Business & Society Ethics, Sustainability, and Stakeholder

Management Eighth Edition

Archie B. Carroll

Ann K. Buchholtz

2012 South-Western, a part of Cengage Learning

Chapter 7 Business Ethics

Fundamentals

2012 South-Western, a part of Cengage Learning

Learning Outcomes

1. Describe how the public regards business ethics.

2. Define business ethics and appreciate the complexities of making

ethical judgments.

3. Explain the conventional approach to business ethics.

4. Analyze economic, legal, and ethical aspects by using a Venn

Model.

5. Enumerate and discuss the four important ethics questions.

6. Identify and explain three models of management ethics.

7. Describe Kohlbergs three levels of developing moral judgment.

8. Identify and discuss the elements of moral judgment.

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Chapter Outline

The Publics Opinion of Business Ethics

Business Ethics: Meaning, Types, Approaches

Ethics, Economics and Law: A Venn Model

Four Important Ethics Questions

Three Models of Management Ethics

Making Moral Management Actionable

Developing Moral Judgment

Elements of Moral Judgment

Summary

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Business Ethics

The publics interest in business ethics is at an all-time high, spurred by headline-grabbing scandals.

The Enron scandal impacted business to greatly it is called The Enron Effect.

Business will never be the same.

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High-Profile Ethics Scandals

Enron Era

Worldcom Tyco Arthur Andersen Wall Street Financial Scandals Era

AIG Bear Stearns Lehman Brothers Fannie Mae/Freddy Mac Bernard Madoff

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Business Ethics Today versus Earlier Periods

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Ethical Problem

Ethical Problem

Societys Expectations

of Business Ethics

Actual

Business Ethics

1960s 2010 Time

Exp

ecte

d a

nd

Act

ual

Lev

els

of

Bu

sin

ess

Eth

ics

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Business Ethics: Meaning, Types, Approaches

Ethics

The discipline that deals with moral duty and obligation.

Moral Conduct

Relates to principles of right, wrong, and fairness in behavior.

Business Ethics

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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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 focuses on two questions: 1. Why do firms do illegal things?

2. What are the consequences of engaging in illegal behavior?

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Ethics, Economics, and Law

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Business Ethics: Meaning, Types, Approaches (continued)

Descriptive Ethics

Involves describing, characterizing, and studying morality.

Focuses on what is occurring.

Normative Ethics

Concerned with supplying and justifying a coherent moral system of thinking and judging.

Focuses on what ought or should be occurring.

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Three Approaches to Business Ethics

Conventional Approach

Based on how common society today views business ethics and on common sense.

Principles Approach

Based upon 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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Conventional Approach

The conventional approach to business ethics involves

a comparison of a decision or practice to prevailing

societal norms.

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Decision, Behavior,

or Practice

Prevailing Norms

of Acceptability

Sources of Ethical Norms

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Fellow

Workers

Family

Friends

The Law

Regions of

Country

Profession

Employer

Society at

Large

Local

Community

Religious

Beliefs

The Individual

Ones Self-

Interest and

Conscience

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Making Ethical Judgments

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Behavior or act that has

been committed

Prevailing norms of

acceptability

Value judgments and

perceptions of the

observer

Compared with

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Ethical Relativism

Ethical Relativism

Picking and choosing which source of norms one wishes to use based on what will justify current

actions or maximize freedom.

A serious danger of the conventional approach to making ethical judgments.

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The Conventional Approach to Business Ethics

1. What is the true nature of the practice, behavior, or

decision that occurred?

2. What are societys (or businesss) prevailing norms

of acceptability?

3. What value judgments are being made by someone

about the practice or behavior, and what are that

persons perceptions of applicable norms?

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Four Important Ethical Questions

1. What is?

2. What ought to be?

3. How do we get from what is to what ought to be?

4. What is our motivation in all this?

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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

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What Is?

What are your personal ethics?

What are your organization's ethics?

What are the ethics practice in your industry?

What are societys ethics?

What global ethics are in practice today?

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What Ought to Be?

How ought we treat our aging employees?

How safe ought we make this product?

How clean an environment should we aim for?

Should we outsource aspects of production to China or India?

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Getting From What Is to What Ought to Be

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What are we able

to accomplish?

What circumstances

permit us to accomplish?

What do we intend

to accomplish?

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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 high standards of ethical behavior or professional standards of conduct.

Amoral Management

Intentional: Does not consider ethical factors. Unintentional: Casual or careless about ethical factors.

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Characteristics of Immoral Managers

Intentionally do wrong

Self-centered and self-absorbed

Care only about self or organizations profits/success

Actively oppose what is right, fair, or just

Exhibit no concern for stakeholders

An ethics course probably would not help them

The bad guys

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Characteristics of Moral Managers

Conform to high level of: Ethical or right behavior

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 The good guys

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Integrity Strategy

Related to moral management; is characterized by a conception of ethics as the driving force of an organization.

Guiding values and commitments make sense and are clearly communicated.

Company leaders are personally committed, credible, and willing to take action on values.

Espoused values are integrated into normal channels of management decision making.

The organizations systems support and reinforce its values.

All managers have the skills, knowledge, and competencies to make ethically sound decisions daily.

2012 South-Western, a part of Cengage Learning

Characteristics of Amoral Managers

Intentionally Amoral Managers

Dont think ethics and business should mix.

Business and ethics exist in separate spheres.

A vanishing breed.

Unintentionally Amoral Managers

Dont consider the ethical dimension of decision making.

Dont think ethically.

Have no ethics buds.

Well-intentioned, but morally casual or unconscious.

Ethical gears are in neutral.

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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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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 immoral and amoral management exist and can be remedied.

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Kohlbergs Model of Moral Development

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Why Managers and Employees Behave Ethically

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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

Ethics of Care Alternative to Kohlberg

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Recognize their own needs

and needs of others

Establish connections and

participate in social life

Self is Sole Object of Concern Level 1

Level 2

Level 3

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External Sources of a Persons Values

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Philosophical values

Cultural values

Legal values

Religious values

Professional values

The Web

of Values

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Internal Sources of a Persons Values

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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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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Key Terms

Amoral management Business ethics Compliance strategy Conventional approach to business ethics Descriptive ethics Ethical egoism Ethical relativism Ethics Immoral management

2012 South-Western, a part of Cengage Learning

Integrity strategy

Intentional amoral

management

Kohlbergs levels of

moral development

Moral development

Moral management

Normative ethics

Unintentional amoral

management