Ethics of Business: The Theory
© 2005 by Nelson, a division of Thomson Canada Limited.
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What would you do if… ?
Phyllis Cramer and the new shoplifting
policy at her department store
If you were Phyllis, what would you do?
© 2005 by Nelson, a division of Thomson Canada Limited.
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High Profile Ethical Scandals in Business
• Wall Street Meltdown: The
ethics of Sub-prime mortgages
• WorldCom / Enron: Accounting
fraud
• Shell: Proposed sinking of North
Sea oil rig
• New York Times: Plagiarism
• NBC: Faking the evidence
• Walkerton: Falsifying records
• UofT Law School Students:
Lying about grades to employers
© 2005 by Nelson, a division of Thomson Canada Limited.
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Ethical Implications in
Business
• Owners
• Competitors
– fair and accurate disclosure
• Employees
– hiring; firing; wages; privacy;
discrimination; honesty;
conflicts of interest; insider
information
• Consumers
– dishonest advertising;
product safety
– non-competitive behaviour;
industrial espionage
• Suppliers
– kickbacks; gifts; bribes
• Government
– legal compliance; lobbying
• Society
– respect for environment;
corporate giving
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Influences on Ethical
Behaviour
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Individual morals
National and ethnic cultures
Government legislation and regulation
The legal system
Religion
Colleagues or peers
Education
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Influences on Ethical
Behaviour
• Media
• Corporate mission, vision, and values
statements
• Union contracts
• Competitive behaviour
• Activists or advocacy groups (NGOs)
• Business or industry organizations
• Professional associations
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© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Business Ethics
• Ethics of business: rules, standards, codes, or
principles that provide guidelines for morally
right behaviour and truthfulness in specific
situations.
• Value judgments: subjective evaluations of what
is considered important.
• Moral standards: the means by which
individuals judge their actions and the actions
of others.
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Economic Efficiency Ethic
• Judges the moral implications of a decision
by its economic consequences and provides
the moral justification for a market system.
• Adam Smith: By focusing on efficient
operations, profits are maximized, and society
ultimately benefits.
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© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Government Requirements Ethic
• The acceptance of a
code of laws as the
governing rules of
society or as a
contract with society
that determines
what is considered
right or appropriate
behaviour.
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
Chapter 5
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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
© 2005 by Nelson, a division of Thomson Canada Limited.
Law
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Ethics, Economics, and Law
© 2005 by Nelson, a division of Thomson Canada Limited.
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Self-Interest (Ethical Egoism)
• Individuals or corporations set their own
standards for judging the ethical implications
of their actions; only the individual’s values
and standards are the basis for actions.
• Self-interest not necessarily the same as:
selfishness, greed, disregard for the rights and
interests of others, hedonism, or materialism.
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Utilitarian Ethic
• Focuses on the distribution of benefits and
harms to all stakeholders with the view to
maximizing benefits.
• “The greatest good for the greatest number.”
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Universal Rules Ethic
• Ensures that managers or corporations have
the same moral obligations in morally similar
situations.
• Treat people as means in themselves (i.e.,
with respect) and never as a means to one’s
own ends.
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Ethics of Caring
• Gives attention to specific individuals or
stakeholders harmed or disadvantaged and
their particular circumstances.
• Golden rule: Do unto others as you would
want done to you.
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Individual Rights Ethic
• Relies on a list of agreed upon rights for
everyone that will be upheld by everyone and
that becomes the basis for deciding what is
right, just, or fair.
• Examples: Rights to safety, information,
privacy, property.
• Rule-based?
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Ethics of Justice
• Considers that moral decisions are based on
the primacy of a single value: justice.
• Different types of justice:
–
–
–
–
Procedural justice
Corrective justice
Retributive justice
Distributive justice
• Mostly ends-based?
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
Personal Virtues Ethic
• An individual’s or corporation’s behaviour is
based upon being a good person or corporate
citizen with traits such as courage, honesty,
wisdom, temperance, and generosity.
• Ask: How would I feel if my actions were
explained on television?
Copyright © 2008 McGraw-Hill Ryerson Ltd.
© 2005 by Nelson, a division of Thomson Canada Limited.
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Chapter 5
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
© 2005 by Nelson, a division of Thomson Canada Limited.
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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
© 2005 by Nelson, a division of Thomson Canada Limited.
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Characteristics of Immoral Managers
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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
© 2005 by Nelson, a division of Thomson Canada Limited.
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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”
© 2005 by Nelson, a division of Thomson Canada Limited.
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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:
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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
© 2005 by Nelson, a division of Thomson Canada Limited.
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Three Models of Management
Morality and Emphasis on CSR
© 2005 by Nelson, a division of Thomson Canada Limited.
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