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2. Chapter 7 Business Ethics Fundamentals
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3. 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. Differentiate it from the principles approach and ethical tests approach.
Analyze economic, legal, and ethical aspects of a decision by using a Venn Model.
Identify and explain three models of management ethics. Give examples of each.
Describe and discuss Kohlberg’s three levels of developing moral judgment.
Identify and discuss the elements of moral judgment.
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4. Chapter Outline The Public’s Opinion of Business Ethics
Business Ethics: Meaning, Types, Approaches
Ethics, Economics and Law - A Venn Model
Three Models of Management Ethics?
Making Moral Management Actionable
Developing Moral Judgment
Elements of Moral Judgment
Summary
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5. Business Ethics Scandals
The public’s interest in business ethics is at an all-time high, spurred by scandals.
The Enron scandal impacted business so greatly it is called “The Enron Effect.” But then followed more scandals:
Worldcom, Tyco, Arthur Andersen
And then the Wall Street financial scandals:
AIG, Bear Stearns, Lehman Bros, Fannie Mae, Freddie Mac, and Bernie Madoff
Business will never be the same.
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7. The Public’s Opinion of Business Ethics (1 of 2)
The public’s view of business ethics has never been very high.
Anecdotal evidence suggests that many people see business ethics as an oxymoron, and think that there’s only a fine line between a business executive and a crook.
A Gallup poll taken in December, 2012, revealed that only 21 % of the public thought business executives had high or very high ethics.
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8. The Public’s Opinion of Business Ethics (2 of 2)
National Business Ethics Survey Findings -
Observed ethical misconduct at work has decreased slightly, from 49% to 45%.
Reporting bad behavior (whistle-blowing) is on the rise. from 63% to 65%.
Retaliation against those who report misconduct has increased sharply, to 22% experienced retaliation.
Pressure to compromise is near the all-time high.
Weak ethical cultures – the percentage of companies with weak ethics cultures increased to almost record levels.
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9. Are the Media Reporting Business Ethics More Vigorously?
It is sometimes difficult to tell whether business ethics have really deteriorated or whether the media is doing a more thorough job of reporting ethics violations.
There is no doubt that news media outlets are reporting ethical problems more frequently and fervently.
The media had a field day with the Bernie Madoff Ponzi scheme which defrauded thousands of investors out of $50 billion.
Investigate reporting on ethics has been shown on 60 Minutes, 20/20, Dateline NBC, Rock Center and Frontline.
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10. Is Society Changing?
Former U.S. Treasury Secretary, Michael Blumenthal-
“People in business have not suddenly become immoral. What has changed are the contexts in which corporate decisions are made, the demands that are being made on business, and the nature of what is considered proper corporate conduct.”
History shows that a good number of what are now called unethical practices were at one time considered acceptable.
Or it may be that those practices never were acceptable to the public, but because they were not known, it seemed they were tolerated.
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11. Business Ethics Today versus Earlier Periods
Ethical Problem
Society’s Expectations of Business Ethics
Actual Business Ethics
1960s
2010
Time
Expected and Actual Levels of Business Ethics
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12. Business Ethics: Meaning, Types, Approaches (1 of 2)
Ethics – is the discipline that deals with moral duty and obligation.
Moral Conduct - relates to principles of right, wrong, and fairness in behavior.
Business Ethics -
Is 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.
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13. Business Ethics: Meaning, Types, Approaches (2 of 2)
Descriptive Ethics -
Involves describing, characterizing, and studying morality.
Focuses on what is occurring.
Normative Ethics -
Focuses on what ought or should be occurring.
Demands a more meaningful moral anchor than just “everyone is doing it.”
Normative Ethics is our primary concern in this text
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14. Three Major Approaches to Business Ethics
Conventional Approach -
Based on how the average person views business ethics, and on common sense.
Principles Approach -
Based on 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.
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15. The Conventional Approach to Business Ethics
The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms.
Ethical Egoism -
An ethical principle based on the idea that the individual should seek to maximize his or her own self interests as a legitimate factor.
Decision, Behavior,
or Practice
Prevailing Norms of Acceptability
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16. Sources of Ethical Norms
Fellow Workers
Family
Friends
The Law
Regions of Country
Profession
Employer
Society at Large
Local Community
Religious Beliefs
The Individual
One’s Self-Interest and Conscience
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17. 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 of illegal corporate behavior focuses on two questions:
What leads firms to behave illegally?
What are the consequences of engaging in illegal behavior?
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18. Making Ethical Judgments
Behavior or act that has been committed
Prevailing norms of acceptability
Value judgments and perceptions of the observer
Compared with
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19. The Danger of Ethical Relativism
A serious danger of using the conventional approach to business ethics is:
Ethical Relativism -
One picks and chooses which source of norms one wishes to use based on what will justify current actions or maximize freedom.
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20. Ethics, Economics, and Law – A Venn Model
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21. 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 highest standards of ethical behavior or professional standards of conduct.
Amoral Management –
Different in nature from the others, it has two kinds:
Intentional: Does not consider ethical factors.
Unintentional: Casual or careless about ethical factors.
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22. Characteristics of Immoral Managers-
These Managers:
Intentionally do wrong
Are Self-centered and self-absorbed
Care only about self or organization’s profits or 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
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23. Examples of Immoral Management -
Stealing petty cash
Cheating on expense reports
Taking credit for another’s 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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24. Characteristics of Moral Managers
These Managers:
Conform to the highest standards of ethical behavior or professional standards of conduct.
Ethical Leadership is commonplace.
Their goal is to succeed within the confines of sound ethical precepts
Demonstrate high integrity in thinking, speaking and doing.
Follow both the letter and the spirit of the law
Possess an acute moral sense and moral maturity
Moral managers are the “good guys”
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25. 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.
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26. Positive Ethical Behaviors of Moral Leaders -
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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27. 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.
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29. Two 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.
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30. Three Models of Management Morality and Emphases on CSR
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31. Moral Management Models And Acceptance or Rejection of Stakeholder Thinking
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32. Making Moral Management Actionable -
The characteristics of immoral, moral and amoral management provide benchmarks for managerial self-analysis, and help managers recognize the need to move from the immoral or amoral ethic to the moral ethic.
Amoral management is a morally vacuous condition that can easily be disguised as an innocent, practical, bottom-line philosophy. But it is the bane of the management profession.
Most managers are not “bad guys,” but managerial decision-making cannot be ethically neutral. Both immoral and amoral management must be discarded and the process of developing moral judgment begun.
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33. Kohlberg’s Model of Moral Development
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34. 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
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35. Ethics of Care as Alternative to Kohlberg
Recognize their own needs and needs of others
Level 3
Establish connections and participate in social life
Level 2
Self is Sole Object of Concern
Level 1
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36. External Sources of a Person’s Values
Philosophical values
Cultural values
Legal values
Religious values
Professional values
The Web of Values
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37. Sources Internal to the Organization
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
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38. 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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39. Key Terms bottom-line mentality Business ethics Compliance strategy
Conventional approach to business ethics
Conventional level of moral development
Descriptive ethics
Ethical egoism
Elements of moral judgment
Ethical relativism
Ethical tests approach to business ethics
Immoral management
Individual hypothesis
Integrity strategy
Intentional amoral management
Kohlberg’s levels of moral development
Moral development
morality
Moral management
Normative ethics
Population hypothesis
Preconventional level of moral development
Principles approach to business ethics
Postconventional, autonomous, principled level of moral development
Unintentional amoral management
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