Copyright © 2003 by South- Western, a division of Thomson Learning1 Chapter One Business Ethics, The Changing Environment, And Stakeholder Management

Copyright © 2003 by South-Western, a division of Thomson Learning2 Chapter Topics 1.Business ethics and the changing environment 2.What is business ethics? Why does it matter? 3.Levels of business ethics 4.Five myths about business ethics 5.Why use ethical reasoning in business? 6.Can business ethics be taught and trained? 7.Plan of the book

Copyright © 2003 by South-Western, a division of Thomson Learning3 Business Ethics and the Changing Environment Businesses & governments operate in changing technological, legal, economic, social & political environments with competing stakeholders & power claims. Stakeholders are individuals, companies, groups & nations that cause and respond to external issues, opportunities, and threats. The rate of change and uncertainty in which stake- holders & society must make & manage business & moral decisions have accelerated due to the impact of: Internet and information technologies Globalization Deregulation Mergers Wars

Copyright © 2003 by South-Western, a division of Thomson Learning4 Environmental Forces and Stakeholders Local, national, and international environments are increasingly moving toward and into a global system of dynamically interrelated interactions among local, national, and regional politics, economies, regulations, technologies, demographics, and international law. Economic environment Technological Political Governmental and regulatory Legal Demographic

Copyright © 2003 by South-Western, a division of Thomson Learning5 Stakeholder Management Approach The stakeholder management approach is a way of understanding the effects of environmental forces and groups on specific issues that affect real-time stakeholders and their welfare. This approach attempts to enable individuals and groups to articulate collaborative win-win strategies: based on: Identifying and prioritizing issues, threats, or opportunities Mapping who the stakeholders are Identifying their stakes, interests, and power sources Showing who the members of coalitions are or may become Showing what each stakeholder’s ethics are and should be Developing collaborative strategies and dialogue from a higher ground perspective to move plans and interactions to the desired closure for all parties

Copyright © 2003 by South-Western, a division of Thomson Learning6 What is Business Ethics? Why Does It Matter? Ethical solutions to business and organizational problems may have more than one right alternative and sometimes, no right solution may seem available. We can learn from case studies, role playing, and discussions about how our actions affect others in different situations. Laura Nash has defined business ethics as “the study of how personal moral norms apply to the activities and goals of commercial enterprise,” as dealing with three basic areas of managerial decision making: Choices about what the laws should be and whether to follow them Choices about economic and social issues outside the domain of law Choices about the priority of self-interest over the company’s interests

Copyright © 2003 by South-Western, a division of Thomson Learning7 What Are Unethical Business Practices? Surveys have identified the following recurring themes to prominent everyday ethical issues facing businesses and their stakeholders: Managers lying to employees Office nepotism and favoritism Taking credit for other’s work Receiving/offering kickbacks Stealing from the company Firing an employee for whistle-blowing Padding expense accounts Divulging confidential information or trade secrets Terminating employment without sufficient notice Using company property/materials for personal use

Copyright © 2003 by South-Western, a division of Thomson Learning8 What Are Unethical Business Practices? The most unethical behavior, per one survey, happens in the following areas: Government Sales Law Media Finance Medicine Banking Manufacturing

Copyright © 2003 by South-Western, a division of Thomson Learning9 Why Does Ethics Matter In Business? “Doing the right thing” matters to employers, employees, stakeholders, and the public. For companies, it means saving billions of dollars each year in lawsuits, settlements, and theft Tobacco industry Dow Corning Costs to businesses include: Deterioration of relationships Damage to reputation Declining employee productivity,creativity, and loyalty Ineffective information flow throughout the organization Absenteeism

Copyright © 2003 by South-Western, a division of Thomson Learning10 Levels of Business Ethics Because ethical problems are not only an individual or personal matter, it is helpful to see the different levels at which issues originate and how they move to other levels. Five levels are: Individual Organizational Association Societal International Examination of the RU 486 story

Copyright © 2003 by South-Western, a division of Thomson Learning11 Asking Key Questions The following questions can be asked when a problematic decision or action is experienced or perceived before it becomes an ethical dilemma: What are my core values and beliefs? What are the core values and beliefs of my organization? Whose values, beliefs, and interests may be at risk in this decision? Why? Who will be harmed or helped by my decision or by the decision of my organization? How will my own and my organization’s core values and beliefs be affected or changed by this decision? How will I and my organization be affected by the decision?

Copyright © 2003 by South-Western, a division of Thomson Learning12 Five Myths About Business Ethics A myth is “a belief given uncritical acceptance by the members of a group, especially in support of existing or traditional practices and institutions.” Myth 1: Ethics is a personal, individual affair, not a public or debatable matter Myth 2: Business and ethics do not mix Myth 3: Ethics in business is relative Myth 4: Good business means good ethics Myth 5: Information and computing are amoral

Copyright © 2003 by South-Western, a division of Thomson Learning13 Why Use Ethical Reasoning In Business? Ethical reasoning is required in business for at least three reasons: Many times laws are insufficient and do not cover all aspects or gray areas of a problem Free-market and regulated-market mechanisms do not effectively inform owners and managers about how to respond to complex issues and crises that have far-reaching ethical consequences Complex moral problems require an intuitive or learned understanding and concern for fairness, justice, and due process to people, groups, and communities

Copyright © 2003 by South-Western, a division of Thomson Learning14 Can Business Ethics Be Taught And Trained? Ethic courses should not: Advocate a set of rules from a single perspective Not offer only one best solution to specific ethical problems Not promise superior or absolute ways of thinking and behaving in situations

Copyright © 2003 by South-Western, a division of Thomson Learning15 Can Business Ethics Be Taught And Trained? Ethic courses and training can do the following: Provide people with rationales, ideas, and vocabulary Help people make sense of their environments Provide intellectual weapons Enable employees to act as alarm systems for company practices Enhance conscientiousness and sensitivity Enhance moral reflectiveness and strengthen moral courage Increase people's ability to become morally autonomous ethical dissenters Improve the firm’s moral climate

Copyright © 2003 by South-Western, a division of Thomson Learning16 Can Business Ethics Be Taught And Trained? Other scholars argue that ethical training can add value to the moral environment of a firm and to relationships in the workplace by: Finding a match between employer’s and employee’s values Managing the push-back point Handling an unethical directive Coping with a performance system that encourages unethical means

Copyright © 2003 by South-Western, a division of Thomson Learning17 Stages Of Moral Development Kohlberg’s 3 levels of moral development: Level 1: Preconventional level (self- orientation) Stage 1: Punishment Stage 2: Reward seeking Level 2: Conventional level (others orientation) Stage 3: Good person Stage 4: Law and order Level 3: Postconventional level (universal, humankind orientation) Stage 5: Social contact Stage 6: Universal ethical principles