Chapter 7
Business Ethics
Fundamentals
© 2012 South-Western, a part of Cengage Learning
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Business Ethics
• The public’s interest in business ethics is at
an all-time high, spurred by headlinegrabbing 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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The Public’s Opinion of Business
Ethics
The Marist College Institute for Public
Opinion Study Survey Findings
• Over 3/4ths said the moral compass of Corporate
America is pointing in the wrong direction. (58% of
business executives feel the same.)
• A majority gave corporate America D or F grades for
honesty and ethics. (Business leaders gave C and B
marks.)
• Around 53% of Americans and two-thirds of executives
gave a grade of D or F to the financial sector for
honesty and ethical conduct.
• Around 90 percent of Americans and executives see
career advancement, personal financial gain, increasing
profits, or gaining competitive advantage as the primary
factors driving business decisions.
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The Public’s Opinion of Business
Ethics (continued)
National Business Ethics Survey Findings
• Observed ethical misconduct at work has decreased
(from 56% to 49%).
• Whistle-blowing is on the rise (from 58% to 63%).
• Ethical cultures have strengthened post-2008 (from
53% to 62%).
• Pressure to cut corners has decreased (from 10% to
8%).
• But, retaliation against those who report
misconduct has increased.
 Business ethics tend to improve in tough economic
times.
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Media Reporting on Business
Ethics
• News media outlets are reporting ethical
problems more frequently and fervently.
• In-depth investigative reporting of business
ethics on TV shows as 60 Minutes, 20/20,
Dateline NBC, and Frontline.
• Internet coverage in the form of webpages
and blogs has expanded.
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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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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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Sources of Ethical Norms
Fellow
Workers
Family
Friends
The Law
Local
Community
Regions of
Country
The Individual
Profession
One’s SelfInterest and
Conscience
Employer
Religious
Beliefs
Society at
Large
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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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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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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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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
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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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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.
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Why Managers and Employees
Behave Ethically
1. To avoid some punishment
Most of Us
2. To receive some reward
Many of Us
3. To be responsive to family, friends,
or superiors
4. To be a good citizen
Very Few Of Us
5. To do what is right, pursue some ideal
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External Sources of a Person’s Values
Religious values
Philosophical values
The Web
of Values
Cultural values
Legal values
Professional values
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