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Business Ethics CHAPTER 5

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1 Business Ethics CHAPTER 5
© 2014 Routledge, Inc., Taylor and Francis Group. All rights reserved. PowerPoint Presentation Design by Charlie Cook CHAPTER 5 Business Ethics © Routledge

2 Learning Outcomes After studying this chapter, you should be able to:
Compare and contrast ethics, business ethics, and managerial ethics Characterize the three levels of moral development Identify reasons for unethical behavior and how people justify it List general guides to ethical decision making Compare and contrast virtues, deontological, and utilitarianism guides to ethical decision making Describe the 3-way ethics test Explain how the 5 Is strategic analysis includes the stakeholder approach and ethics Define the key terms in the chapter © Routledge

3 Ethics Foundations Ethics Honesty Values
The moral standard (or principles) of right and wrong (or moral and immoral), and fairness that influences behavior—what we do and say or our actions. Honesty The moral standard (or principles) of right and wrong (or moral and immoral), and fairness that influences behavior—what we do and say or our actions. Values Important desired behaviors that help shape morals or what is considered ethical and unethical. © Routledge

4 Universal vs. Relativism Ethics
Universal Ethics Relativism Ethics Ethical concepts are impartial, they apply to everyone, and morals should take precedence over self-interest. Morals affecting ethical behaviors can change based on time, the circumstances of the situation, and personal opinion. © Routledge

5 Business Ethics Foundations
Personality Traits and Attitudes Moral Development The Situation Ethical Behavior © Routledge

6 Levels of Moral Development
Postconventional (Principle-Centered) Fairness ethics Universal ethics Conventional (Social-Centered) Social group norms Societal norms Preconventional (Self-Centered) Punishment avoidance Reward seeking © Routledge

7 Figure 5.1 Levels of Moral Development
Description of Motivation, Behavior and Leadership Examples 3. Postconventional (Principle-Centered) Behavior is motivated by universal principles of right and wrong, regardless of the expectations of the leader or group and possible negative consequences for the behavior. The common leadership style is participative; it is leadership that is committed to serving others and a higher cause while empowering followers to reach this level. “I don’t lie to customers because lying is wrong.” 2. Conventional (Social-Centered) Behavior is motivated by the desire to live up to others’ expectations, to copy the behavior of the leaders or of those in one’s group. Peer pressure is used to enforce group norms. It is common for lower-level managers to use a similar leadership style of the higher-level managers. “I lie to customers because the other sales reps do it too.” 1. Preconventional (Self-Centered) Behavior is motivated by the relativism ethics of self-interest (get rewards and avoid punishment). The common leadership style is autocratic toward others while using one’s position for personal advantage. “I lie to customers to sell more products and get higher commission checks.” © Routledge

8 Business Ethics and Ethical Dilemmas
Is the application of ethics to issues that arise in business. Ethical dilemma Occurs when a decision must be made in the midst of conflicting interests; there is no simple right and wrong answer and multiple ethical alternatives. Managerial ethics Are responsibilities of managers for developing moral standard policies and procedures to foster, guide and ensure ethical employee behaviors. Moral management Describes the ethical (or unethical ) behaviors of moral, immoral, and amoral managers © Routledge

9 Business Ethics Myths Myth 1. Ethics is just a matter of opinion.
Myth 2. There is no point in studying ethics because we all know what is right; it’s just a matter of doing what is ethical. Myth 3. Business ethics is simple; just follow a guide such as “don’t do anything you wouldn’t want to appear on the front page of the newspaper.” Myth 4. You can’t teach and learn business ethics. Myth 5. We learn ethics as kids and really can’t change our behavior to be more ethical as adults. © Routledge

10 Why People Use Unethical Behavior
Personal Gain, Self-Interest, and Conflict of Interest External Pressure Cross-Cultural Inconsistency Unethical Behavior © Routledge

11 Influences on Ethical Behavior
Personality Traits Attitudes Competitive Situations Ethical Behavior © Routledge

12 How People Justify Unethical Behavior
Ethical rationalization The process of determining motives, reasons, explanations, and justifications that lead to particular decisions and behavior when faced with ethical dilemmas. Justifying unethical behavior The process of convincing oneself that a decision is rational and ethical, when in fact it really serves self-interest or provides an easy way out of the ethical dilemma. © Routledge

13 Processes Used to Justify Unethical Behavior
Relativism ethics Displacement of responsibility Disregard or distortion of consequences Moral justification Diffusion of responsibility Attribution of blame Conventional justification Advantageous comparison Euphemistic labeling © Routledge

14 Figure 5.2 Ethical Rationalizations and Unethical Behavior
the process of determining motives, reasons, explanations, and justifications that lead to particular decisions and behavior when faced with ethical dilemmas Justification for unethical behavior: relativism ethics, moral justification, conventional justification, displacement of responsibility, diffusion of responsibility, advantageous comparison, disregard or distortion of consequences, attribution of blame, euphemistic labeling Why people use unethical behavior: personal gain, self-interest, conflict of interest, external pressure, cross-cultural inconsistency, personality and attitudes, the situation © Routledge

15 Figure 5.5 Guides to Ethical Decisions and Behavior
Golden rule Advice Four-way test Five-question test Comfort Moral level Common sense Discloser © Routledge

16 General Guides to Ethical Decisions
Golden Rule Advice Moral level Comfort Rights Disclosure Justice 4-Way Test Common sense 5-Question Test © Routledge

17 Business Ethics Tests Four-way Test (Rotary International)
Five-Question Test (Sears, Roebuck and Co.) Is it the truth? Is it fair to all concerned? Will it build goodwill and better friendship? Will it be beneficial to all concerned? If you can answer yes to all four questions, the action may be ethical. Is it legal? Is it within Sears’ shared beliefs and policies? Is it right/fair/appropriate? Would I want everyone to know it? How will I feel about myself? If you have positive answers to all five questions, the action may be ethical. © Routledge

18 Personal Virtue Ethics Ethical Dilemma Decisions
Virtues Ethics Guide Character Integrity Relationships Personal Virtue Ethics Ethical Dilemma Decisions © Routledge

19 Ethical Dilemma Questions to Ask Yourself
What character traits does the organization value? Will the behavior of my decision be consistent with the values of the firm? Who do I want to be? What type of person will I be defined as and become if I choose a certain behavior? How will the behavior affect my relationships? © Routledge

20 Deontological Ethics Guide
Right and wrong behaviors Standards of Conduct (norms) Ethical decisions and actions © Routledge

21 Deontological Questions to Ask Yourself?
Does the behavior in the situation violate a standard of conduct or law? Can I rationalize the action as ethical and consistent based on the standards of conduct of the firm, industry, and society, or am I just justifying my unethical behavior? If people find out about my behavior, could it lead to action against me and/or my firm (e.g., lawsuits)? © Routledge

22 The Generalization Test: Rationalizing Behavior as Being Ethical
To pass the generalization test: The reasons for the action must be consistent with commonly accepted standards of conduct. Everyone in the same situation with the same reasons is likely to exhibit the same behavior. © Routledge

23 Utilitarianism Ethics Guide
Refers to making ethical decisions based on a cost- benefits analysis of the consequences (end results) of the behavior or action (means) taken. Questions to Ask Yourself What is the purpose or objective to be accomplished? What are the likely consequences and the cost–benefit of each alternative action to meet the objective? Do the ends justify the means? How can we work together to benefit relevant stakeholders in the long run? © Routledge

24 Figure 5.3 The 13 Guides to Ethical Decision Making and Behavior
Virtue Test 10 General Guides 1. Golden Rule 2. Moral Level 3. Rights 4. Justice 5. Common Sense 6. Advice 7. Comfort 8. Disclosure 9. 4-way test 10. 5-question test Generalization Test Utilitarian Test © Routledge

25 Figure 5.4 The 3-Way Ethics Test
The 3-way ethics test is used to determine whether an action is ethical. The test has three parts taking into account situational factors: To pass the virtues test, the behavior must be honest, be based on good character traits, and maintain one’s integrity and relationships. To pass the generalization test, the reasons for the action must be consistent, and everyone in the same situation with the same reasons will use the same behavior. To pass the utilitarian test, one specific action will lead to more favorable consequences than any alternative decision. To be ethical, the behavior must pass all three tests. © Routledge

26 Figure 5.5 General Electric’s Code of Conduct
Obey the applicable laws and regulations governing our business conduct worldwide. Foster an atmosphere in which fair employment practices extend to every member of the diverse community. Be honest, fair, and trustworthy in all your activities and relationships. Strive to create a safe workplace to protect the environment. Avoid all conflict of interest between work and personal affairs. Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees. © Routledge

27 Figure 5.6 Lockheed Martin’s Warning Signs of Unethical Behavior
It doesn’t matter how it gets done as long as it gets done. We didn’t have this conversation. No one will ever know. It sounds too good to be true. Shred that document. I deserve it. We can hide it. It’s all for a good cause. Well, maybe just this once. Everyone does it. This will destroy the competition. What’s in it for me? It’s okay if I don’t gain personally. No one will get hurt. This is a non-meeting. © Routledge

28 Managing Ethics Methods for Managing Ethics
Institute ethics codes, training and communication Set up ethics advice helplines Discipline ethics violators Conduct ethics audits Consult U.S. Sentencing Guidelines Get directors and top management commitment Have realistic objectives Appoint ethics and compliance officers Methods for Managing Ethics © Routledge

29 Business Nonmarket and Market Strategies and Ethics: 5 Is Strategic Analysis
Step 1 Step 2 Step 3 Step 4 Assess the range of moral concerns that strategic stakeholders may have about the issue. Determine the reaction of nonmarket members to the firm’s strategic action concerning the issue. Conduct a cost–benefit analysis to gauge positive or negative media coverage or publicity about the issue. Select the alternatives that represent rational and appropriate integrated strategies. © Routledge

30 Key Terms business ethics deontological ethics ethical decision guides
ethical dilemma ethical rationalization ethics audit ethics helpline generalization test justifying unethical behavior levels of moral development relativism ethics utilitarianism ethics utilitarian test universal ethics virtues ethics virtues ethics test © Routledge

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