Business
Ethics
Fundamentals
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Chapter Six Outline
• Business Ethics and
Public Opinion
• Define business ethics
• Ethics, Economics,
and Law: Venn Model
• Four Essential Factors
at Play in Ethical &
Moral Choices
• Three Models of
Management Ethics
• Making Moral
Management Actionable
• Developing Moral
Judgment
• Summary of Forces
© 2005 by Nelson, a division of Thomson Canada Limited.
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Introduction to Chapter Six
Business Ethics
• Public’s interest in business ethics
increased during the last four decades
• Public’s interest in business ethics is
spurred by the media
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High Profile Ethical Scandals in Business
• WorldCom / Enron: Accounting
Fraud
• Shell: Proposed sinking of
North Sea oil rig
• Pfizer: Drug Overcharging
• Sotheby’s: Price-fixing
• New York Times: Plagiarism
• NBC: Faking the evidence
• Walkerton: Falsifying records
• UofT Law School Students:
Lying about grades to employers
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Public’s Opinion of Business Ethics
• Gallup Poll finds that only 17 percent to 20
percent of the public thought the business
ethics of executives to be very high or high
• To understand public sentiment ask:
– Has business ethics really deteriorated?
– Has reporting become more frequent and vigorous?
– Are past acceptable practices becoming no longer
socially acceptable?
© 2005 by Nelson, a division of Thomson Canada Limited.
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Business Ethics: What Does It
Really Mean?
Ethics Today vs. The Past
Society’s
Expectations
Ethical
Problem
Actual
Business
Ethics
Ethical Problem
1950s
Time
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Early 2000s
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Business Ethics:
What Does It Mean?
Definitions
• Ethics is a set of moral principles and values
• Moral conduct is behaviour that is right or
wrong
• Business ethics involves good and bad
practices and behaviours that takes place
within a business context
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Business Ethics
Two Key Branches of Ethics
• Descriptive ethics involves describing,
characterizing and studying morality
– “What is”
• Normative ethics involves supplying
and justifying moral systems
– “What should be”
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Conventional Approach to
Business Ethics
• Conventional approach to business ethics
involves comparing a decision or practice
to prevailing societal norms
– Pitfall: ethical relativism
Decision or Practice
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Prevailing Norms
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Sources of Ethical Norms
Fellow Workers
Fellow Workers
Family
Regions of
Country
Profession
The Individual
Conscience
Friends
The Law
Employer
Religious
Beliefs
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Society at Large
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Ethics and the Law
• Law often represents an ethical minimum
• Ethics often represents a standard that
exceeds the legal minimum
Frequent Overlap
Ethics
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Law
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Ethics, Economics, and Law
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Making Ethical Decisions
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Four Essentials Factors at Play
1. Forensic Accounting:
The 20% Angel Rule
2. Self-interested
Consequences:
The 60% Rule
3. Social Norms of
Fairness:
The Last 20%
4. The Domino Effect
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Three Models of Management Ethics
Immoral
Management
A style devoid of ethical principles
and active opposition to what is ethical
Moral
Management
Conforms to high standards
of ethical behavior

Amoral
Management

Intentional: does not consider
ethical factors
Unintentional: casual or careless
about ethical factors
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Characteristics of Immoral Managers
•
•
•
•
•
•
•
Intentionally do wrong
Self-centered and self-absorbed
Care only about self or organization’s profits
Actively oppose what is right, fair, or just
Exhibit no concern for stakeholders
Are the “bad guys”
An ethics course probably would not help them
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Characteristics of Moral Managers
• Conform to high level of ethical or right behavior
• Conform to high level of 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
• Are 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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Three Models of Management
Morality and Emphasis on CSR
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Moral Management Models and
Acceptable Stakeholder Thinking
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Making Moral Management Actionable
• Senior management leads the transition from
amoral to moral management
–
–
–
–
–
–
–
Business ethics training
Codes of conduct
Mission/Vision statements
Ethics officers
Tighter financial controls
Ethically sensitive decision-making processes
Leadership by example
• Recognize that amoral management exists
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Developing Moral Judgment
Kohlberg’s Levels of Moral Development
Level 1
Preconventional Level
Level 2
Conventional Level
Level 3
Postconventional Level
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Developing Moral Judgment
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Forces That Shape Managerial Ethics
Personal Ethics
Beliefs and Values
Moral Development
Ethical Framework
Organizational Culture
Is
Decision
or Behavior
Ethical and
Socially
Responsible?
Rituals, Ceremonies
Stories, Heroes
Language, Slogans
Symbols
Founder, History
Organizational Systems
External Stakeholders
Structure
Policies, Rules
Code of Ethics
Reward System
Selection, Training
Government Regulations
Customers
Special Interest Groups
Global Market Forces
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