1. Business Ethics Fundamentals
Chapter 7
Business Ethics Fundamentals
Business Ethics Fundamentals
Chapter 7
Prepared by Deborah Baker Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved

2. Chapter 7 Learning Outcomes
Business Ethics Fundamentals
Chapter 7 Learning Outcomes
Describe how the public regards business ethics.
Define business ethics and appreciate the complexities of making ethical judgments.
Explain the conventional approach to business ethics.
Analyze economic, legal, and ethical aspects by using a Venn Model.
Enumerate and discuss the four important ethics questions.
Identify and explain three models of management ethics.
Describe Kohlberg’s three levels of developing moral judgment.
Identify and discuss the elements of moral judgment.

3. Chapter 7 Outline The Public’s Opinion of Business Ethics
Business Ethics Fundamentals
Chapter 7 Outline
The Public’s Opinion of Business Ethics
Business Ethics: What Does It Really Mean?
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
Key Terms
Discussion Questions
Business and Society
Business Defined
Society Defined
The Macroenvironment
Role of Pluralism
Weaknesses and Strengths of Pluralism
Business Versus Multiple Publics and Systems
Our Special-Interest Society
Business Criticism and Corporate Response
Factors in the Social Environment
Criticisms: Use and Abuse of Power
Response: A Changing Social Environment and Social Contract
Focus of the Book
Managerial Approach
Two Broad Classes of Social Issues
The Ethics Theme
Structure of the Book
Summary

4. Introduction to Chapter 7
Business Ethics Fundamentals
Introduction to Chapter 7
Business Ethics
Public’s interest in business ethics has heightened during the last three decades
Public’s interest in business ethics has been spurred by headline-grabbing scandals
The scandals of the early 2000s, beginning with Enron, created and defined the “ethics industry”

5. Introduction to Chapter 7
Business Ethics Fundamentals
Introduction to Chapter 7
Recent Ethics Scandals
Enron
WorldCom
Arthur Anderson
Tyco
Adelphia
Global Crossing
Dynegy
HealthSouth
Boeing
Martha Stewart
Parmalat (Italy)
Computer Associates
Figure 7-1

6. Inventory of Ethical Issues in Business
Chapter 7
Business Ethics Fundamentals
Inventory of Ethical Issues in Business
Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community / Public Interest
Figure 7-2

7. The Public’s Opinion of Business Ethics
Chapter 7
Business Ethics Fundamentals
The Public’s Opinion of Business Ethics
Public Agenda Survey Findings
The most egregious violators of business ethics were corrupt executives who protected their own wealth
Greed for money and power and a weakening sense of personal values have been behind the recent ethics scandals
People define business ethics in broad terms and are concerned with how it has affected them
Many participants thought it was possible for executives to be both ethical and successful
The media and financial press are not regarded as vigilant watchdogs protecting the public interest

8. The Public’s Opinion of Business Ethics
Chapter 7
Business Ethics Fundamentals
The Public’s Opinion of Business Ethics
LRN Ethics Study Survey Findings
Three out of four employees reported encountering ethical lapses on the job
More than one in three respondents said these incidents happen at least once a week
Ten percent believed that a current issue in their company could create a business scandal if discovered
Younger workers reported higher levels of witnessing ethical lapses and being distracted by them

9. Media Reporting on Business Ethics
Chapter 7
Business Ethics Fundamentals
Media Reporting on Business Ethics
The media are reporting ethical problems more frequently and fervently
In-depth investigative reporting of business ethics on TV shows as 60 Minutes, 20/20, Dateline NBC, Primetime Live, and FRONTLINE
Internet coverage in the form of webpages and blogs has expanded in recent years

10. Business Ethics Today versus Earlier Periods
Chapter 7
Business Ethics Fundamentals
Business Ethics Today versus Earlier Periods
Ethical Problem
Society’s Expectations of Business Ethics
Actual Business Ethics
1960s
Early 2000s
Time
Expected and Actual Levels of Business Ethics
Figure 7-3

11. Business Ethics: What Does It Really Mean?
Chapter 7
Business Ethics Fundamentals
Business Ethics: What Does It Really Mean?
Ethics
The discipline that examines good or bad practices within the context of moral duty and obligation
Moral conduct
Relates to principles of right and wrong in behavior
Business Ethics
Concerned with good and bad or right and wrong behavior and practices that take place in business

12. Business Ethics: What Does It Really Mean?
Chapter 7
Business Ethics Fundamentals
Business Ethics: What Does It Really Mean?
Descriptive Ethics
Involves describing, characterizing and studying morality
Focuses on “What is”
Normative Ethics
Concerned with supplying and justifying moral systems
Focuses on “What ought / ought not to be”

13. Three Approaches to Business Ethics
Chapter 7
Business Ethics Fundamentals
Three Approaches to Business Ethics
Conventional
Approach
Based on how normal society today
views business ethics
Principles
Based upon the use of ethics principles to direct behavior, actions and policies
Ethical Tests
Based on short, practical questions to guide ethical decision making and behavior

14. Conventional Approach
Chapter 7
Business Ethics Fundamentals
Conventional Approach
The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms
Decision or Practice
Prevailing Norms of Acceptability

15. Sources of Ethical Norms
Chapter 7
Business Ethics Fundamentals
Sources of Ethical Norms
Fellow Workers
Family
Friends
The Law
Regions of Country
Profession
Employer
Society at Large
Local Community
Religious Beliefs
The Individual
Conscience
Is mandatory vaccinations ethical?
See Link:
Figure 7-4

16. Ethics and the Law Why do firms behave illegally?
Chapter 7
Business Ethics Fundamentals
Ethics and the Law
Why do firms behave illegally?
What are the consequences of behaving illegally?

17. Making Ethical Judgments
Chapter 7
Business Ethics Fundamentals
Making Ethical Judgments
Behavior or act that has been committed
Prevailing norms of acceptability
Value judgments and perceptions of the observer
compared with
Figure 7-5

18. The Conventional Approach to Business Ethics
Chapter 7
Business Ethics Fundamentals
The Conventional Approach to Business Ethics
What is the true nature of the practice, behavior, or decision that occurred?
What are society’s (or business’s) prevailing norms of acceptability?
What value judgments are being made by someone about the practice or behavior, and what are that person’s perceptions of applicable norms?

19. Ethics, Economics, and Law
Chapter 7
Business Ethics Fundamentals
Ethics, Economics, and Law
Figure 7-6

20. Four Important Ethical Questions
Chapter 7
Business Ethics Fundamentals
Four Important Ethical Questions
What is?
What ought to be?
How to we get from what is to what ought to be?
What is our motivation in all this?

21. Five Levels for Questions
Chapter 7
Business Ethics Fundamentals
Five Levels for Questions
Level of the individual
Level of the organization
Level of the industry or profession
Societal level
Global or international level

22. What Is? What are your personal ethics?
Chapter 7
Business Ethics Fundamentals
What Is?
What are your personal ethics?
What are your organization's ethics?
What are the ethics of your industry?
What are society’s ethics?
What are global ethics?

23. What Ought to Be? How ought we treat our aging employees?
Chapter 7
Business Ethics Fundamentals
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?
How should we treat long-time employees when the company is downsizing?
Should we outsource aspects of production to China or India?

24. The Practical Question
Chapter 7
Business Ethics Fundamentals
The Practical Question
What are we able to accomplish?
What circumstances permit us to accomplish?
What do we intend to accomplish?

25. Three Models of Management Ethics
Chapter 7
Business Ethics Fundamentals
Three Models of Management Ethics
Immoral management
Moral management
Amoral management

26. Three Models of Management Ethics
Chapter 7
Business Ethics Fundamentals
Three Models of Management Ethics
Immoral Management
An approach devoid of ethical principles and active opposition to what is ethical
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

27. Characteristics of Immoral Managers
Chapter 7
Business Ethics Fundamentals
Characteristics of Immoral Managers
Intentionally do wrong
Self-centered and self-absorbed
Care only about self or organization’s profits / success
Actively oppose what is right, fair, or just
Exhibit no concern for stakeholders
Are the “bad guys”
An ethics course probably would not help them
Figure 7-7

28. Illustrative Cases of Immoral Management
Chapter 7
Business Ethics Fundamentals
Illustrative Cases of Immoral Management
Stealing petty cash
Cheating on expense reports
Taking credit for another’s accomplishments
Lying on time sheets
Coming into work hungover
Telling a demeaning joke
Taking office supplies for personal use
Showing preferential treatment toward certain employees
Rewarding employees who display wrong behaviors
Harassing a fellow employee

29. Characteristics of Moral Managers
Chapter 7
Business Ethics Fundamentals
Characteristics of Moral Managers
Conform to high level of ethical or right behavior
Conform to high level of 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
Are the “good guys”
Figure 7-8

30. Chapter 7
Business Ethics Fundamentals
Integrity Strategy
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 organization’s systems support and reinforce its values
All managers have the skills, knowledge, and competencies to make ethically sound decisions daily

31. Chapter 7
Business Ethics Fundamentals
Ethics Criteria
Be a leader in the company's field, showing the way ethically
Sponsor programs that demonstrate sincerity and ongoing vibrancy, and reach deep into the company
Be a significant presence on the national scene, so the company’s ethical behavior sends a loud signal
Stand out in at least one area
Demonstrate the ability to face a recent challenge and overcome it with integrity

32. Habits of Moral Leaders
Chapter 7
Business Ethics Fundamentals
Habits of Moral Leaders
They have a passion to do right
They are morally proactive
They consider all stakeholders
They have a strong ethical character
They have an obsession with fairness
They undertake principled decision making
They integrate ethics wisdom with management wisdom

33. Positive Ethical Behaviors
Chapter 7
Business Ethics Fundamentals
Positive Ethical Behaviors
Giving proper credit where it is due
Being straightforward and honest with other employees
Treating all employees equally
Being a responsible steward of company assets
Resisting pressure to act unethically
Recognizing and rewarding ethical behavior of others
Talking about the importance of ethics and compliance on a regular basis

34. Characteristics of Amoral Managers
Chapter 7
Business Ethics Fundamentals
Characteristics of Amoral Managers
Intentionally Amoral Managers:
Don’t think ethics and business should “mix”
Business and ethics are existing in separate spheres
A vanishing breed
Unintentionally Amoral Managers:
Don’t consider the ethical dimension of decision making
Don’t “think ethically”
Have no “ethics buds”
Well-intentioned, but morally casual or unconscious
Ethical gears are in neutral
Figure 7-9

35. Hypotheses Regarding Moral Management Models
Chapter 7
Business Ethics Fundamentals
Hypotheses Regarding Moral Management Models
Population Hypothesis
Individual Hypothesis

36. Three Models of Management Morality and Emphases on CSR
Chapter 7
Business Ethics Fundamentals
Three Models of Management Morality and Emphases on CSR
Figure 7-11

37. Chapter 7
Business Ethics Fundamentals
Moral Management Models and Acceptance or Rejection of Stakeholder Thinking
Figure 7-12

38. Making Moral Management Actionable
Chapter 7
Business Ethics Fundamentals
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 amoral management exists and can be remedied

39. Developing Moral Judgment
Chapter 7
Business Ethics Fundamentals
Developing Moral Judgment
Kohlberg’s Levels of Moral Development
Level 1
Preconventional Level
Level 2
Conventional Level
Level 3
Postconventional Level

40. Developing Moral Judgment
Chapter 7
Business Ethics Fundamentals
Developing Moral Judgment
Figure 7-13

41. Why Managers / Employees Behave Ethically
Chapter 7
Business Ethics Fundamentals
Why Managers / Employees Behave Ethically
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
Figure 7-14

42. Feminist Views of Kohlberg’s Research
Chapter 7
Business Ethics Fundamentals
Feminist Views of Kohlberg’s Research
Recognize their own needs and needs of others
Level 3
Establish connections and participate in social life
Level 2
Sole Concern for Self
Level 1

43. External Sources of a Manager’s Values
Chapter 7
Business Ethics Fundamentals
External Sources of a Manager’s Values
Philosophical values
Cultural values
Legal values
Religious values
Professional values
The Web of Values

44. Internal Sources of a Manager’s Values
Chapter 7
Business Ethics Fundamentals
Internal Sources of a Manager’s Values
“Norms” prevalent in business organizations 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

45. Elements of Moral Judgment
Chapter 7
Business Ethics Fundamentals
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

46. Key Terms Amoral management Amoral management: intentional
Chapter 7
Business Ethics Fundamentals
Key Terms
Amoral management
Amoral management: intentional
Business ethics
Compliance strategy
Conventional approach to business ethics
Descriptive ethics
Ethical relativism
Ethics
Immoral management
Integrity strategy
Kohlberg’s levels of moral development
Moral development
Moral management
Morality
Normative ethics
Unintentional