Emerging Issues in
Management (Mgmt
440)
Business Ethics (Chapter 7);
Making Ethical Decisions in
Business (Chapter 8)
Professor Charles H. Smith
Fall 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 22628).
• “Short Incidents for Ethical Reasoning”
(pages 243-47).