Business & Society

Ethics, Sustainability, and Stakeholder

Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
2012 South-Western, a part of Cengage Learning
Chapter 7
Business Ethics
Fundamentals
2012 South-Western, a part of Cengage Learning
Learning Outcomes
1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities of making
ethical judgments.
3. Explain the conventional approach to business ethics.
4. Analyze economic, legal, and ethical aspects by using a Venn
Model.
5. Enumerate and discuss the four important ethics questions.
6. Identify and explain three models of management ethics.
7. Describe Kohlbergs three levels of developing moral judgment.
8. Identify and discuss the elements of moral judgment.
2012 South-Western, a part of Cengage Learning
Chapter Outline
The Publics Opinion of Business Ethics
Business Ethics: Meaning, Types, Approaches
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
2012 South-Western, a part of Cengage Learning
Business Ethics

The publics interest in business ethics is at an all-
time high, spurred by headline-grabbing scandals.
The Enron scandal impacted business to greatly it is
called The Enron Effect.
Business will never be the same.



2012 South-Western, a part of Cengage Learning
High-Profile Ethics Scandals
Enron Era
Worldcom
Tyco
Arthur Andersen
Wall Street Financial Scandals Era
AIG
Bear Stearns
Lehman Brothers
Fannie Mae/Freddy Mac
Bernard Madoff




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Business Ethics Today versus Earlier Periods
2012 South-Western, a part of Cengage Learning
Ethical Problem
Ethical Problem
Societys Expectations
of Business Ethics
Actual
Business Ethics
1960s 2010 Time
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2012 South-Western, a part of Cengage Learning
Business Ethics: Meaning, Types, Approaches
Ethics
The discipline that deals with moral duty and obligation.
Moral Conduct
Relates to principles of right, wrong, and fairness in behavior.
Business Ethics
Concerned with morality and fairness in behavior, actions, and
practices that take place within a business context.
Is the study of practices in organizations and is a quest to
determine whether these practices are acceptable or not.



2012 South-Western, a part of Cengage Learning
Ethics and the Law
The law and ethics can overlap in many respects.
The law is a reflection of what society thinks are
minimal standards of conduct and behavior.
Research focuses on two questions:
1. Why do firms do illegal things?
2. What are the consequences of engaging in illegal behavior?



2012 South-Western, a part of Cengage Learning
Ethics, Economics, and Law
2012 South-Western, a part of Cengage Learning
2012 South-Western, a part of Cengage Learning
Business Ethics: Meaning, Types, Approaches
(continued)
Descriptive Ethics
Involves describing, characterizing, and studying
morality.
Focuses on what is occurring.
Normative Ethics
Concerned with supplying and justifying a coherent
moral system of thinking and judging.
Focuses on what ought or should be occurring.



2012 South-Western, a part of Cengage Learning
Three Approaches to Business Ethics
Conventional Approach
Based on how common society today views business ethics
and on common sense.
Principles Approach
Based upon the use of ethics principles to justify and direct
behavior, actions, and policies.
Ethical Tests Approach
Based on short, practical questions to guide ethical decision
making and behavior and practices.





2012 South-Western, a part of Cengage Learning
Conventional Approach
The conventional approach to business ethics involves
a comparison of a decision or practice to prevailing
societal norms.



2012 South-Western, a part of Cengage Learning
Decision, Behavior,
or Practice
Prevailing Norms
of Acceptability
Sources of Ethical Norms
2012 South-Western, a part of Cengage Learning
Fellow
Workers
Family
Friends
The Law
Regions of
Country
Profession
Employer
Society at
Large
Local
Community
Religious
Beliefs
The Individual
Ones Self-
Interest and
Conscience
2012 South-Western, a part of Cengage Learning
Making Ethical Judgments
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Behavior or act that has
been committed
Prevailing norms of
acceptability
Value judgments and
perceptions of the
observer
Compared with
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Ethical Relativism
Ethical Relativism
Picking and choosing which source of norms one
wishes to use based on what will justify current
actions or maximize freedom.

A serious danger of the conventional approach to
making ethical judgments.

2012 South-Western, a part of Cengage Learning
The Conventional Approach to Business Ethics

1. What is the true nature of the practice, behavior, or
decision that occurred?
2. What are societys (or businesss) prevailing norms
of acceptability?
3. What value judgments are being made by someone
about the practice or behavior, and what are that
persons perceptions of applicable norms?


2012 South-Western, a part of Cengage Learning
Four Important Ethical Questions

1. What is?
2. What ought to be?
3. How do we get from what is to what ought to be?
4. What is our motivation in all this?


2012 South-Western, a part of Cengage Learning
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

2012 South-Western, a part of Cengage Learning
What Is?

What are your personal ethics?
What are your organization's ethics?
What are the ethics practice in your industry?
What are societys ethics?
What global ethics are in practice today?


2012 South-Western, a part of Cengage Learning
What Ought to Be?

How ought we treat our aging employees?
How safe ought we make this product?
How clean an environment should we aim for?
Should we outsource aspects of production to
China or India?


2012 South-Western, a part of Cengage Learning
Getting From What I s to What Ought to Be
2012 South-Western, a part of Cengage Learning
What are we able
to accomplish?
What circumstances
permit us to accomplish?
What do we intend
to accomplish?
2012 South-Western, a part of Cengage Learning
Three Models of Management Ethics
Immoral Management
An approach devoid of ethical principles and an active
opposition to what is ethical.
The operating strategy of immoral management is focused
on exploiting opportunities for corporate or personal gain.
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.
2012 South-Western, a part of Cengage Learning
Characteristics of Immoral Managers

Intentionally do wrong
Self-centered and self-absorbed
Care only about self or organizations profits/success
Actively oppose what is right, fair, or just
Exhibit no concern for stakeholders
An ethics course probably would not help them
The bad guys



2012 South-Western, a part of Cengage Learning
Characteristics of Moral Managers
Conform to high level of:
Ethical or right behavior
Personal and professional 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
The good guys


2012 South-Western, a part of Cengage Learning
Integrity Strategy
Related to moral management; is characterized by a conception
of ethics as the driving force of an organization.
Guiding values and commitments make sense and are 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 organizations systems support and reinforce its values.
All managers have the skills, knowledge, and competencies to
make ethically sound decisions daily.



2012 South-Western, a part of Cengage Learning
Characteristics of Amoral Managers
Intentionally Amoral Managers
Dont think ethics and business should mix.
Business and ethics exist in separate spheres.
A vanishing breed.
Unintentionally Amoral Managers
Dont consider the ethical dimension of decision making.
Dont think ethically.
Have no ethics buds.
Well-intentioned, but morally casual or unconscious.
Ethical gears are in neutral.
2012 South-Western, a part of Cengage Learning
Hypotheses Regarding Moral Management
Models
Population hypothesis
The distribution of the three models approximate a
normal curve, with the amoral group occupying the
large middle part of the curve and the moral and
immoral categories occupying the tails.
Individual hypothesis
Within the individual manager, these three models
may operate at various times and under various
circumstances.



2012 South-Western, a part of Cengage Learning
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 immoral and amoral management exist and
can be remedied.
2012 South-Western, a part of Cengage Learning
Kohlbergs Model of Moral Development
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2012 South-Western, a part of Cengage Learning
Why Managers and Employees Behave Ethically
2012 South-Western, a part of Cengage Learning
Most of Us
Many of Us
Very Few Of Us
1. To avoid some punishment
2. To receive some reward
3. To be responsive to family, friends,
or superiors
4. To be a good citizen
5. To do what is right, pursue some ideal
Ethics of Care Alternative to Kohlberg
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Recognize their own needs
and needs of others
Establish connections and
participate in social life
Self is Sole Object of Concern
Level 1
Level 2
Level 3
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External Sources of a Persons Values
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Philosophical values
Cultural values
Legal values
Religious values
Professional values
The Web
of Values
2012 South-Western, a part of Cengage Learning
Internal Sources of a Persons Values

Norms prevalent in business include
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



2012 South-Western, a part of Cengage Learning
Elements of Moral Judgment
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


2012 South-Western, a part of Cengage Learning
Key Terms
Amoral management
Business ethics
Compliance strategy
Conventional approach to business ethics
Descriptive ethics
Ethical egoism
Ethical relativism
Ethics
Immoral management

2012 South-Western, a part of Cengage Learning
Integrity strategy
Intentional amoral
management
Kohlbergs levels of
moral development
Moral development
Moral management
Normative ethics
Unintentional amoral
management