Business Ethics
“Doing the Right thing, and
Making the Good Life Better”
Overview of Ethics
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What is Business Ethics?
Some Ethical Quotes/Quiz
Some moral theories
Moral Development
Professional Standards/Industry
Paradigms
Moral Decision Making
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ETHICS QUOTES – which ethical theory might agree?
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1. When I do good, I feel good; when I do bad, I feel bad. That’s my religion. (Abraham Lincoln)
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2. A man does what he must.. in spite of personal consequences, in spite of obstacles and dangers, and pressures.. and that
is the basis of all human morality. (JFK)
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3. If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you are
not a moral and ethical person, you really have nothing. (Henry Kravis)
4. Always do right – this will gratify some and astonish the rest. (Mark Twain)
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5. Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. (Plato)
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6. Associate with men of good quality, if you esteem your own reputation; for it is better to be alone than in bad company.
(George Washington)
7. To educate a person in mind and not in morals is to educate a menace to society. (Theodore Roosevelt)
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8. A good name is more desirable than great riches; to be esteemed is better than silver or gold. (Pr 22:1)
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9. Its not enough to be busy– so are the ants! The question is– what are we busy about? (Thoreau)
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10. What does it profit a man to gain the whole world, yet forfeit his soul? (Jesus)
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11. It takes less time to do a thing right than to explain why you did it wrong. (Longfellow)
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12. “Live so that when your children think of fairness and integrity, they think of you.” (H.J. Brown)
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13. “The most important persuasion tool you have in your entire arsenal is integrity” (Zig Zigler)
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14. Ethics or simple honesty is the building block upon which our whole society is based, and business is a part of our
society, and it's integral to the practice of being able to conduct business, that you have a set of honest standards. And it's
much easier to do business with someone when you look them in the eye and say, "This is what we're going to do," and
you understand what you each mean, and you can go away and get it done. (Kerry Stokes)
ETHICS
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QUIZ
Question 1
1. Which of the following has been found to be a true statement
regarding ethics and the insurance industry?
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a.) On average, insurance practitioners are more likely to act
unethically in business practices than in purely personal
situations.
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b.) More than 50 percent of people in business indicate having
observed one or more unethical or illegal acts in the past twelve
months.
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c.) Insurance practitioners believe that management’s
emphasis on the bottom line is one of the main factors leading
to unethical decision-making.
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d.) All of the above are true statements.
Answer
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Answer Q1. (d) All of the above are true
statements. (a) is based on research by
Eastman, Eastman, and Eastman 1996; (b) is
American Society of CLU and CFC Ethics
Officer Association); (c) Cooper and Frank,
1991. People with high ethical values in their
personal lives may act unethically in their
business practices because of what is
expected and rewarded in their work. (Reilly,
Kjy 1990)
Question 2
2. A strong organizational culture is one in which there is a high
expectation of conformity with the organization’s beliefs, values,
and purpose. All of the following are true statements regarding
organizational culture EXCEPT:
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a.) In general, members of organizations having strong cultures
are more likely act ethically.
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b.) In general, members in organizations with weak cultures
are more likely to base their ethical decisions on the norms and
values of small groups within the organization.
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c.) In general, members of large organizations feel less
responsibility for their actions than those in small organizations.
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d.) In general, higher level employees have less ethical beliefs
and their ethical decision-making is less than lower level
employees.
Answer
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Answer Q2. (a) A strong culture can lead to
more ethical behavior if the culture’s values
and purposes are ethical but it can also lead
to conformity of unethical behavior. (Diacon
& Ennew, 1996); (b) is true (Trevino 1986);
(c) is true because responsibility is more
diffused in large organizations (Ford &
Richardson, 1994); (d) (Ford & Richardson
1994)
Question
3. All of the following are true statements EXCEPT:
 a.) Individuals see themselves as more ethical than
their coworkers or supervisors.
 b.) The ethical behavior of supervisors strongly
influences the ethical behavior of their subordinates.
 c.) In general, supervisors’ and management’s
actions have little influence over individuals’ ethical
behavior because individuals form their ethical values
outside of the work environment.
 d.) Supervisors who are successful performers have
greater influence over their subordinates’ ethical
behavior.
Answer
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Answer Q3. (c ) is the only one that is not
true. Countless studies show that although
some core values may not change, most
values and ethical standards of conduct are
influenced by supervisors and management
actions; (a) is true (Tyson 1992), people
judge themselves by their intentions and they
judge others by their actions. (Cooper, 1996);
(b) Nel & Watson, 1989, Cooper & Frank,
1992)); (d) True, (Javidan, Memmels, Devine
& Dastmalchian).
Question
4. Which one of the following is a true statement?
 a.) Most employees report that a company’s ethical
position is stated in their training courses.
 b.) The existence of a formal code of ethics is a
strong deterrent to unethical behavior.
 c.) The awareness of a formal code of ethics is a
strong deterrent to unethical conduct rather than just
the mere existence of one.
 d.) The most successful ethical training programs
are ones that emphasize how to make ethical
decisions rather than setting clear, uncompromising
rules.
Answer
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Answer Q4. (d) As in other training in other aspects, training
on how to make decisions is more effective in changing
behaviors than training that sets out lists of rules to abide by.
(Mahoney, 1997);
(a) less than half of employees state that their company’s
ethical position is stated in training;
(b) The existence of a formal code has no relationship on ethical
behavior. (Weaver, Trevino, Cochran, 1999) Enron, for example,
had an award-winning 79 page Code of Conduct.
(c) Unfortunately, awareness by employees does not affect their
behavior either. (Kohut & Corriher, 1994, Vitell, 1997).
However, clearly communicated and strongly enforced
guidelines do make a difference. (Laczniak & Inderrieden,
1987).
Vocabulary: “Business Ethics”
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What is “Business” ?
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What is “Ethics” ?
Business is inherently social
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Business has its own culture.
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Business Transforms Culture.
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Enron, Paypal, your office/ school
Tesco - green commitment
Business is about relationships.
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Workers, subcontractors, suppliers
Business: Its purpose/goal
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Lone Ranger/I am an Island View:
The purpose of business is to make me
money, and increase stockholder value
(Milton Friedman)
Alternate Stakeholder View:
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Business should make money, but it has many
stakeholders– groups/individuals who have a stake in
what the business does. Owners are not the only
one’s with a stake (Freeman).
Who else has a stake?
Responsibilities in Business:
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To
To
To
To
To
To
To
your employer
Customers
employees
boss/es
your community
your family
your belief system
Your business makes the world
Better or Worse for people by:
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The way they
The way they
The way they
The way they
community
treat customers
treat their employees
treat their boss/company
contribute to the local
The challenge:
Balancing Responsibilities
What is ethics?
“Ethics” isn’t “legal”
Difference between the Law and Ethics:
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Some legal issues are neither ethical or
unethical.
Some ethical issues have no laws to
support them eg showing compassion.
Law often tries to encourage ethical
behavior:
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Better to have self-regulation than more
gov’t regulations
Ethics and Regulation
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Government regulation often is
designed to promote ethical behavior:
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Financial Services Authority (RBS/UK)
Federal Trade Commission (USA)
Energy Authority (Enron)
Competition Commission (UK)
Ofcom, Oftel, etc are regulatory bodies
(UK)
Federal Sentencing Guidelines
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1. Having Standards
2. Assigned Responsibility - Adequate
Resources
3. Due diligence in Hiring
4. Communications and Training
5. Monitoring, Auditing, Reporting
6. Promotion and Enforcement of Ethical
Conduct
7. Reasonable Steps to Prevent Misconduct
Company Ethics
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Company Policy often has some basis in
the compliance regulations and legal
statutes set up by government.
But Personal ethics requires personal
decision-making, rooted in values.
Many think Ethics is just about
what to NOT do: “Don’t do __!!”
But ethics is more than just
what not to do
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Minimal: What we shouldn’t do
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Better: What we should do (justice)
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Don’t steal, don’t kill, don’t lie
Be fair, Be honest, Fulfill duties, work hard
Best: What we could do to make things
excellent for all of us…
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Reduce emissions, improve safety
Business can help create an
excellent life (eudaimonia)
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Example of this mindset: Midland National
Life insurance mission:
"To make life better for individuals and families…
to afford security, trust, superior value, and
peace of mind to those we serve… to offer the
best in financial resources and services.“
How does Business make life
better? Discuss
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How else can business make life better for
the community?
What would a. Kant b. Mill c. Aristotle say?
The point is: business can
do in society!
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Businesses do have an effect on
society and culture. Business is not
just about making money.
Moral Psychology
WHY DO PEOPLE DO WRONG
THINGS?
Link with the Milgram experiment.
Question: Why do people
sometimes drive like idiots?
Question: Why do people forge
signatures and documents?
Why do people stretch or edit
the truth, or exaggerate?
Moral Development: Why do
people do unethical things?
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Why did that person drive me off the
road?
Why did my student cheat on the
exam?
Why did people at Enron do unethical
things?
Why do subcontractors cut corners?
Some reasons people do wrong:
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Ignorant
In a hurry
Thoughtless
Didn’t plan ahead
Financial difficulties
Pressure from organization
Not clear communication from management
Lazy
Want a quick buck
They are a bad /evil /wicked person
More Moral Psychology:
WHY DO PEOPLE DO THE
RIGHT THINGS?
Kohlberg’s theory of moral
development
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Stage
Stage
Stage
Stage
Stage
Stage
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Obedience and Punishment
For self-benefit
For sake of reputation (good boy)
Maintain Social order
Contractual-Legalistic orientation
Conscience/Principle Orientation
moral dilemma: Condo
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Scott Bennett is the engineer assigned to deal with companies who
supply needed parts to the Upscale Company. Larry Newman, sales
representative from one of Upscale's regular suppliers, plays in the
same golf league as Scott. One evening they go off in the same
foursome. Sometime during the round Scott mentions that he is really
looking forward to having a holiday in Florida next month. Larry says
his uncle owns a condo in Florida that he rents out during the months
he and his family are up north. Larry offers to see if the condo is
available next month -- assuring Scott that the rental cost would be
quite moderate.
What should Scott say?
Condo II
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Larry tells Scott he can rent his uncle's condo for $100 a week.
"My uncle," Larry says, "gets nervous when he rents to total
strangers. He likes to have reliable people stay in his condo; the
condo is paid for, and my uncle isn't interested in making
money on it -- he just wants a little help meeting basic
operating expenses and the taxes."
Scott accepts the offer and begins making plans for his
vacation. Just before leaving, an Upscale vice president sends
out a new policy statement that says, among other things:
"Accepting incentives from suppliers is strictly prohibited".
What should Scott do?
Kohlberg’s theory of moral
development
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Stage
Stage
Stage
Stage
Stage
Stage
1:
2:
3:
4:
5:
6:
Obedience and Punishment
For self-benefit
For sake of reputation (good boy)
Maintain Social order
Contractual-Legalistic orientation
Conscience/Principle Orientation
Part 2: Ethical Principles,
and how to use them
Brief explanation of the 5 classic
ethical theories:
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Egoism:
Natural Law Theory
Utilitarianism
Duty-Based Kantian Ethics
Virtue Ethics
Egoism
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People should always do what is in their
own self-interest.
(e.g. do what it takes to get repeat business)
Natural Law Theory
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How do we apply the primary precepts?
Is this course of action rational and in
line with “doing good and avoiding
evil”?
Is the end goal a flourishing community
as well as a flourishing business?
Are anyone’s natural rights violated?
Utilitarian:Outcome-Based
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Do what benefits the greatest number the
most
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Jump on the grenade if it benefits the most.
Do what is right if it will make for a better
society in the long run, even if you could have
short term maximization right now
I can save my client on this insurance premium
by under-reporting risks, but in the long run
this will cause the insurance company and
other clients to be at considerable risk.
We can lose our moral
conscience and concern!
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“Capacity for the nobler feeling is in most
natures a very tender plant, easily killed, not
only by hostile influences, but by mere want
of sustenance; and in the majority of young
persons it speedily dies away if the
occupations to which their position in life has
devoted them, and the society into which it
has thrown them, are not favourable to
keeping that higher capacity in exercise.”
John Stuart Mill:
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“Men lose their high aspirations as they lose
their intellectual tastes, because they have
not time or opportunity for indulging them;
and they addict themselves to inferior
pleasures, not because they deliberately
prefer them, but because they are either the
only ones to which they have access, or the
only ones which they are any longer capable
of enjoying.”
Principle/Duty-Based:
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Only act in a way that you could make
your act a universal law
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Should I lie? Would I make lying a universal
law? No. Then don’t lie!
Should I cheat on my taxes? Would I want
everyone to do that? No. Then don’t!
Principle of ends
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Treat others always as an end, not as a
means to an end.
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Don’t treat checkout person as humanoid ATM
Don’t treat other drivers as obstacles in your
path
Don’t treat customer as a just a means to
money
Virtue Ethics and the
flourishing life
What is the GOOD life,
and how do we achieve that?
Aim for excellence
Moderation/Balance
-- Vice
Virtue
++Vice
(Too little)
(just right)
(too much)
Coward
Courage
Foolhardy
Being Virtuous:
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Does depend on the situation
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Does depend on the individual
Is something we must constantly strive
to keep up, work at
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When to be witty
We can lose our touch!
It helps to have role models. Alan
Sugar? Richard Branson?
Virtues
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Honesty
Integrity
Responsibility
Respect/Caring
Truthfulness
Any more?
Guiding Questions
Questions to help decide if the
situation or decision has ethical
dimensions
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Is it legal but unethical?
What if everyone behaved like this?
Does it involve a core ethical principle
such as honesty, integrity, truthfulness,
etc.?
Guiding Questions: Info
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Information gathering questions
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Who are the stakeholders and what are
their rights?
Consider the source, reliability, and
accuracy of all relevant information.
Who should be involved in this decision?
Do I have enough information to make a
sound ethical decision? If not, how do I
get it?
Guiding Questions: Options
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Questions to help identify and evaluate
alternatives
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Am I rationalizing to justify what I want to do?
Am I using anyone for my own personal gain?
(Who will be injured and how)
Are there conflicting loyalties to stakeholders?
What would result in the long run if everyone did
this?
Guiding Questions: Conclusion
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Questions that help in reaching a decision
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Could I defend my position before the Board of
Directors, the Managing Director, or the media?
What would ______________________ do? (Fill
in the name of the best role model you know.)
Will this seem to be the right decision a year from
now? Five years from mow?
Do I have the moral courage to take the more
ethical course of action? (Am I willing to pay the
price for my convictions?)
Summary:
What have we covered?
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What is Business Ethics?
Some moral theories
Moral Development
Moral Decision Making
The End