1. Ethics and Ethical Reasoning
Chapter 4
Ethics and Ethical Reasoning

2. Ch. 4: Key Learning Objectives
Defining ethics and business ethics
Evaluating why businesses should be ethical
Knowing why ethical problems occur in business
Identifying managerial values as influencing ethical decision making
Recognizing how people’s spirituality influences their ethical behavior
Understanding stages of moral reasoning
Analyzing ethical problems using generally accepted ethics theories

3. The Meaning of Ethics Ethics Ethical Principles Business Ethics
A conception of right and wrong conduct
Tells us whether our behavior is moral or immoral
Deals with fundamental human relationships—how we think and behave toward others and want them to think and behave toward us
Ethical Principles
Guides to moral behavior
Business Ethics
Application of general ethical ideas to business behavior

4. Sources of Ethics Notions of right and wrong come from many sources
Religious beliefs
Family background
Education
Community/neighborhood
Media influences
These experiences create a concept of ethics, morality, and socially acceptable behavior in each person
Acts as a moral compass to guide an individual when ethical dilemmas arise

5. Ethical Relativism
Concept which holds that ethical behavior should be defined by various periods in time in history, a society’s traditions, the special circumstances of the moment, or personal opinion
The meaning given to ethics would be relative to time, place, circumstance, and the person/s involved
There would be no universal ethical standards on which people around the globe could agree

6. Observations of Unethical Behavior at Work
Figure 4.1
Observations of Unethical Behavior at Work

7. Five Key Reasons Business Should be Ethical
To meet demands of business stakeholders
About three-fourths of employees surveyed in 2007 believe their
firms are considering the environment, employee well-being, and the interests of society and the community.
Meeting demands of stakeholders is good business
To enhance business performance
Research shows linkage between ethically responsible
behavior and favorable corporate financial performance
Imparts trust, promoting positive alliances among
business partners

8. Five Key Reasons Business Should be Ethical
To comply with legal requirements
Two legal requirements provide direction for companies interested in being more ethical in their business operations
U.S. Corporate Sentencing Guidelines
Sarbanes-Oxley Act of 2002
Although they apply only to U.S.-based firms, these legal requirements also provide a model for firms that operate outside the United States

9. U.S. Corporate Sentencing Guidelines
Establish standards and procedures to reduce criminal conduct
Assign high-level officer(s) responsibility for compliance
Not assign discretionary authority to “risky” individuals
Effectively communicate standards and procedures through training
Take reasonable steps to ensure compliance—monitor and audit systems, maintain and publicize reporting systems
Enforce standards and procedures through disciplinary mechanisms
Following detection of offense, respond appropriately and prevent reoccurrence

10. Sarbanes-Oxley Act of 2002
Born from the ethics scandals at Enron, WorldCom, Tyco
Seeks to ensure that firms maintain high ethical standards in how they conduct and monitor business operations
Requires executives to vouch for the accuracy of a firm’s financial reports
Requires executives to pay back bonuses based on earnings that are later proved fraudulent
Established strict rules fro auditing firms
In 2006 and 2007 regulation loosening occurred when the SEC provided more relaxed guidelines to parts of the Sarbanes-Oxley Act

11. Five Key Reasons Business Should be Ethical
To prevent or minimize harm
Overriding principle that business should
“do no harm”
Examples include not harming society with toxic
waste, protecting business from unethical employees
and unethical competitors
To promote personal morality
Knowing one works in a supportive ethical climate
contributes to sense of psychological security
People want to work for companies that do the right
thing

12. Why Ethical Problems Occur in Business
Four Primary Reasons
Personal gain and self-interest
Competitive pressure on profits
Conflicts of interest
Cross-cultural contradictions

13. Why Ethical Problems Occur in Business
Figure 4.3

14. Core Elements of Ethical Character: Managers’ Values
Managers are key to whether a company and its employees will act ethically or unethically
The values held my managers will serve as models for others who work at the company
Differences in ethical stances of U.S. versus European managers and employees
Younger generation of managers more concerned about ethics/social responsibility
A company’s CSR performance is a major factor when selecting a new employer for today’s graduating MBAs

15. Spirituality in the Workplace
Personal belief in a supreme being, religious organization, power of nature or some other life-guiding force
Organizations have responded to the increased attention to spirituality and religion at work by attempting to accommodate their employees
Opponents of spirituality at work point to the myriad of implementation issues as grounds for keeping spirituality out of the workplace
Issues include which religion should be promoted, and need for recognizing diversity of religious beliefs

16. Stages of Moral Development
From childhood to mature adulthood people move up in their moral reasoning
Earliest stages of reasoning are ego-centered
Most developed stages are principle-centered
Most managers make decisions based on criteria in levels 3 and 4
Company executives’ reasoning has wide implications both inside and outside the organization

17. Stages of Moral Development and Ethical Reasoning
Figure 4.4

18. Analyzing Ethical Dilemmas in Business
Business managers and employees need a set of decision guidelines that will shape their thinking when on-the-job ethics issues occur
These guidelines should help them
Identify and analyze the nature of an ethical problem, and
Decide which course of action is likely to produce an ethical result

19. Four Methods of Ethical Reasoning
Virtues
Values and character are critical determining factors
Utilitarian
Compares benefits and costs of a decision, policy or action
Costs and benefits can be economic, social or human
Rights
Person or group is entitled to something or to be treated in a certain way
Examples of basic human rights are right to life, safety, and due process
Justice
Means benefits and burdens are distributed equally, according to some accepted rule

20. Four Methods of Ethical Reasoning
Figure 4.5

21. Applying Ethical Reasoning to Business Activities
Can use the virtues, utility, rights, and justice framework as a tool to analyze real business ethics dilemmas
Once the ethical analysis is complete, the decision maker should ask the question: Do all of the above ethics approaches lead to the same decision?
If all the answers are “Yes”, the proposed action is ethical
If all the answers are “No”, the action is not ethical and needs to be reconsidered
If “Yes” and “No” answers are mixed, you must decide which takes priority