Emerging Issues in Management (Mgmt 440) Business Ethics (Chapter 7); Making Ethical Decisions in Business (Chapter 8) Professor Charles H. Smith Fall 2010

Introduction to Business Ethics “Ethics” – study of right and wrong. “Business ethics” Study of right and wrong in the context of the business world. Study of ethics in different context; not study of different type of ethics – business ethics is subset of ethics in general. While someone’s ethics should be the same all the time, it is natural to have different ethical guidelines at work, at home, in social situations, and in different personal relationships. Problematic ethical issues encountered frequently in business – however, “applying clear guidelines resolves the vast majority of them.”

Two Competing Theories of Business Ethics – Amorality Business should be amoral and therefore not guided by the full range of society’s ethical standards. These “compromised ethics” are acceptable since competition causes business’ actions to result in benefits to society. See Daniel Drew quote on page 191 about adopting different beliefs as Sunday turns into Monday. Examples – businessperson active in church but then will engage in deceptive business practices. Student examples.

Two Competing Theories of Business Ethics – Moral Unity Business should be judged by same ethical rules as other parts of society because there should not be different ethics for work and the rest of life. See J.C. Penney’s story on page 192. Examples – boss takes phone call from undesirable client or at least tells secretary to advise client that boss does not want to talk to him; businessperson applies principles of his/her religion to business practices (Jim Edson painting). Student examples.

Sources of Business Ethics

Source of Business Ethics – Religion Divine being or will determines what is right and wrong. Guidelines found in sources such as Inspired writings – Bible, Koran, Torah. Doctrine – rules created by people which are supposed to be consistent with inspired writings. Student examples of business ethics guided by religion.

Source of Business Ethics – Philosophy Informed by wisdom of men as opposed to divine guidance. Examples include ancient Greeks (Socrates, Plato, Aristotle), philosophers who used logic (Baruch Spinoza, Immanuel Kant), utilitarian thinkers (Bentham, Mill), and the realist school (Machiavelli, Spencer). Student examples of business ethics guided by philosophy.

Source of Business Ethics – Culture Transmittal between generations of set of traditional values, rules and standards for acceptable behavior. Two schools of thought Ethical universalism – human nature is common throughout the world so same basic ethics apply; some room for differences. Ethical relativism – ethical values created by cultural experience so not possible to have universal standard for ethics. Student examples of business ethics guided by culture.

Source of Business Ethics – Law The codification or formalization of ethics – all laws are the product of someone’s ethics; e.g., legislator votes for statute due to cultural experience, citizen votes for (or against) Proposition 8 based on religious beliefs. Regulation of business through threat of Civil judgment of damages – “you play, you pay.” Criminal prosecution/punishment. Student examples of business ethics guided by law.

How Companies Manage Ethics – Ethics Programs An ethics program is “a coordinated application of management methods to prevent law-breaking and promote more ethical behavior.” Example – GE Code of Conduct (page 211). Student examples of codes of conduct.

How Companies Manage Ethics – Ethics Programs cont. U.S. Sentencing Commission created minimal requirements to prevent criminal behavior and promote ethics in the workplace Establish standards and policies. Create high-level oversight; e.g., board of directors sets standards and policies → high-level executive refines and supervises process → managers have day-to-day responsibilities for implementing process. Screen out criminals; e.g., background checks for criminal records; “ethics” questions in job interviews (see page 214). Communicate standards to all employees. Monitor and set up a hotline. Enforce standards/discipline violators; e.g., no follow-up = continued ethical and legal problems. Assess areas of risk/modify the program. Student examples of these minimal requirements.

Fourteen Ethical Principles Categorical imperative (Kant) What would happen if everyone – not just one person or company – did the same thing? Examples – steal small item from office; punch someone in the face. Student examples. Conventionalist ethic Business is a game; actions based on lower ethics which further one’s interest are acceptable if those actions do not violate law. Examples – resume changes for different jobs; failure to mention unfavorable facts on resume or in job interview. Student examples.

Fourteen Ethical Principles cont. Disclosure Rule “Others” or “media” tests – what if others (people close to you or important to your job) knew truth about what I did or plan to do. Examples – job decision made for illegal reason; affair with co-worker. Student examples. Doctrine of the Mean Virtue achieved through moderation; avoid excessive or virtue-deficient behavior. Examples – turn off your cell phone during meals; do not check for 24 hours. Student examples.

Fourteen Ethical Principles cont. Ends-Means Ethic “The end [successful result] justifies the means [methods used to gain the successful result].” Examples – entertaining clients with illegal drugs; industrial espionage; “just win, baby.” Student examples. Golden Rule “Do unto others as you would have them do unto you.” Examples – giving employees bereavement leave; telling your boss’ supervisor (or your employee) that your boss (or employee) is doing a good job instead of just reporting negatives. Student examples.

Fourteen Ethical Principles cont. Intuition Ethic “What is good is simply understood” – reliance on “inner moral sense” and “intuition.” Examples – businessperson feels comfortable or uncomfortable doing business with new client. Student examples. Might-Equals-Right Ethic What is “right” is determined by what stronger company or person can impose on weaker company or person. Examples – John D. Rockefeller, Microsoft. Student examples.

Fourteen Ethical Principles cont. Organization Ethic “Be loyal to the organization” or put the company’s interest ahead of your own interest. Examples – employee who does great work for the company but has no personal life; teamwork instead of individual glory. Student examples. Principle of Equal Freedom Right to act unless this action deprives someone else of right. Examples – talk about your strengths instead of competition’s weaknesses in sales pitch; “your right to swing your fist ends where my nose begins.” Student examples.

Fourteen Ethical Principles cont. Proportionality Ethic Set of rules for making decisions having both good and bad consequences Principle of proportionality (see 5 factors on page 235). Principle of double effect (see 3 factors on page 235). Student examples. Rights Ethic Everyone has rights that others must respect Natural rights inferred by reason from study of human nature. Legal rights are imposed on society as a whole. Student examples.

Fourteen Ethical Principles cont. Theory of Justice Act for common good of society and to maintain community. Examples – constitutional guarantees of equal protection and due process. Student examples. Utilitarianism “The greatest good for the greatest number” or whether benefits are maximized. Examples – building new school to eliminate overcrowding at other schools; closing branch office because cost of maintaining it is prohibitive. Student examples.

Case Studies Read the following on your own before class and then discuss with small groups in class “Today’s verdict is a triumph of our legal system...” (pages ). “Realtors in the Wilderness” (pages ). “Short Incidents for Ethical Reasoning” (pages ).