the ethics industry

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 Introduction to Chapter 7

Recent Ethics Scandals

Enron Dynegy
WorldCom HealthSouth
Arthur Anderson Boeing
Tyco Martha Stewart
Adelphia Parmalat (Italy)
Global Crossing Computer Associates

Figure 7-1 5
 Inventory of Ethical Issues in Business

Employee-Employer Relations

Employer-Employee Relations

Company-Customer Relations

Company-Shareholder Relations

Company-Community / Public Interest

Figure 7-2 6
 The Publics Opinion of Business Ethics

Public Agenda Survey Findings

The most egregious violators of business ethics were corrupt

executives who protected their own wealth
Greed for money and power and a weakening sense of
personal values have been behind the recent ethics scandals
People define business ethics in broad terms and are
concerned with how it has affected them
Many participants thought it was possible for executives to be
both ethical and successful
The media and financial press are not regarded as vigilant
watchdogs protecting the public interest
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 The Publics Opinion of Business Ethics

LRN Ethics Study Survey Findings

Three out of four employees reported encountering ethical

lapses on the job
More than one in three respondents said these incidents
happen at least once a week
Ten percent believed that a current issue in their company
could create a business scandal if discovered
Younger workers reported higher levels of witnessing
ethical lapses and being distracted by them

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 Media Reporting on Business Ethics

The media are reporting ethical problems more frequently

and fervently

In-depth investigative reporting of business ethics on TV

shows as 60 Minutes, 20/20, Dateline NBC, Primetime Live,
and FRONTLINE

Internet coverage in the form of webpages and blogs has

expanded in recent years

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 Business Ethics
Today versus Earlier Periods

Societys
Expected and Actual Levels

Expectations of
Business Ethics
of Business Ethics

Ethical Problem

Actual
Ethical Problem Business Ethics

1960s Time Early 2000s

Figure 7-3 10
 Business Ethics:
What Does It Really Mean?
The discipline that examines
Ethics good or bad practices within the
context of moral duty and obligation

Relates to principles of right and wrong

Moral conduct in behavior

Concerned with good and bad or

Business right and wrong behavior and
Ethics practices that take place in business
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 Business Ethics:
What Does It Really Mean?

Involves describing, characterizing

Descriptive and studying morality
Ethics
Focuses on What is

Concerned with supplying and

justifying moral systems
Normative
Ethics Focuses on What ought /
ought not to be

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 Three Approaches to Business Ethics

Based on how normal society today

Conventional
views business ethics
Approach

Based upon the use of ethics

Principles
principles to direct behavior, actions
Approach and policies

Based on short, practical questions

Ethical Tests to guide ethical decision making and
Approach behavior
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 Conventional Approach
The conventional approach to business ethics involves
a comparison of a decision or practice to prevailing
societal norms

Prevailing Norms
Decision or Practice
of Acceptability

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 Sources of Ethical Norms

Fellow Local Regions of

Workers Community Country

Family Profession
The
Individual
Friends Conscience Employer

The Law Religious Society at

Beliefs Large

Figure 7-4 15
 Ethics and the Law

1. Why do firms behave illegally?

2. What are the consequences of behaving illegally?

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 Making Ethical Judgments

Behavior or act that has compared with Prevailing norms of

been committed acceptability

Value judgments and

perceptions of the
observer

Figure 7-5 17
 The Conventional Approach
to Business Ethics

1. What is the true nature of the practice, behavior, or

decision that occurred?

2. What are societys (or businesss) prevailing norms

of acceptability?

3. What value judgments are being made by someone

about the practice or behavior, and what are that
persons perceptions of applicable norms?

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 Ethics, Economics, and Law

Figure 7-6 19
 Four Important Ethical Questions

1. What is?

2. What ought to be?

3. How to we get from what is to what ought to be?

4. What is our motivation in all this?

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 Five Levels for Questions

1. Level of the individual

2. Level of the organization

3. Level of the industry or profession

4. Societal level

5. Global or international level

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 What Is?

What are your personal ethics?

What are your organization's ethics?
What are the ethics of your industry?
What are societys ethics?
What are global ethics?

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 What Ought to Be?

How ought we treat our aging employees?

How safe ought we make this product?
How clean an environment should we aim for?
How should we treat long-time employees when the
company is downsizing?
Should we outsource aspects of production to China
or India?

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 The Practical Question

What are we able

to accomplish?

What circumstances
permit us to accomplish?

What do we intend
to accomplish?

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 Three Models of Management Ethics

Immoral management

Moral management

Amoral management

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 Three Models of Management Ethics

Immoral An approach devoid of ethical principles

Management and active opposition to what is ethical

Conforms to high standards

Moral
of ethical behavior or professional
Management standards of conduct

Intentional: does not consider

Amoral ethical factors
Management Unintentional: casual or careless
about ethical factors
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 Characteristics of Immoral Managers

Intentionally do wrong
Self-centered and self-absorbed
Care only about self or organizations profits / success
Actively oppose what is right, fair, or just
Exhibit no concern for stakeholders
Are the bad guys
An ethics course probably would not help them

Figure 7-7 27
 Illustrative Cases of Immoral Management

Stealing petty cash

Cheating on expense reports
Taking credit for anothers 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

Conform to high level of ethical or right behavior

Conform to high level of personal and professional
standards
Ethical leadership is commonplace
Goal is to succeed within confines of sound ethical
precepts
High integrity is displayed
Embrace letter and spirit of the law
Possess an acute moral sense and moral maturity
Are the good guys

Figure 7-8 29
 Integrity Strategy

Guiding values and commitments make sense and are

clearly communicated.
Company leaders are personally committed, credible,
and willing to take action on values
Espoused values are integrated into normal channels of
management decision making
The organizations systems support and reinforce its
values
All managers have the skills, knowledge, and
competencies to make ethically sound decisions daily

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 Ethics Criteria

Be a leader in the company's field, showing the way

ethically
Sponsor programs that demonstrate sincerity and
ongoing vibrancy, and reach deep into the company
Be a significant presence on the national scene, so the
companys ethical behavior sends a loud signal
Stand out in at least one area
Demonstrate the ability to face a recent challenge and
overcome it with integrity

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 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

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

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 Characteristics of Amoral Managers
Intentionally Amoral Managers:
Dont think ethics and business should mix
Business and ethics are existing in separate spheres
A vanishing breed

Unintentionally Amoral Managers:

Dont consider the ethical dimension of decision making
Dont think ethically
Have no ethics buds
Well-intentioned, but morally casual or unconscious
Ethical gears are in neutral

Figure 7-9 34
 Hypotheses Regarding
Moral Management Models

Population Hypothesis

Individual Hypothesis

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 Three Models of Management Morality
and Emphases on CSR

Figure 7-11 36
 Moral Management Models and Acceptance
or Rejection of Stakeholder Thinking

Figure 7-12 37
 Making Moral Management Actionable

Senior management leads the transition from

amoral to moral management
Business ethics training
Codes of conduct
Mission / Vision statements
Ethics officers
Tighter financial controls
Ethically sensitive decision-making processes
Leadership by example

Recognize that amoral management exists and

can be remedied
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 Developing Moral Judgment

Kohlbergs Levels of Moral Development

Level 1 Preconventional Level

Level 2 Conventional Level

Level 3 Postconventional Level

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 Developing Moral Judgment

Figure 7-13 40
 Why Managers / Employees
Behave Ethically

1. To avoid some punishment

Most of Us
2. To receive some reward

3. To be responsive to family, friends,

or superiors
Many of Us
4. To be a good citizen

Very Few Of Us 5. To do what is right, pursue some ideal

Figure 7-14 41
Feminist Views of Kohlbergs Research

Recognize their own needs Level 3

and needs of others

Establish connections and Level 2

participate in social life

Level 1
Sole Concern for Self

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External Sources of a Managers Values

Religious values

Philosophical values

The Web
Cultural values
of Values

Legal values

Professional values

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 Internal Sources of a Managers Values

Norms prevalent in business organizations 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

Moral imagination
Moral identification and ordering
Moral evaluation
Tolerance of moral disagreement and ambiguity
Integration of managerial and moral competence
A sense of moral obligation

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 Key Terms
Amoral management Immoral management
Amoral management: Integrity strategy
intentional Kohlbergs levels of moral
Business ethics development
Compliance strategy Moral development
Conventional approach to Moral management
business ethics Morality
Descriptive ethics Normative ethics
Ethical relativism Unintentional
Ethics

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