Archie B. Carroll Ann K. Buchholtz Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning

Chapter 7 Business Ethics Fundamentals © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Learning Outcomes Describe how the public regards business ethics. Define business ethics and appreciate the complexities of making ethical judgments. Explain the conventional approach to business ethics. Analyze economic, legal, and ethical aspects by using a Venn Model. Enumerate and discuss the four important ethics questions. Identify and explain three models of management ethics. Describe Kohlberg’s three levels of developing moral judgment. Identify and discuss the elements of moral judgment. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Chapter Outline The Public’s Opinion of Business Ethics Business Ethics: Meaning, Types, Approaches 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 © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Business Ethics The public’s interest in business ethics is at an all-time high, spurred by headline- grabbing scandals. The Enron scandal impacted business to greatly it is called “The Enron Effect.” Business will never be the same. © 2012 South-Western, a part of Cengage Learning

Inventory of Ethical Issues in Business Employee-Employer Relations Employer-Employee Relations Company-Customer Relations Company-Shareholder Relations Company-Community/Public Interest © 2012 South-Western, a part of Cengage Learning

Business Ethics: Meaning, Types, Approaches The discipline that deals with moral duty and obligation. Moral Conduct Relates to principles of right, wrong, and fairness in behavior. Business Ethics 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. © 2012 South-Western, a part of Cengage Learning

Business Ethics: Meaning, Types, Approaches (continued) Descriptive Ethics Involves describing, characterizing, and studying morality. Focuses on what is occurring. Normative Ethics Concerned with supplying and justifying a coherent moral system of thinking and judging. Focuses on what ought or should be occurring. © 2012 South-Western, a part of Cengage Learning

Three Approaches to Business Ethics Conventional Approach Based on how common society today views business ethics and on common sense. Principles Approach Based upon 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. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning 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 focuses on two questions: Why do firms do illegal things? What are the consequences of engaging in illegal behavior? © 2012 South-Western, a part of Cengage Learning

The Conventional Approach to Business Ethics What is the true nature of the practice, behavior, or decision that occurred? What are society’s (or business’s) prevailing norms of acceptability? What value judgments are being made by someone about the practice or behavior, and what are that person’s perceptions of applicable norms? © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Ethical Relativism Ethical Relativism Picking and choosing which source of norms one wishes to use based on what will justify current actions or maximize freedom. A serious danger of the conventional approach to making ethical judgments. © 2012 South-Western, a part of Cengage Learning

Four Important Ethical Questions What is? What ought to be? How do we get from what is to what ought to be? What is our motivation in all this? © 2012 South-Western, a part of Cengage Learning

Five Levels for Questions Level of the individual Level of the organization Level of the industry or profession Societal level Global or international level © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning What Is? What are your personal ethics? What are your organization's ethics? What are the ethics practice in your industry? What are society’s ethics? What global ethics are in practice today? © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning 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? Should we outsource aspects of production to China or India? © 2012 South-Western, a part of Cengage Learning

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 high standards of ethical behavior or professional standards of conduct. Amoral Management Intentional: Does not consider ethical factors. Unintentional: Casual or careless about ethical factors. © 2012 South-Western, a part of Cengage Learning

Characteristics of Immoral Managers Intentionally do wrong Self-centered and self-absorbed Care only about self or organization’s profits/success Actively oppose what is right, fair, or just Exhibit no concern for stakeholders An ethics course probably would not help them The “bad guys” © 2012 South-Western, a part of Cengage Learning

Characteristics of Moral Managers Conform to high level of: Ethical or right behavior 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 The “good guys” © 2012 South-Western, a part of Cengage Learning

Habits of Moral Leaders They have a passion to do right. They are morally proactive. They consider all stakeholders. They have a strong ethical character. They have an obsession with fairness. They undertake principled decision making. They integrate ethics wisdom with management wisdom. © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Integrity Strategy Related to moral management; is characterized by a conception of ethics as the driving force of an organization. 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 organization’s systems support and reinforce its values. All managers have the skills, knowledge, and competencies to make ethically sound decisions daily. © 2012 South-Western, a part of Cengage Learning

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. © 2012 South-Western, a part of Cengage Learning

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. © 2012 South-Western, a part of Cengage Learning

Why Managers and Employees Behave Ethically Most of Us Many of Us Very Few Of Us 1. To avoid some punishment 2. To receive some reward 3. To be responsive to family, friends, or superiors 4. To be a good citizen 5. To do what is right, pursue some ideal © 2012 South-Western, a part of Cengage Learning

External Sources of a Person’s Values Philosophical values Cultural values Legal values Religious values Professional values The Web of Values © 2012 South-Western, a part of Cengage Learning

Internal Sources of a Person’s Values 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 © 2012 South-Western, a part of Cengage Learning

© 2012 South-Western, a part of Cengage Learning Key Terms Amoral management Business ethics Compliance strategy Conventional approach to business ethics Descriptive ethics Ethical egoism Ethical relativism Ethics Immoral management Integrity strategy Intentional amoral management Kohlberg’s levels of moral development Moral development Moral management Normative ethics Unintentional amoral management © 2012 South-Western, a part of Cengage Learning