1. 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

2. Chapter 8 Personal and Organizational Ethics
© 2012 South-Western, a part of Cengage Learning

3. © 2012 South-Western, a part of Cengage Learning
Learning Outcomes
Understand the different levels at which business ethics may be addressed.
Differentiate between consequence-based and duty-based principles of ethics.
Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions.
Identify the factors affecting an organization’s ethical culture and provide examples.
Describe and explain actions, strategies, or “best practices” to improve an organization’s ethical climate.
© 2012 South-Western, a part of Cengage Learning

4. © 2012 South-Western, a part of Cengage Learning
Chapter Outline
Ethics Issues Arise at Different Levels
Personal and Managerial Ethics
Managing Organizational Ethics
From Moral Decisions to Moral Organizations
Summary
© 2012 South-Western, a part of Cengage Learning

5. Organizational Ethics
Ethical decision making occurs daily in organizations.
Many managers have no training in ethics or ethical decision making.
Ethics is vital to business success.
© 2012 South-Western, a part of Cengage Learning

6. Levels at Which Ethical Issues May be Addressed
Personal level
Situations faced in our personal lives outside the context of our employment.
Organizational level
Workplace situations faced by managers and employees.
Industry or profession level
A manager or organization might experience business ethics issues at the industry or professional level.
Societal and global levels
Managers acting in concert through their companies and industries can bring about constructive changes.
© 2012 South-Western, a part of Cengage Learning

7. Personal and Managerial Ethics
There are three major approaches to ethical decision making
Conventional Approach
Discussed in chapter 7.
Principles Approach
Managers desire to make decisions based on more than is provided by the conventional approach to ethics.
A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course.
Ethical Tests Approach
Discussed later in this chapter.
© 2012 South-Western, a part of Cengage Learning

8. Types of Ethical Principles or Theories
Teleological theories
Focus on consequences or results.
Deontological theories
Focus on duties.
Aretaic theories
Focus on virtue.
© 2012 South-Western, a part of Cengage Learning

9. Principles Approach to Ethics
Major principles of ethics
Utilitarianism
Kant’s Categorical Imperative
Rights
Justice
Principles of care
Virtue ethics
Servant leadership
Golden Rule
© 2012 South-Western, a part of Cengage Learning

10. © 2012 South-Western, a part of Cengage Learning
Utilitarianism
A teleological principle that focuses on acts that produce the greatest good for the greatest number.
Strengths
Weaknesses
Forces thinking about the general welfare of stakeholders
Ignores actions that may be inherently wrong
Allows personal decisions to fit into situational complexities
May conflict with the notion of justice
Difficult to formulate satisfactory rules for decision making
© 2012 South-Western, a part of Cengage Learning

11. Kant’s Categorical Imperative
A duty-based, deontological, principle.
Formulations:
Act only on rules that you would be willing to see everyone follow.
Act to treat humanity in every case as an end and never as a means.
Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.
© 2012 South-Western, a part of Cengage Learning

12. © 2012 South-Western, a part of Cengage Learning
Principle of Rights
Moral rights
Rights that we ought to have based on moral reasoning.
Principle of rights
Focuses on examining and possibly protecting individual moral or legal rights.
A negative right is the right to be left alone.
A positive right is the right to something.
© 2012 South-Western, a part of Cengage Learning

13. © 2012 South-Western, a part of Cengage Learning
Principle of Justice
Involves considering what alternative promotes fair treatment of people.
Types of justice
Distributive
Compensatory
Procedural
Rawlsian
© 2012 South-Western, a part of Cengage Learning

14. © 2012 South-Western, a part of Cengage Learning
Ethical Due Process
Process Fairness
Have employees been given input into the decision process?
Do employees believe the decisions were made and implemented in an appropriate manner?
Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made?
© 2012 South-Western, a part of Cengage Learning

15. Rawls’s Principles of Justice
Each person has an equal right to the most basic liberties compatible with similar liberties for others.
Social and economic inequalities are arranged so that they are both:
Reasonably expected to be to everyone’s advantage, and
Attached to positions and offices open to all.
© 2012 South-Western, a part of Cengage Learning

16. Ethic of Care and Virtue Ethics
Ethic of care/Principle of caring
Traditional ethics focus too much on the individual self.
Views the individual as relational, not individualistic– similar to stakeholder theory.
Virtue ethics
Focuses on individuals becoming imbued with virtues.
Based on Aristotle and Plato.
© 2012 South-Western, a part of Cengage Learning

17. © 2012 South-Western, a part of Cengage Learning
Servant Leadership
Servant leadership
Based on the moral principle of serving others first, such as employees, customers, and community.
© 2012 South-Western, a part of Cengage Learning

18. Characteristics of Servant Leaders
Listening
Empathy
Healing
Persuasion
Awareness
Foresight
Conceptualization
Commitment to the growth of people
Stewardship
Building community
© 2012 South-Western, a part of Cengage Learning

19. © 2012 South-Western, a part of Cengage Learning
The Golden Rule
Do unto others as you would have them do unto you.
The Golden Rule is:
Accepted by most people.
Easy to understand.
A win-win philosophy.
A compass when you need direction.
© 2012 South-Western, a part of Cengage Learning

20. A Sketch of Ethical Principles
The Categorical Imperative
The Means-Ends Ethic
The Conventionalist Ethic
The Might-Equals-Right Ethic
The Disclosure Rule
The Organization Ethic
The Golden Rule
The Hedonistic Ethic
The Professional Ethic
The Intuition Ethic
The Proportionality Principle
The Market Ethic
The Revelation Ethic
The Utilitarian Ethic
© 2012 South-Western, a part of Cengage Learning

21. Ethical Tests Approach
Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of Common Sense
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
© 2012 South-Western, a part of Cengage Learning

22. Factors Affecting the Morality of Managers
Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Individual One’s Personal Situation
Superiors
Policies
Peers
Organization’s Moral Climate
© 2012 South-Western, a part of Cengage Learning

23. Factors Affecting the Organization’s Moral Climate
Behavior of superiors
Ethical practices of one’s industry or profession
Behavior of one’s peers in the organization
Formal organizational policy (or lack thereof)
Personal financial need
© 2012 South-Western, a part of Cengage Learning

24. Improving Organizational Ethical Culture
Most organizations are a mix of compliance and emphasizing values like ethics.
Concerns about the compliance orientation
Could undermine the ways of thinking or habits of mind that are needed in ethics thinking.
Can squeeze out ethics.
Managers many not consider tougher issues that a more ethics-focused approach might require.
© 2012 South-Western, a part of Cengage Learning

25. Improving Ethical Culture
Top Management Leadership Moral Management
Ethics Programs and Officers
Realistic Objectives
Ethical Decision- Making Processes
Codes of Conduct
Effective Communication
Ethics Training
Corporate Transparency
Whistle-Blowing Mechanisms
Ethics Audits and Risk Assessments
Board of Directors’ Oversight
Discipline of
Violators
© 2012 South-Western, a part of Cengage Learning

26. Effective Rewards and Discipline
Pillars of Leadership
Traits
Moral Person
Moral Manager
Ethical Leadership
Behaviors
Decision Making
Role
Modeling
Ethics Communication
Effective Rewards and Discipline
© 2012 South-Western, a part of Cengage Learning

27. Effective Communication of Ethics
Requires
Written and verbal communication
Candor
Fidelity
Confidentiality
© 2012 South-Western, a part of Cengage Learning

28. Features of Ethics Programs
Written standards of conduct
Ethics training
Mechanisms to seek ethics advice or information
Methods for reporting misconduct anonymously
Disciplinary measures for employees who violate ethical standards
Inclusion of ethical conduct in the evaluation of employee performance
© 2012 South-Western, a part of Cengage Learning

29. © 2012 South-Western, a part of Cengage Learning
Ethics Officers
Are in charge of implementing ethics initiatives in the organization.
The position may be created in response to the Federal Sentencing Guidelines, which reduces penalties to those companies with ethics programs.
Problem with diminishing organizational status.
© 2012 South-Western, a part of Cengage Learning

30. Ethical Decision-Making Process
© 2012 South-Western, a part of Cengage Learning

31. Is it legal? Is it balanced? How will it make me feel about myself?
Ethics Check
Is it legal?
Is it balanced?
How will it make me feel about myself?
© 2012 South-Western, a part of Cengage Learning

32. © 2012 South-Western, a part of Cengage Learning
Ethics Quick Test
Is the action legal?
Does it comply with our values?
If you do it, will you feel bad?
How will it look in the newspaper?
If you know it’s wrong, don’t do it.
If you’re not sure, ask.
Keep asking until you get an answer.
© 2012 South-Western, a part of Cengage Learning

33. Sears’ Ethics Guidelines
Is it legal?
Is it within Sears’ shared beliefs and policies?
Is it right/fair/appropriate?
Would I want everyone to know about this?
How will I feel about myself?
© 2012 South-Western, a part of Cengage Learning

34. © 2012 South-Western, a part of Cengage Learning
Codes of Conduct
A way of establishing standards of behavior and communicating them to managers and employees.
The single most important element of an ethics and compliance program.
A fairly recent phenomenon.
Codes of conduct positively affect corporate culture.
© 2012 South-Western, a part of Cengage Learning

35. Content of Codes of Conduct
Employment practices
Employee, client, and vendor information
Public information/communications
Conflicts of interest
Relationships with vendors
Environmental issues
Ethical management practices
Political involvement
© 2012 South-Western, a part of Cengage Learning

36. How Codes of Conduct Influence Behavior
Codes of conduct act as a
Rule book
Signpost
Mirror
Magnifying glass
Shield
Smoke detector
Fire alarm
Club
© 2012 South-Western, a part of Cengage Learning

37. Violators of Ethics Standards
Management must forcefully discipline all violators of ethical norms and standards.
Many business are unwilling to discipline violators.
© 2012 South-Western, a part of Cengage Learning

38. Ethics Hotlines and Whistle Blowing
Employees must have outlets to anonymously report questionable behaviors.
Hotlines are the most common way to report corporate fraud.
Can be telephone, web, or -based.
© 2012 South-Western, a part of Cengage Learning

39. Purposes of Ethics Training
Learn the fundamentals of business ethics.
Learn to solve ethical dilemmas.
Learn to identify causes of unethical behavior.
Learn about common managerial ethical issues.
Learn whistle-blowing criteria and risks.
Learn to develop a code of ethics and execute an internal ethical audit.
© 2012 South-Western, a part of Cengage Learning

40. Ethics Audits and Risk Assessments
Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs.
Sustainability Audit
Helps to identify sustainability issues within an organization.
Fraud Risk Assessment
Review processes that identify and monitor conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns.
© 2012 South-Western, a part of Cengage Learning

41. Corporate Transparency
A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.
The degree to which an organization:
Provides public access to information.
Accepts responsibility for its actions.
Makes decisions more openly.
Establishes incentives for leaders to uphold standards.
© 2012 South-Western, a part of Cengage Learning

42. Board of Director Leadership and Oversight
Leadership and oversight of ethical initiatives by boards is not a given.
The Sarbanes-Oxley Act
Companies are required to protect whistle- blowers without fear of retaliation.
It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.
© 2012 South-Western, a part of Cengage Learning

43. From Moral Decisions to Moral Organizations
Moral Managers
Moral Organizations
© 2012 South-Western, a part of Cengage Learning

44. © 2012 South-Western, a part of Cengage Learning
Key Terms
Aretaic theories/principles
Categorical imperative
Codes of conduct
Codes of ethics
Compensatory justice
Compliance orientation
Corporate transparency
Deontological theories/principles
Distributive justice
Ethical due process
Ethics orientation
Ethical tests
Ethic of care
Ethics audits
Ethics officer
Ethics programs
Golden Rule
Legal rights
Moral rights
Negative rights
Opacity
Positive rights
Principle of justice
Principle of rights
Principle of utilitarianism
Procedural justice
Process fairness
Rights
Risk assessments
Servant leadership
Sustainability audit
Teleological theories/principles
Transparency
Utilitarianism
Virtue ethics
© 2012 South-Western, a part of Cengage Learning