Business Ethics Fundamentals
Chapter
7
Prepared by Deborah Baker
Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
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Chapter 7 Learning Outcomes
1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities
3.
4.
5.
6.
7.
8.
of making ethical judgments.
Explain the conventional approach to business ethics.
Analyze economic, legal, and ethical aspects by using a
Venn Model.
Enumerate and discuss the four important ethics
questions.
Identify and explain three models of management ethics.
Describe Kohlberg’s three levels of developing moral
judgment.
Identify and discuss the elements of moral judgment.
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Chapter 7 Outline
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The Public’s Opinion of Business Ethics
Business Ethics: What Does It Really Mean?
Ethics, Economics and Law: A Venn Model
Four Important Ethics Questions
Three Models of Management Ethics
Making Moral Management Actionable
Developing Moral Judgment
Elements of Moral Judgment
Summary
Key Terms
Discussion Questions
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Introduction to Chapter 7
Business Ethics
 Public’s interest in business ethics has heightened
during the last three decades
 Public’s interest in business ethics has been spurred
by headline-grabbing scandals
 The scandals of the early 2000s, beginning with Enron,
created and defined the “ethics industry”
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Introduction to Chapter 7
Recent Ethics Scandals
Enron
Dynegy
WorldCom
HealthSouth
Arthur Anderson
Boeing
Tyco
Martha Stewart
Adelphia
Parmalat (Italy)
Global Crossing
Computer Associates
Figure 7-1
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Inventory of Ethical Issues in Business
Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community / Public Interest
Figure 7-2
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The Public’s Opinion of Business Ethics
Public Agenda Survey Findings
 The most egregious violators of business ethics were corrupt
executives who protected their own wealth
 Greed for money and power and a weakening sense of
personal values have been behind the recent ethics scandals
 People define business ethics in broad terms and are
concerned with how it has affected them
 Many participants thought it was possible for executives to be
both ethical and successful
 The media and financial press are not regarded as vigilant
watchdogs protecting the public interest
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The Public’s Opinion of Business Ethics
LRN Ethics Study Survey Findings
 Three out of four employees reported encountering ethical
lapses on the job
 More than one in three respondents said these incidents
happen at least once a week
 Ten percent believed that a current issue in their company
could create a business scandal if discovered
 Younger workers reported higher levels of witnessing
ethical lapses and being distracted by them
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Media Reporting on Business Ethics
 The media are reporting ethical problems more frequently
and fervently
 In-depth investigative reporting of business ethics on TV
shows as 60 Minutes, 20/20, Dateline NBC, Primetime Live,
and FRONTLINE
 Internet coverage in the form of webpages and blogs has
expanded in recent years
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Business Ethics
Today versus Earlier Periods
Expected and Actual Levels
of Business Ethics
Society’s
Expectations of
Business Ethics
Ethical Problem
Ethical Problem
1960s
Figure 7-3
Time
Actual
Business Ethics
Early 2000s
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Business Ethics:
What Does It Really Mean?
Ethics
Moral conduct
Business
Ethics
The discipline that examines
good or bad practices within the
context of moral duty and obligation
Relates to principles of right and wrong
in behavior
Concerned with good and bad or
right and wrong behavior and
practices that take place in business
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Business Ethics:
What Does It Really Mean?
Descriptive
Ethics
Normative
Ethics
Involves describing, characterizing
and studying morality
 Focuses on “What is”
Concerned with supplying and
justifying moral systems
 Focuses on “What ought /
ought not to be”
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Three Approaches to Business Ethics
Conventional
Approach
Based on how normal society today
views business ethics
Principles
Approach
Based upon the use of ethics
principles to direct behavior, actions
and policies
Ethical Tests
Approach
Based on short, practical questions
to guide ethical decision making and
behavior
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Conventional Approach
The conventional approach to business ethics involves
a comparison of a decision or practice to prevailing
societal norms
Decision or Practice
Prevailing Norms
of Acceptability
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Sources of Ethical Norms
Fellow
Workers
Local
Community
Regions of
Country
The
Individual
Profession
Friends
Conscience
Employer
The Law
Religious
Beliefs
Society at
Large
Family
Figure 7-4
Is mandatory vaccinations ethical?
See Link: http://www.healthfreedomusa.org/?p=3074
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Ethics and the Law
1. Why do firms behave illegally?
2. What are the consequences of behaving illegally?
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Making Ethical Judgments
Behavior or act that has
been committed
compared with
Prevailing norms of
acceptability
Value judgments and
perceptions of the
observer
Figure 7-5
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The Conventional Approach
to Business Ethics
1. What is the true nature of the practice, behavior, or
decision that occurred?
2. What are society’s (or business’s) prevailing norms
of acceptability?
3. What value judgments are being made by someone
about the practice or behavior, and what are that
person’s perceptions of applicable norms?
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Ethics, Economics, and Law
Figure 7-6
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Four Important Ethical Questions
1. What is?
2. What ought to be?
3. How to we get from what is to what ought to be?
4. What is our motivation in all this?
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Five Levels for Questions
1. Level of the individual
2. Level of the organization
3. Level of the industry or profession
4. Societal level
5. Global or international level
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What Is?
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What are your personal ethics?
What are your organization's ethics?
What are the ethics of your industry?
What are society’s ethics?
What are global ethics?
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What Ought to Be?
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How ought we treat our aging employees?
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Should we outsource aspects of production to China
or India?
How safe ought we make this product?
How clean an environment should we aim for?
How should we treat long-time employees when the
company is downsizing?
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The Practical Question
What are we able
to accomplish?
What circumstances
permit us to accomplish?
What do we intend
to accomplish?
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Three Models of Management Ethics
 Immoral management
 Moral management
 Amoral management
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Three Models of Management Ethics
Immoral
Management
An approach devoid of ethical principles
and active opposition to what is ethical
Moral
Management
Conforms to high standards
of ethical behavior or professional
standards of conduct
Amoral
Management
 Intentional: does not consider
ethical factors
 Unintentional: casual or careless
about ethical factors
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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 / success
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
Figure 7-7
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Illustrative Cases of Immoral Management
• Stealing petty cash
• Cheating on expense reports
• Taking credit for another’s accomplishments
• Lying on time sheets
• Coming into work hungover
• Telling a demeaning joke
• Taking office supplies for personal use
• Showing preferential treatment toward certain employees
• Rewarding employees who display wrong behaviors
• Harassing a fellow employee
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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
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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”
Figure 7-8
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Integrity Strategy
 Guiding values and commitments make sense and are
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clearly communicated.
Company leaders are personally committed, credible,
and willing to take action on values
Espoused values are integrated into normal channels of
management decision making
The organization’s systems support and reinforce its
values
All managers have the skills, knowledge, and
competencies to make ethically sound decisions daily
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Ethics Criteria
 Be a leader in the company's field, showing the way
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ethically
Sponsor programs that demonstrate sincerity and
ongoing vibrancy, and reach deep into the company
Be a significant presence on the national scene, so the
company’s ethical behavior sends a loud signal
Stand out in at least one area
Demonstrate the ability to face a recent challenge and
overcome it with integrity
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Habits of Moral Leaders
1.
2.
3.
4.
5.
6.
7.
They have a passion to do right
They are morally proactive
They consider all stakeholders
They have a strong ethical character
They have an obsession with fairness
They undertake principled decision making
They integrate ethics wisdom with management wisdom
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Positive Ethical Behaviors
 Giving proper credit where it is due
 Being straightforward and honest with other
employees
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Treating all employees equally
Being a responsible steward of company assets
Resisting pressure to act unethically
Recognizing and rewarding ethical behavior of others
Talking about the importance of ethics and
compliance on a regular basis
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Characteristics of Amoral Managers
Intentionally Amoral Managers:
 Don’t think ethics and business should “mix”
 Business and ethics are existing 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
Figure 7-9
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Hypotheses Regarding
Moral Management Models
 Population Hypothesis
 Individual Hypothesis
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Three Models of Management Morality
and Emphases on CSR
Figure 7-11
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Moral Management Models and Acceptance
or Rejection of Stakeholder Thinking
Figure 7-12
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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 and
can be remedied
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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
Figure 7-13
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Why Managers / Employees
Behave Ethically
1. To avoid some punishment
Most of Us
2. To receive some reward
Many of Us
3. To be responsive to family, friends,
or superiors
4. To be a good citizen
Very Few Of Us
Figure 7-14
5. To do what is right, pursue some ideal
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Feminist Views of Kohlberg’s Research
Recognize their own needs
and needs of others
Level 2
Establish connections and
participate in social life
Sole Concern for Self
Level 3
Level 1
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External Sources of a Manager’s Values
Religious values
Philosophical values
The Web
of Values
Cultural values
Legal values
Professional values
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Internal Sources of a Manager’s Values
“Norms” prevalent in business organizations include:
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Respect for the authority structure
Loyalty to bosses and the organization
Conformity to principles and practices
Performance counts above all else
Results count above all else
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Elements of Moral Judgment
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Moral imagination
Moral identification and ordering
Moral evaluation
Tolerance of moral disagreement and ambiguity
Integration of managerial and moral competence
A sense of moral obligation
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Key Terms
 Amoral management
 Amoral management:
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intentional
Business ethics
Compliance strategy
Conventional approach to
business ethics
Descriptive ethics
Ethical relativism
Ethics
 Immoral management
 Integrity strategy
 Kohlberg’s levels of moral
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development
Moral development
Moral management
Morality
Normative ethics
Unintentional
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