Emerging Issues in Management (Mgmt 440)

Business Ethics (Chapter 7); Making Ethical Decisions in Business (Chapter 8)Professor Charles H. SmithFall 2010

Introduction to Business Ethics

• “Ethics” – study of right and wrong.• “Business ethics”

• Study of right and wrong in the context of the business world.

• Study of ethics in different context; not study of different type of ethics – business ethics is subset of ethics in general.

• While someone’s ethics should be the same all the time, it is natural to have different ethical guidelines at work, at home, in social situations, and in different personal relationships.

• Problematic ethical issues encountered frequently in business – however, “applying clear guidelines resolves the vast majority of them.”

Two Competing Theories of Business Ethics – Amorality

• Business should be amoral and therefore not guided by the full range of society’s ethical standards.

• These “compromised ethics” are acceptable since competition causes business’ actions to result in benefits to society.

• See Daniel Drew quote on page 191 about adopting different beliefs as Sunday turns into Monday.

• Examples – businessperson active in church but then will engage in deceptive business practices.

• Student examples.

Two Competing Theories of Business Ethics – Moral Unity

• Business should be judged by same ethical rules as other parts of society because there should not be different ethics for work and the rest of life.

• See J.C. Penney’s story on page 192.• Examples – boss takes phone call from

undesirable client or at least tells secretary to advise client that boss does not want to talk to him; businessperson applies principles of his/her religion to business practices (Jim Edson painting).

• Student examples.

Sources of Business Ethics

Source of Business Ethics – Religion

• Divine being or will determines what is right and wrong.

• Guidelines found in sources such as• Inspired writings – Bible, Koran,

Torah.• Doctrine – rules created by people

which are supposed to be consistent with inspired writings.

• Student examples of business ethics guided by religion.

Source of Business Ethics – Philosophy

• Informed by wisdom of men as opposed to divine guidance.

• Examples include ancient Greeks (Socrates, Plato, Aristotle), philosophers who used logic (Baruch Spinoza, Immanuel Kant), utilitarian thinkers (Bentham, Mill), and the realist school (Machiavelli, Spencer).

• Student examples of business ethics guided by philosophy.

Source of Business Ethics – Culture

• Transmittal between generations of set of traditional values, rules and standards for acceptable behavior.

• Two schools of thought• Ethical universalism – human nature is

common throughout the world so same basic ethics apply; some room for differences.

• Ethical relativism – ethical values created by cultural experience so not possible to have universal standard for ethics.

• Student examples of business ethics guided by culture.

Source of Business Ethics – Law

• The codification or formalization of ethics – all laws are the product of someone’s ethics; e.g., legislator votes for statute due to cultural experience, citizen votes for (or against) Proposition 8 based on religious beliefs.

• Regulation of business through threat of• Civil judgment of damages – “you play,

you pay.”• Criminal prosecution/punishment.

• Student examples of business ethics guided by law.

How Companies Manage Ethics – Ethics Programs

• An ethics program is “a coordinated application of management methods to prevent law-breaking and promote more ethical behavior.”

• Example – GE Code of Conduct (page 211).

• Student examples of codes of conduct.

How Companies Manage Ethics – Ethics Programs cont.

• U.S. Sentencing Commission created minimal requirements to prevent criminal behavior and promote ethics in the workplace• Establish standards and policies.• Create high-level oversight; e.g., board of directors sets

standards and policies → high-level executive refines and supervises process → managers have day-to-day responsibilities for implementing process.

• Screen out criminals; e.g., background checks for criminal records; “ethics” questions in job interviews (see page 214).

• Communicate standards to all employees.• Monitor and set up a hotline.• Enforce standards/discipline violators; e.g., no follow-up =

continued ethical and legal problems.• Assess areas of risk/modify the program.

• Student examples of these minimal requirements.

Fourteen Ethical Principles

• Categorical imperative (Kant)• What would happen if everyone – not just one

person or company – did the same thing?• Examples – steal small item from office; punch

someone in the face.• Student examples.

• Conventionalist ethic• Business is a game; actions based on lower ethics

which further one’s interest are acceptable if those actions do not violate law.

• Examples – resume changes for different jobs; failure to mention unfavorable facts on resume or in job interview.

• Student examples.

Fourteen Ethical Principles cont.

• Disclosure Rule• “Others” or “media” tests – what if others

(people close to you or important to your job) knew truth about what I did or plan to do.

• Examples – job decision made for illegal reason; affair with co-worker.

• Student examples.• Doctrine of the Mean

• Virtue achieved through moderation; avoid excessive or virtue-deficient behavior.

• Examples – turn off your cell phone during meals; do not check e-mail for 24 hours.

• Student examples.

Fourteen Ethical Principles cont.

• Ends-Means Ethic• “The end [successful result] justifies the means

[methods used to gain the successful result].”• Examples – entertaining clients with illegal drugs;

industrial espionage; “just win, baby.”• Student examples.

• Golden Rule• “Do unto others as you would have them do unto

you.”• Examples – giving employees bereavement leave;

telling your boss’ supervisor (or your employee) that your boss (or employee) is doing a good job instead of just reporting negatives.

• Student examples.

Fourteen Ethical Principles cont.

• Intuition Ethic• “What is good is simply understood” – reliance

on “inner moral sense” and “intuition.”• Examples – businessperson feels comfortable

or uncomfortable doing business with new client.

• Student examples.• Might-Equals-Right Ethic

• What is “right” is determined by what stronger company or person can impose on weaker company or person.

• Examples – John D. Rockefeller, Microsoft.• Student examples.

Fourteen Ethical Principles cont.

• Organization Ethic• “Be loyal to the organization” or put the company’s

interest ahead of your own interest.• Examples – employee who does great work for the

company but has no personal life; teamwork instead of individual glory.

• Student examples.• Principle of Equal Freedom

• Right to act unless this action deprives someone else of right.

• Examples – talk about your strengths instead of competition’s weaknesses in sales pitch; “your right to swing your fist ends where my nose begins.”

• Student examples.

Fourteen Ethical Principles cont.

• Proportionality Ethic• Set of rules for making decisions having both good

and bad consequences• Principle of proportionality (see 5 factors on page

235).• Principle of double effect (see 3 factors on page

235).• Student examples.

• Rights Ethic• Everyone has rights that others must respect

• Natural rights inferred by reason from study of human nature.

• Legal rights are imposed on society as a whole.• Student examples.

Fourteen Ethical Principles cont.

• Theory of Justice• Act for common good of society and to maintain

community.• Examples – constitutional guarantees of equal

protection and due process.• Student examples.

• Utilitarianism• “The greatest good for the greatest number” or

whether benefits are maximized.• Examples – building new school to eliminate

overcrowding at other schools; closing branch office because cost of maintaining it is prohibitive.

• Student examples.

Case Studies

• Read the following on your own before class and then discuss with small groups in class• “Today’s verdict is a triumph of our

legal system . . .” (pages 186-88).• “Realtors in the Wilderness” (pages

226-28).• “Short Incidents for Ethical

Reasoning” (pages 243-47).