ethics & business paul l. schumann, ph.d. © 2003 by paul l. schumann. all rights reserved

Ethics & BusinessEthics & Business

Paul L. Schumann, Ph.D.Paul L. Schumann, Ph.D.

© 2003 by Paul L. Schumann. All rights reserved.© 2003 by Paul L. Schumann. All rights reserved.

OutlineOutline

TerminologyTerminology Ethical RelativismEthical Relativism Moral DevelopmentMoral Development Role of Ethics in BusinessRole of Ethics in Business Moral Responsibility in BusinessMoral Responsibility in Business

TerminologyTerminology

Positive Statement


Positive Statement Normative Judgment



Moral Judgment Nonmoral Judgment




LegalJudgment

uses

LegalStandards




LegalJudgment

GrammaticalJudgment

uses uses

LegalStandards

GrammaticalStandards


AestheticStandards



LegalJudgment

GrammaticalJudgment

AestheticJudgment

uses uses uses

LegalStandards



AestheticStandards



LegalJudgment

GrammaticalJudgment

AestheticJudgment

uses uses uses uses

MoralStandards

LegalStandards



AestheticStandards



LegalJudgment

GrammaticalJudgment

AestheticJudgment

uses uses uses uses

MoralStandards

LegalStandards


MoralNorms


AestheticStandards



LegalJudgment

GrammaticalJudgment

AestheticJudgment

uses uses uses uses

MoralStandards

LegalStandards


MoralNorms

MoralPrinciples

Ethical RelativismEthical Relativism

Theory of Ethical Relativism:Theory of Ethical Relativism: There are no There are no universal moral principlesuniversal moral principles– Different societies have different moral beliefsDifferent societies have different moral beliefs– No way to judge a society’s moral principles as No way to judge a society’s moral principles as

being right or wrongbeing right or wrong– Only possible judgment: Does a society live up Only possible judgment: Does a society live up

to its own moral principles?to its own moral principles?

Ethical Relativism Is FalseEthical Relativism Is False

Some moral principles are required if the Some moral principles are required if the society is to survivesociety is to survive

What appear to be differences in moral What appear to be differences in moral principles may only be surface differencesprinciples may only be surface differences

Just because two people have different Just because two people have different moral beliefs doesn’t mean they’re both moral beliefs doesn’t mean they’re both rightright


The theory produces unacceptable The theory produces unacceptable conclusions.conclusions.Examples:Examples:– Slavery in the United StatesSlavery in the United States– Treatment of Jews in Nazi GermanyTreatment of Jews in Nazi Germany


The theory must be false because it The theory must be false because it contradicts itselfcontradicts itself– Consider the following statement:Consider the following statement:

“There are no absolute truths.”“There are no absolute truths.”• Apply the statement to itselfApply the statement to itself—what does it say —what does it say

about itself?about itself?

– Apply the Theory of Ethical Relativism to itselfApply the Theory of Ethical Relativism to itself• Is it ethical for someone who believes in ethical Is it ethical for someone who believes in ethical

relativism to advocate ethical relativism?relativism to advocate ethical relativism?


““A writer who says that there are no truths, A writer who says that there are no truths, or that all truth is ‘merely relative’, or that all truth is ‘merely relative’, is asking you not to believe him. is asking you not to believe him. So don’t.”So don’t.”– Roger Scruton, Roger Scruton, Modern Philosophy: An Modern Philosophy: An

Introduction and Survey,Introduction and Survey, NY: Allen Lane, NY: Allen Lane, 1994.1994.

If there are universal moral principles, how If there are universal moral principles, how do individual’s learn them?do individual’s learn them?

Moral DevelopmentMoral Development

Kohlberg identified a sequence of 6 stages Kohlberg identified a sequence of 6 stages of moral developmentof moral development

The six stages are divided into 3 levelsThe six stages are divided into 3 levels– 2 stages in each level2 stages in each level– The 2 stages in each level have something in The 2 stages in each level have something in

commoncommon


Level 1: Pre-Conventional MoralityLevel 1: Pre-Conventional Morality– 2 stages2 stages– Common element: Self-focusedCommon element: Self-focused– Motivation is self-interest: Motivation is self-interest:

“What’s in it for me?”“What’s in it for me?”

Level 1: Pre-Conventional MoralityLevel 1: Pre-Conventional Morality

Stage 1: Punishment & Obedience StageStage 1: Punishment & Obedience Stage– Person acts to avoid punishmentPerson acts to avoid punishment– Example: children sharing toysExample: children sharing toys– ““The only crime is getting caught.”The only crime is getting caught.”

Level 1: Pre-Conventional MoralityLevel 1: Pre-Conventional Morality

Stage 2: Instrument & Relativity StageStage 2: Instrument & Relativity Stage– Person uses others as a tool to self-satisfactionPerson uses others as a tool to self-satisfaction– Example: children sharing toysExample: children sharing toys– ““You scratch my back and I’ll scratch yours.”You scratch my back and I’ll scratch yours.”– Example: a friend is moving, do you help?Example: a friend is moving, do you help?


Level 2: Conventional MoralityLevel 2: Conventional Morality– 2 stages2 stages– Common element: Group-focusedCommon element: Group-focused– Group norms are important: what does the Group norms are important: what does the

group expect of me?group expect of me?

Level 2: Conventional MoralityLevel 2: Conventional Morality

Stage 3: Interpersonal Concordance StageStage 3: Interpersonal Concordance Stage– Relevant groups: family, friends, co-workersRelevant groups: family, friends, co-workers– Group norms and expectations affect behaviorGroup norms and expectations affect behavior– Person is motivated by a desire to be seen as a Person is motivated by a desire to be seen as a

good son or daughter, a good brother or sister, a good son or daughter, a good brother or sister, a good friend, a good co-workergood friend, a good co-worker

– Example: a friend is moving, do you help?Example: a friend is moving, do you help?

Level 2: Conventional MoralityLevel 2: Conventional Morality

Stage 4: Law & Order StageStage 4: Law & Order Stage– Relevant group: society at largeRelevant group: society at large– Norms, expectations, and laws of society Norms, expectations, and laws of society

affects behavioraffects behavior– Person is motivated by a desire to be seen as a Person is motivated by a desire to be seen as a

good citizengood citizen– ““It’s my duty as a citizen.”It’s my duty as a citizen.”


Level 3: Autonomous (or Principled or Level 3: Autonomous (or Principled or Post-Conventional) MoralityPost-Conventional) Morality– 2 stages2 stages– Common element: Universal-focusedCommon element: Universal-focused– Person takes a impartial viewpointPerson takes a impartial viewpoint

• Not just what’s best for meNot just what’s best for me

• Not just what groups expect of meNot just what groups expect of me

Level 3: Autonomous MoralityLevel 3: Autonomous Morality

Stage 5: Social Contract StageStage 5: Social Contract Stage– Social Contract: The rules members of a society Social Contract: The rules members of a society

agree to follow to govern relationships within agree to follow to govern relationships within the societythe society

• How are the rules of society decided?How are the rules of society decided?• Example: the King makes up the rulesExample: the King makes up the rules• Example: DemocracyExample: Democracy—majority rules—majority rules

– Person is motivated by a desire to maintain the Person is motivated by a desire to maintain the social contractsocial contract

– ““I’m satisfied even though I lost the vote.”I’m satisfied even though I lost the vote.”

Level 3: Autonomous MoralityLevel 3: Autonomous Morality

Stage 6: Universal Ethical Principles StageStage 6: Universal Ethical Principles Stage– Person develops a set of comprehensive, Person develops a set of comprehensive,

coherent, and consistent moral principlescoherent, and consistent moral principles– Person follows the moral principles even if it Person follows the moral principles even if it

means self-sacrificemeans self-sacrifice


Individuals go through stages of moral Individuals go through stages of moral developmentdevelopment

Different individuals may develop at Different individuals may develop at different ratesdifferent rates

Can’t skip stagesCan’t skip stages Can go backwardsCan go backwards Different individuals may end up in Different individuals may end up in

different stagesdifferent stages


Implications for managers:Implications for managers:– May have employees at different stagesMay have employees at different stages– What motivates ethical behavior for one What motivates ethical behavior for one

employee may not motivate ethical behavior for employee may not motivate ethical behavior for another employeeanother employee


How do you motivate an employee to act How do you motivate an employee to act ethically if the employee is in:ethically if the employee is in:– Stage 1 (Punishment & Obedience)?Stage 1 (Punishment & Obedience)?– Stage 2 (Instrument & Relativity)?Stage 2 (Instrument & Relativity)?– Stage 3 (Interpersonal Concordance)?Stage 3 (Interpersonal Concordance)?– Stage 4 (Law & Order)?Stage 4 (Law & Order)?– Stage 5 (Social Contract)?Stage 5 (Social Contract)?– Stage 6 (Universal Ethical Principles)?Stage 6 (Universal Ethical Principles)?

Can Ethics Be Taught?Can Ethics Be Taught?

Yes, moral development can be encouragedYes, moral development can be encouraged Research concludes (Rest, 1988):Research concludes (Rest, 1988):

– Deliberate educational efforts to teach ethics Deliberate educational efforts to teach ethics affects actual, real world, behavioraffects actual, real world, behavior

– Dramatic changes in moral reasoning occur into Dramatic changes in moral reasoning occur into young adulthood (20’s and 30’s) and beyondyoung adulthood (20’s and 30’s) and beyond

But is ethics relevant in business?But is ethics relevant in business?

Role of Ethics in BusinessRole of Ethics in Business

Adam Smith (1790):Adam Smith (1790):Why do humans behave in generous and Why do humans behave in generous and noble ways? It is due to “reason, principle, noble ways? It is due to “reason, principle, conscience, the inhabitant of the breast, the conscience, the inhabitant of the breast, the man within, the quiet judge and arbiter of man within, the quiet judge and arbiter of our conduct.”our conduct.”


Peter Drucker (1954):Peter Drucker (1954):“But what is most important is that “But what is most important is that management realize that it must consider management realize that it must consider the impact of every business policy and the impact of every business policy and business action upon society. It has to business action upon society. It has to consider whether the action is likely to consider whether the action is likely to promote the public good, to advance the promote the public good, to advance the basic beliefs of our society, to contribute to basic beliefs of our society, to contribute to its stability, strength, and harmony.”its stability, strength, and harmony.”


Thompson & Strickland (1995):Thompson & Strickland (1995):“A strong corporate culture founded on “A strong corporate culture founded on ethical principles and sound values is a ethical principles and sound values is a vital driving force behind continued vital driving force behind continued strategic success.”strategic success.”


Milton Friedman (1970):Milton Friedman (1970):It is the responsibility of management “to It is the responsibility of management “to conduct the business in accordance with conduct the business in accordance with [the desires of the owners of the business], [the desires of the owners of the business], which generally will be to make as much which generally will be to make as much money as possible, while conforming to the money as possible, while conforming to the basic rules of society, both those embodied basic rules of society, both those embodied in law and those embodied in ethical in law and those embodied in ethical custom.”custom.”


Business relationships are repetitive and on-Business relationships are repetitive and on-going:going:– EmployeesEmployees– CustomersCustomers– SuppliersSuppliers– CreditorsCreditors– StockholdersStockholders

Unethical behavior results in retaliationUnethical behavior results in retaliation

Moral ResponsibilityMoral Responsibility

Who is responsible for unethical conduct in Who is responsible for unethical conduct in business? business? 3 Views:3 Views:– 1. The employees who made the unethical 1. The employees who made the unethical

decisiondecision• Corporations don’t make decisions, people doCorporations don’t make decisions, people do

• Therefore, the people who made the unethical Therefore, the people who made the unethical decision should be held responsibledecision should be held responsible

Moral ResponsibilityMoral Responsibility

Who is responsible for unethical conduct in Who is responsible for unethical conduct in business?business?– 2. The corporation2. The corporation

• Employees’ decisions are made in the context of Employees’ decisions are made in the context of corporate policies, corporate norms, organizational corporate policies, corporate norms, organizational structure, and corporate culturestructure, and corporate culture

• Therefore, the corporation as a whole should be held Therefore, the corporation as a whole should be held responsibleresponsible

– 3. Both the corporation and the employees 3. Both the corporation and the employees involvedinvolved

Reduce Moral Responsibility?Reduce Moral Responsibility?

True ignorance of factTrue ignorance of fact– Not willful ignoranceNot willful ignorance– Not ignorance due to negligenceNot ignorance due to negligence– Not ignorance of ethicsNot ignorance of ethics

True inability to do anything elseTrue inability to do anything else

ethics & business paul l. schumann, ph.d. © 2003 by paul l. schumann. all rights reserved

Documents

terminology slide

common slide

business slide

right slide

moral development level

stages of moral development

societys moral principles

moral development kohlberg