© 2015 Cengage Learning1. Chapter 7 Business Ethics Fundamentals © 2015 Cengage Learning2.

Chapter 7Chapter 7Business EthicsBusiness EthicsFundamentalsFundamentals


Learning OutcomesLearning Outcomes

1.1. Describe how the public regards business ethics.Describe how the public regards business ethics.2.2. Define business ethics and appreciate the complexities of making Define business ethics and appreciate the complexities of making

ethical judgments.ethical judgments.3.3. Explain the conventional approach to business ethics. Explain the conventional approach to business ethics.

Differentiate it from the principles approach and ethical tests Differentiate it from the principles approach and ethical tests approach. approach.

4.4. Analyze economic, legal, and ethical aspects of a decision by using Analyze economic, legal, and ethical aspects of a decision by using a Venn Model.a Venn Model.

5.5. Identify and explain three models of management ethics. Give Identify and explain three models of management ethics. Give examples of each. examples of each.

6.6. Describe and discuss Kohlberg’s three levels of developing moral Describe and discuss Kohlberg’s three levels of developing moral judgment.judgment.

7.7. Identify and Identify and discussdiscuss the elements of moral judgment. the elements of moral judgment.


Chapter OutlineChapter Outline

• The Public’s Opinion of Business Ethics The Public’s Opinion of Business Ethics • Business Ethics: Meaning, Types, ApproachesBusiness Ethics: Meaning, Types, Approaches• Ethics, Economics and Law - A Venn ModelEthics, Economics and Law - A Venn Model• Three Models of Management Ethics?Three Models of Management Ethics?• Making Moral Management ActionableMaking Moral Management Actionable• Developing Moral JudgmentDeveloping Moral Judgment• Elements of Moral JudgmentElements of Moral Judgment• SummarySummary


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: • WorldcomWorldcom, TycoTyco, Arthur AndersenArthur Andersen

• And then the Wall Street financial scandals: • AIGAIG, Bear StearnsBear Stearns, Lehman BrosLehman Bros, Fannie MaeFannie Mae,

Freddie MacFreddie Mac, and Bernie MadoffBernie Madoff

• Business will never be the same.


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.


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.


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.


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.


Business Ethics Today versus Earlier Periods

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Ethical Problem

Ethical Problem

Society’s Expectations of Business Ethics

Actual Business Ethics

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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.


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


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.


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.


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?© 2015 Cengage Learning 17

Making Ethical Judgments


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.


Ethics, Economics, and Law – A Venn Model


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

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Characteristics of Immoral Managers-

These Managers:• Intentionally do wrongIntentionally do wrong

• Are Self-centeredSelf-centered and self-absorbed

• Care only about self Care only about self or organization’s profits or success

• Actively oppose what is rightActively oppose what is right, fair, or just

• Exhibit no concern for stakeholdersno concern for stakeholders

• Are the “bad guys”the “bad guys”

•An ethics course probably would not help them


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


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”


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 decision- making.

7. They integrate ethics wisdom with management wisdom.


Positive Ethical Behaviorsof 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


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.


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.


Three Models of Management Morality and Emphases on CSR


Moral Management Models And Acceptance or Rejection of Stakeholder Thinking


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.


Kohlberg’s Model of Moral Development


Why Managers and Employees Behave Ethically


Ethics of Care asAlternative 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 ConcernLevel 1

Level 2

Level 3

© 2015 Cengage Learning

External Sources of a Person’s Values


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


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


• 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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Key Terms Key Terms

© 2015 Cengage Learning1. Chapter 7 Business Ethics Fundamentals © 2015 Cengage Learning2.

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Transcript of © 2015 Cengage Learning1. Chapter 7 Business Ethics Fundamentals © 2015 Cengage Learning2.