1. Copyright © 2008 McGraw-Hill Ryerson Ltd.1 Chapter Five Ethics of Business: The Theoretical Basis Canadian Business and Society: Ethics & Responsibilities

2. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.2 Chapter Outline Business Ethics: Key Terms Ethical Implications in Business Influences on Ethical Behaviour Theoretical Basis for Ethical Conduct Moral Reasoning Process Kohlberg’s Stages of Moral Development

3. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.3 Business Ethics Ethics of business: rules, standards, codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations. Value judgments: subjective evaluations of what is considered important. Moral standards: the means by which individuals judge their actions and the actions of others.

4. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.4 Types of Ethical Assessment Amoral Awareness of Implications Individual and Societal Influences Value judgments Moral standards Systematic Analysis

5. Influences on Ethical Behaviour Individual morals National and ethnic cultures Government legislation and regulation The legal system Religion Colleagues or peers Education Media Corporate mission, vision and values statements Union Contracts Competitive behavour Activist or advocacy groups Business or industry organizations Professional associations Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.5

6. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.6 Self-Interest (Ethical Egoism) Individuals or corporations set their own standards for judging the ethical implications of their actions; only the individual’s values and standards are the basis for actions.

7. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.7 Egoism (Self-interest) Self-interest not necessarily the same as: selfishness, greed, disregard for the rights and interests of others, hedonism, or materialism. Not “eat, drink and be merry” That’s not in your best interest

8. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.8 Egoism (Self-interest) Look out for # 1 No moral obligation to help others Moral obligation is to do the best you can do for yourself Can involve helping others as long as it furthers your own interests

9. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.9 Egoism (Self-interest) Self-interest to some degree is always present Short-term vs. Long-term Negative light Enlightened egoist Scale

10. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.10 Personal Virtues Ethic An individual’s or corporation’s behaviour is based upon being a good person or corporate citizen with traits such as courage, honesty, wisdom, temperance, and generosity.

11. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.11 Personal Virtues Ethic Honor, pride, and self-worth Not about kindness or compassion Not about rights or benefits All about the character of actions Ask, how would I feel if my actions were explained on television?

12. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.12 Ethics of Caring Gives attention to specific individuals or stakeholders harmed or disadvantaged and their particular circumstances.

13. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.13 Ethics of Caring Responsibility to reduce harm or suffering of others Golden rule: Do unto others as you would want done to you.

14. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.14 Ethics of Caring Upside for business: Flexible Quick response Downside for business: Miss the big picture Subjective criteria

15. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.15 Government Requirements Ethic The acceptance of a code of laws as the governing rules of society or as a contract with society that determines what is considered right or appropriate behaviour. The law represents the minimal moral standard.

16. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.16 Government Requirements Ethic Legal system and a code of laws Government enforces obedience to provide fair competition and peace “It’s legal so it’s okay” Do laws cover everything?

17. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.17 Utilitarian Ethic Focuses on the distribution of benefits and harms to all stakeholders with the view to maximizing benefits. “The greatest good for the greatest number.”

18. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.18 Utilitarian Ethic Cost-Benefit analysis Good means happiness or pleasure Anything has the potential of being morally right Take the long-term into account Can we predict the future?

19. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.19 Universal Rules Ethic Ensures that managers or corporations have the same moral obligations in morally similar situations. Treat people as means in themselves (i.e., with respect) and never as a means to one’s own ends.

20. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.20 Universal Rules Ethic Goal: eliminate self-interest Create rules and morals that are fair to everyone Only act if you are willing for it to become a universal law Drawback: no exceptions

21. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.21 Individual Rights Ethic Relies on a list of agreed upon rights for everyone that will be upheld by everyone and that becomes the basis for deciding what is right, just, or fair. Examples: Rights to safety, information, privacy, property. “Universal Declaration of Human Rights”

22. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.22 Economic Efficiency Ethic Judges the moral implications of a decision by its economic consequences and provides the moral justification for a market system. Adam Smith: By focusing on efficient operations, profits are maximized, and society ultimately benefits.

23. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.23 Economic Efficiency Ethic Market and legal constraints No wasted resources Environmental sustainability Economic efficiency Competitive effectiveness

24. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.24 Ethics of Justice Considers that moral decisions are based on the primacy of a single value: justice. Social contract

25. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.25 Ethics of Justice Different types of justice: Procedural justice Corrective justice Retributive justice Distributive justice

26. Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.26 Ethics of Justice Benefits: Logical and impartial process Equal rights Drawbacks: Who has moral authority? Stakeholder may be overlooked Impersonal, inflexible, cold and uncaring Markets are unjust