Chapter 3 -1
Business Ethics
Ethics

Values, morals, beliefs about right and
wrong or good and bad
– The study of right and wrong and of the morality of
choices made by individual

Individual belief and social norms:
– Ethical: right and good
– Unethical: wrong and bad
• according to some standard of behavior
 Standard: Subjective - value judgement
– By person, by situation, by culture, etc.
The Escaped Prisoner
A man had been sentenced to prison for ten years.
After one year, however, he escaped from prison,
moved to a new area of the country, and took on
the name of Thompson. For eight years he
worked hard, and gradually he saved enough
money to buy his own business. He was fair to
his customers, gave his employees top wages,
and gave most of his own profits to charity. Then
one day, Mrs. Jones, an old neighbor, recognized
him as the man who had escaped from prison
eight years before and whom the police had been
looking for.
What is Ethical?
Should Mrs. Jones report Mr.
Thompson to the police and
have him sent back to prison?
How ethical are the following behaviors?

A beer company engages in an advertising
campaign that is targeted to undergraduate
college students, many of whom are under
the legal drinking age.
 A rental car company strongly advises
customers to purchase insurance when
renting a car. Although most personal car
insurance covers the insured motorist when
driving a rental car, most rental car customers
are not aware of this.
Importance of business ethics
The true difference between a successful business and
the others is not in overall strategy, not in
organizational structure, not in management system.
The true difference is in management style, human
resource policies, and the most importantly, in spirits
and (shared) value and beliefs.
理查德•帕斯卡尔,美国哈佛大学
安东尼•阿索斯,斯坦福大学
（1988）
Elements of economic development (Japan)
Spirit 50%
Law and order 40%
Capital 10%
(Source unknown)
Values and Spirits
“The Six Pillars of Character”
•
•
Trustworthiness
• Respect
Responsibility
• Fairness
• Caring
• Citizenship
For more detail, go to the website by clicking on this hotlink.
Source: Josephson Institute of Ethics, “Resources: Making Ethical Decisions- The
Six Pillars of Character,” http://www.josephsoninstitute.org/MED/MED2sixpillars.htm.
Employee Work Ethics
Most desired values at workplace





Responsible and honest (85%)
Capable (65%)
Imaginative (55%)
Logical (49%)
Obedient, clean, polite, forgiving
Schmidt and Posner, 1982, study of 1460
managers
Business Ethical Issues
 Fairness
and honesty
Business people are expected to refrain from
knowingly deceiving, misrepresenting, or
intimidating others
 Organizational
relationships
A business person should put the welfare of others
and that of the organization above their own
personal welfare
 Conflict
of interest
Issues arise when a business person takes
advantage of a situation for personal gain rather
than for the employer’s interest
 Communications
Business communications that are false, misleading,
or deceptive are both illegal and unethical
Managerial Ethics
(norms)
Areas of Concern
Sample Issues
Relationship of the firm Hiring and firing
to the employee
Wages and working conditions
Privacy
Relationship of the
employee to the firm
Conflict of interest
Secrecy
Honesty
Expense accounts
Relationship of the firm Fairness of pricing
to customers
Honesty in advertising
Product safety
Right of privacy
Managerial ethics:

Organization toward employees
– Non-discrimination; salaries and
payments; guidance to employee
behaviors

Employee toward the organization
– Conflicts of interests; confidentiality;
honesty

Organization toward other agents
– Advertising; financial disclosure;
purchasing; …
Law and Ethics: common norms

Law:
– Interpretation and application

Ambiguity in reality
Common Ethical Norms
Utility: benefit optimization
 Rights: respect others’ rights
 Justice: fair
 Caring: responsibility

Moral Principles:
what is right and proper

Universalism: everyone under the same
circumstances should be expected to act
in the same way.
 Reversibility: individuals making the
decision would be willing to be treated in
the same way.
 Dignity and liberty: preserves basic
humanity of individuals and provides
opportunities for greater freedom.
Moral Principles:
what is right and proper
Utilitarianism: generates the greatest
amount of good for most people
while producing no harm.
 Distributive justice: least advantages
individuals are benefited
 Personal morality: consistent with a
set of guidelines.

Value Maturity:
Self centered level
Moral value
resides in external,
quasi-physical
happenings, or in
quasi-physical
needs, rather than
in person and
standards
1.Obedience and
punishment oriented.
2. Naively egotistic
oriented. Actions that
satisfies self needs are
right ones. Relativism of
value, orientation to
exchange and reciprocity
Value Maturity:
Conformity level
Moral value
resides in
performing good
and right roles, in
maintaining
conventional
order and
expectations of
others
3.Good boy
orientation.
Approval. Pleasing.
4. Orientation of
doing duty, showing
respect to authority,
maintaining social
order.
Value Maturity:
Principled level
Moral value
resides in
conformity by
self to shared or
sharable
standards, rights,
duties
5. Contractual legalistic
orientation. Rules for
agreements. Avoid
violations of wills &
rights of others.
6. Conscience of
principle orientation.
Logical and consistency.
Mutual respect and trust
Why obey laws and rules:
 Self
centered: get awarded or
avoid punishment.
 Conformist: learned and
accepted.
 Principled: internalized
principles supersede laws and
rules.
Debate: Can Ethics Be Taught?
NO
YES
Learn
factors that influence
decision-making (individual
beliefs and values, pressure from
peers and managers, and
opportunity)
Learn how to analyze the ethical
dilemmas faced by today’s
practicing managers
Learn the principles of ethical
decision making to understand
why decision makers behave as
they do
Apply what they have learned to
ethical dilemmas they face.
An
individual’s beliefs, values,
and morals are developed long
before he or she enters school
or begins a career.
Every person’s morality is
shaped by his or her social
experience (family, friends,
school, and church), therefore a
simple ethics course can not
change a person’s deep-rooted
and long-held beliefs and
values.
Learning ethical principles
does not guarantee that they
will be used.
Behaviors will not be changed.
Factors Affecting Ethical Behavior
Source: Based on O. C. Ferrell and Larry Gresham, “A Contingency Framework for
Understanding Ethical Decision Making in Marketing,” Journal of Marketing, Summer
1985, p. 89.
Factors Affecting Ethical Behavior
 Individual
factors
– Individual knowledge of an issue
– Personal values
– Personal goals
 Social
factors
– Cultural norms
– Coworkers
– Significant others
– Use of the Internet
 Opportunity
– Presence of opportunity
– Ethical codes
– Enforcement
Encouraging Ethical Behavior

External to a specific organization
– Governmental legislation and regulations
– Trade association guidelines

Within an organization
– Code of ethics
• A written guide to acceptable and ethical behavior as
defined by an organization that outlines policies,
standards, and punishments
– Organizational environment
• Management direction
• Employee training
• Ethics officer

Whistle-blowing
– Informing the press or government officials about
unethical practices within one’s organization