Lecture Business and society - Chapter 7: Business Ethics Fundamentals

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Chapter 7
Business
Ethics
Fundamentals

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Learning Outcomes
1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities of
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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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Chapter Outline
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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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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

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greatly it is called “The Enron Effect.”
But then followed more scandals:
• Worldcom,
Worldcom Tyco,
Tyco Arthur Andersen
And then the Wall Street financial
scandals:
• AIG,
AIG Bear Stearns,
Stearns Lehman Bros,
Bros Fannie
Mae,
Mae Freddie Mac,
Mac and Bernie Madoff

• Business will never be the same.
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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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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
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companies with
weak ethics cultures increased to8


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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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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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Business Ethics Today versus
Earlier Periods
Expected and Actual Levels
of Business Ethics

Society’s
Expectations of
Business Ethics

Ethical Problem
Actual
Business Ethics

Ethical Problem

1960s

Time
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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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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
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this text


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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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.
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Sources of Ethical Norms

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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 of illegal corporate behavior
focuses on two questions:
1. What leads firms to behave illegally?
2. What are the consequences of
engaging in illegal behavior?
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Making Ethical Judgments

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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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Ethics, Economics, and Law –
A Venn Model

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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 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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Characteristics of Immoral
ManagersThese Managers:
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Intentionally do wrong

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Are Self-centered and self-absorbed

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Care only about self or organization’s profits
or success

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Actively oppose what is right,
right fair, or just

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Exhibit no concern for stakeholders

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Are the “bad guys”

•An ethics course probably would not help
them
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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
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• Harassing©a2015fellow
employee

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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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Habits of Moral Leaders 1. They have a passion to do right.
2. They are morally proactive.
3. They consider all stakeholders.
4. They have a strong ethical
character.
5. They have an obsession with
fairness.
6. They undertake principled decisionmaking.
7. They integrate
ethics wisdom with25
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