1. 1 Business Ethics Fundamentals Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved Prepared by Deborah Baker Texas Christian University Chapter 7

2. 2 Quote for the Day Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. Plato

3. 3 Introduction to Chapter 7 Business Ethics  Public’s interest in business ethics has heightened during the last three decades  Public’s interest in business ethics has been spurred by headline-grabbing scandals  The scandals of the early 2000s, beginning with Enron, created and defined the “ethics industry”

4. 4  The most egregious violators of business ethics were corrupt executives who protected their own wealth  Greed for money and power and a weakening sense of personal values have been behind the recent ethics scandals  People define business ethics in broad terms and are concerned with how it has affected them  Many participants thought it was possible for executives to be both ethical and successful  The media and financial press are not regarded as vigilant watchdogs protecting the public interest The Public’s Opinion of Business Ethics Public Agenda Survey Findings

5. 5  Three out of four employees reported encountering ethical lapses on the job  More than one in three respondents said these incidents happen at least once a week  Ten percent believed that a current issue in their company could create a business scandal if discovered  Younger workers reported higher levels of witnessing ethical lapses and being distracted by them The Public’s Opinion of Business Ethics LRN Ethics Study Survey Findings

6. 6  The media are reporting ethical problems more frequently and fervently  In-depth investigative reporting of business ethics on TV shows as 60 Minutes, 20/20, Dateline NBC, Primetime Live, and FRONTLINE  Internet coverage in the form of webpages and blogs has expanded in recent years Media Reporting on Business Ethics

7. 7 Business Ethics Today versus Earlier Periods Ethical Problem Society’s Expectations of Business Ethics Actual Business Ethics 1960sEarly 2000sTime Expected and Actual Levels of Business Ethics Figure 7-3

8. 8 Business Ethics: What Does It Really Mean? Ethics The discipline that examinesgood or bad practices within thecontext of moral duty and obligation Moral conduct Relates to principles of right and wrongin behavior Business Ethics Concerned with good and bad orright and wrong behavior andpractices that take place in business

9. 9 Descriptive Ethics Involves describing, characterizingand studying morality  Focuses on “What is” Normative Ethics Concerned with supplying andjustifying moral systems  Focuses on “What ought / ought not to be” Business Ethics: What Does It Really Mean?

10. 10 Three Approaches to Business Ethics Conventional Approach Based on how normal society todayviews business ethics Principles Approach Based upon the use of ethicsprinciples to direct behavior, actionsand policies Ethical Tests Approach Based on short, practical questionsto guide ethical decision making andbehavior

11. 11 Conventional Approach The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms Decision or Practice Prevailing Norms of Acceptability

12. 12 The Individual Conscience

13. 13 Sources of Ethical Norms Fellow Workers Family Friends The Law Regions of Country Profession Employer Society at Large Local Community Religious Beliefs The Individual Conscience Figure 7-4

14. 14 Ethics and the Law 1. Why do firms behave illegally? 2. What are the consequences of behaving illegally?

15. 15 Ethics and the Law  Law often represents an ethical minimum  law reflects society’s codified ethics  Ethics often represents a standard that exceeds the legal minimum EthicsLaw

16. 16 Making Ethical Judgments Behavior or act that has been committed Prevailing norms of acceptability Value judgments and perceptions of the observer compared with Figure 7-5

17. 17 Ethics, Economics, and Law Figure 7-6

18. 18 Four Important Ethical Questions 1. What is? 2. What ought to be? 3. How to we get from what is to what ought to be? 4. What is our motivation in all this?

19. 19 Five Levels for Questions 1. Level of the individual 2. Level of the organization 3. Level of the industry or profession 4. Societal level 5. Global or international level

20. 20 The Practical Question What are we able to accomplish? What circumstances permit us to accomplish? What do we intend to accomplish?

21. 21 Three Models of Management Ethics Immoral Management An approach devoid of ethical principlesand active opposition to what is ethical Moral Management Conforms to high standardsof ethical behavior or professionalstandards of conduct Amoral Management  Intentional: does not considerethical factors  Unintentional: casual or carelessabout ethical factors  Intentional: does not considerethical factors  Unintentional: casual or carelessabout ethical factors

22. 22 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  Are the “bad guys”  An ethics course probably would not help them Figure 7-7

23. 23 Immoral Managers….can they change??

24. 24 Illustrative Cases 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

25. 25 Characteristics of Moral Managers  Conform to high level of ethical or right behavior  Conform to high level of 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  Are the “good guys” Figure 7-8

26. 26 Moral Managers

27. 27 Characteristics of Amoral Managers Intentionally Amoral Managers:  Don’t think ethics and business should “mix”  Business and ethics are existing 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 Figure 7-9

28. 28 Amoral Managers – Not my problem…

29. 29 Three Models of Management Morality and Emphases on CSR Figure 7-11

30. 30 Making Moral Management Actionable  Senior management leads the transition from amoral to moral management Business ethics training Codes of conduct Mission / Vision statements Ethics officers Tighter financial controls Ethically sensitive decision-making processes Leadership by example  Recognize that amoral management exists and can be remedied

31. 31 Developing Moral Judgment Figure 7-13

32. 32 Why Managers / 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 Figure 7-14

33. 33 Feminist Views of Kohlberg’s Research Recognize their own needs and needs of others Establish connections and participate in social life Sole Concern for Self Level 1 Level 2 Level 3

34. 34 External Sources of a Manager’s Values Philosophical values Cultural values Legal values Religious values Professional values The Web of Values

35. 35 “Norms” prevalent in business organizations include: Internal Sources of a Manager’s Values  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