Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
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© 2012 South-Western, a part of Cengage Learning

1.
Understand the different levels at which business ethics may be addressed.
2.
Differentiate between consequence-based and duty-based principles of ethics.
3.
Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions.
4.
Identify the factors affecting an organization’s ethical culture and provide examples.
5.
Describe and explain actions, strategies, or “best practices” to improve an organization’s ethical climate.
© 2012 South-Western, a part of Cengage Learning 3

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Ethics Issues Arise at Different Levels
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Personal and Managerial Ethics
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Managing Organizational Ethics
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From Moral Decisions to Moral Organizations
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Summary
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Ethical decision making occurs daily in organizations.
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Many managers have no training in ethics or ethical decision making.
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Ethics is vital to business success.
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Personal level
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Situations faced in our personal lives outside the context of our employment.
Organizational level
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Workplace situations faced by managers and employees.
Industry or profession level
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A manager or organization might experience business ethics issues at the industry or professional level.
Societal and global levels
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Managers acting in concert through their companies and industries can bring about constructive changes.
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There are three major approaches to ethical decision making
1.
Conventional Approach
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Discussed in chapter 7.
2.
Principles Approach
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Managers desire to make decisions based on more than is provided by the conventional approach to ethics.
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A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course.
3.
Ethical Tests Approach
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Discussed later in this chapter.
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Teleological theories
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Focus on consequences or results.
Deontological theories
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Focus on duties.
Aretaic theories
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Focus on virtue.
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Major principles of ethics
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Utilitarianism
• Kant’s Categorical Imperative
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Rights
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Justice
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Principles of care
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Virtue ethics
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Servant leadership
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Golden Rule
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A teleological principle that focuses on acts that produce the greatest good for the greatest number.
Strengths
Forces thinking about the general welfare of stakeholders
Weaknesses
Ignores actions that may be inherently wrong
Allows personal decisions to fit into situational complexities
May conflict with the notion of justice
Difficult to formulate satisfactory rules for decision making
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A duty-based, deontological, principle.
Formulations :
1.
Act only on rules that you would be willing to see everyone follow.
2.
Act to treat humanity in every case as an end and never as a means.
3.
Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.
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Moral rights
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Rights that we ought to have based on moral reasoning.
Principle of rights
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Focuses on examining and possibly protecting individual moral or legal rights.
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A negative right is the right to be left alone.
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A positive right is the right to something.
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Involves considering what alternative promotes fair treatment of people.
Types of justice
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Distributive
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Compensatory
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Procedural
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Rawlsian
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Process Fairness
1.
Have employees been given input into the decision process?
2.
Do employees believe the decisions were made and implemented in an appropriate manner?
3.
Do managers provide explanations when asked?
Do they treat others respectfully? Do they listen to comments being made?
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1.
Each person has an equal right to the most basic liberties compatible with similar liberties for others.
2.
Social and economic inequalities are arranged so that they are both:

Reasonably expected to be to everyone’s advantage, and

Attached to positions and offices open to all.
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Ethic of care/Principle of caring
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Traditional ethics focus too much on the individual self.
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Views the individual as relational, not individualistic– similar to stakeholder theory.
Virtue ethics
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Focuses on individuals becoming imbued with virtues.
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Based on Aristotle and Plato.
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Servant leadership
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Based on the moral principle of serving others first, such as employees, customers, and community.
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Listening
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Empathy
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Healing
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Persuasion
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Awareness
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Foresight
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Conceptualization
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Commitment to the growth of people
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Stewardship
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Building community
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Do unto others as you would have them do unto you.
The Golden Rule is:
1.
Accepted by most people.
2.
Easy to understand.
3.
A win-win philosophy.
4.
A compass when you need direction.
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The Categorical
Imperative
The Conventionalist
Ethic
The Means-Ends
Ethic
The Might-Equals-
Right Ethic
The Disclosure Rule The Organization
Ethic
The Golden Rule The Organization
Ethic
The Hedonistic Ethic The Professional
Ethic
The Intuition Ethic The Proportionality
Principle
The Market Ethic
The Utilitarian Ethic
The Revelation Ethic
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Test of Common Sense
Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
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Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Organization’s Moral Climate
Individual
One’s Personal
Situation
Superiors
Policies
Peers
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1.
Behavior of superiors
2.
Ethical practices of one’s industry or profession
3.
Behavior of one’s peers in the organization
4.
Formal organizational policy (or lack thereof)
5.
Personal financial need
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© 2012 South-Western, a part of Cengage Learning

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Most organizations are a mix of compliance and emphasizing values like ethics.
Concerns about the compliance orientation
1.
Could undermine the ways of thinking or habits of mind that are needed in ethics thinking.
2.
Can squeeze out ethics.
3.
Managers many not consider tougher issues that a more ethics-focused approach might require.
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© 2012 South-Western, a part of Cengage Learning

Board of Directors’
Oversight
Ethics Programs and Officers
Ethics Audits and
Risk Assessments
Effective
Communication
Realistic
Objectives
Ethical Decision-
Making Processes
Top
Management
Leadership
Moral
Management
Ethics Training
Corporate
Transparency
Codes of
Conduct
Discipline of
Violators
Whistle-Blowing
Mechanisms
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Ethical Leadership
Traits
Behaviors
Decision
Making
Role
Modeling
Ethics
Communication
Effective Rewards and Discipline
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Requires
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Written and verbal communication
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Candor
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Fidelity
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Confidentiality
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Written standards of conduct
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Ethics training
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Mechanisms to seek ethics advice or information
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Methods for reporting misconduct anonymously
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Disciplinary measures for employees who violate ethical standards
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Inclusion of ethical conduct in the evaluation of employee performance
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Are in charge of implementing ethics initiatives in the organization.
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The position may be created in response to the Federal Sentencing Guidelines, which reduces penalties to those companies with ethics programs.
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Problem with diminishing organizational status.
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1.
Is it legal?
2.
Is it balanced?
3.
How will it make me feel about myself?
© 2012 South-Western, a part of Cengage Learning
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1.
Is the action legal?
2.
Does it comply with our values?
3.
If you do it, will you feel bad?
4.
How will it look in the newspaper?
5.
If you know it’s wrong, don’t do it.
6.
If you’re not sure, ask.
7.
Keep asking until you get an answer.
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1.
Is it legal ?
2.
Is it within Sears’ shared beliefs and policies ?
3.
Is it right/fair/appropriate ?
4.
Would I want everyone to know about this?
5.
How will I feel about myself ?
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A way of establishing standards of behavior and communicating them to managers and employees.
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The single most important element of an ethics and compliance program.
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A fairly recent phenomenon.
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Codes of conduct positively affect corporate culture.
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Employment practices
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Employee, client, and vendor information
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Public information/communications
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Conflicts of interest
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Relationships with vendors
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Environmental issues
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Ethical management practices
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Political involvement
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Codes of conduct act as a

Rule book

Signpost
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Mirror
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Magnifying glass
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Shield

Smoke detector

Fire alarm
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Club
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Management must forcefully discipline all violators of ethical norms and standards.
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Many business are unwilling to discipline violators.
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Employees must have outlets to anonymously report questionable behaviors.
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Hotlines are the most common way to report corporate fraud.
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Can be telephone, web, or email-based.
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1.
Learn the fundamentals of business ethics.
2.
Learn to solve ethical dilemmas.
3.
Learn to identify causes of unethical behavior.
4.
Learn about common managerial ethical issues.
5.
Learn whistle-blowing criteria and risks.
6.
Learn to develop a code of ethics and execute an internal ethical audit.
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Ethics Audits
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Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs.
Sustainability Audit
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Helps to identify sustainability issues within an organization.
Fraud Risk Assessment
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Review processes that identify and monitor conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns.
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Corporate Transparency
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A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.
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The degree to which an organization:
 Provides public access to information.
 Accepts responsibility for its actions.

Makes decisions more openly.

Establishes incentives for leaders to uphold standards.
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
Leadership and oversight of ethical initiatives by boards is not a given.
The Sarbanes-Oxley Act
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Companies are required to protect whistleblowers without fear of retaliation.
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It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.
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Moral Decisions
Moral Managers
Moral Organizations
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Aretaic theories/principles
Categorical imperative
Codes of conduct
Codes of ethics
Compensatory justice
Compliance orientation
Corporate transparency
Deontological theories/principles
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Distributive justice
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Ethical due process
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Ethics orientation
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Ethical tests
Ethic of care
Ethics audits
Ethics officer
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Ethics programs
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Golden Rule
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Moral rights
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Negative rights
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Opacity
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Positive rights
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Principle of justice
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Principle of rights
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Principle of utilitarianism
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Procedural justice
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Process fairness
Rights
Risk assessments
Servant leadership
Sustainability audit
Teleological theories/principles
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Transparency
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Utilitarianism
Virtue ethics
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Legal rights
© 2012 South-Western, a part of Cengage Learning
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