ETHICS

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 the core elements of ethical character
Understanding stages of moral reasoning
Analyzing ethical problems using generally accepted
ethics theories

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The Meaning of Ethics

Ethics
A conception of right and wrong conduct
Tells us whether our behavior is moral or immoral
Deals with fundamental human relationshipshow 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
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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 him/her when ethical
puzzles arise
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Ethical Relativism
Concept that holds that ethical behavior should be defined
by various periods in time in history, a societys 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
Is an important and controversial issue

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Observations of Unethical Behavior at

Work

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Five Key Reasons Business Should be

Ethical
1.

To meet demands of business stakeholders

10 country poll shows 90% of general public placed
business ethics standards above traditional
corporate goals

2.

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
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Five Key Reasons Business Should be

Ethical
3. To comply with legal requirements
U.S. Corporate Sentencing Guidelines provides
that if an employee of a firm is found guilty
of wrong-doing, the sentence may be reduced if
preventive measures were in place in the
company

Measures judges look for in assessing this

culpability (degree of blame) shown on next slide

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Five Key Reasons Business Should be

Ethical
3. To comply with legal requirements (cont.)

2002 Sarbanes-Oley legislation was approved as

result of corporate accounting scandals like
Enron, and WorldCom
Major provisions of Sarbanes-Oxley shown on
next slide

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Five Key Reasons Business Should

be Ethical
4. 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

5. 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
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Why Ethical Problems Occur in

Business
4 Primary Reasons
1. Personal gain and self-interest
2. Competitive pressure on profits
3. Conflicts of interest
4. Cross-cultural contradictions
Chart on next page provides background for each reason

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Why Ethical Problems Occur in Business

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Core Elements of Ethical Character:

Managers Values
Managers values set the ethical tone for the company

Corporate scandals has led to a crisis of confidence in business

leadership

Differences in ethical stances of U.S. versus European managers and

employees

Survey of new U.S. CEOs shows concern for short-term profits

One in four managers emphasizes moral values

Younger generation of managers more concerned about ethics/social

responsibility

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Virtue Ethics
Part of business ethics theory derived from Philosophy
(Aristotle)
Posits that a person with good character traits will use these
values to show good behavior
Virtue ethics holds that ethics is not rule determined but
based on a way of being and valuable characteristics
Stated differently moral virtues are habits that enable a
person to live according to reason and avoid extremes

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Personal Spirituality
Personal belief in a supreme being, religious organization,
power of nature or some other life-guiding force
In past 10 years has been a rise in spirituality at work
McKinsey survey of Australian companies showed increase
in productivity and reduced turnover for companies that
provided spirituality outlets for employees
Is controversial, given separation of church and state and
common view that business is secular
Issues include which religion should be promoted, and
need for recognizing diversity of religious beliefs
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Stages of Moral Development

Well researched model by Dr. Lawrence Kohlberg of how
individuals grow and mature in relation to moral reasoning and
decision-making
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
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inside and outside the organization

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Stages of Moral Development and

Ethical Reasoning

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Analyzing Ethical Dilemmas in Business

Model presented in next set of slides is powerful tool
for reasoning through ethical problems that occur in
business
Based on three standards of ethical reasoning
borrowed from philosophy
Presents guidelines to

Identify and analyze the nature of an ethical problem, and

Decide which course of action is likely to produce an ethical
result

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Three Approaches to Ethical Reasoning

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

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Three Methods of Ethical Reasoning

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Applying Ethical Reasoning to Business

Activities
Can use the Utility, Rights and Justice framework as a tool to analyze real
business ethics dilemmas
For each possible action or decision, ask the three critical questions
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

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Analytical Approach to Ethical Problems

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What is Whistle-blowing?
When an employee in an organization uncovers wrongdoing,
attempts to get it resolved within the organization and is unable
to (either because mechanisms are not in place or there is no
response), they then choose to report the situation outside of the
organization (e.g. media or government agency) to achieve
resolution
Becoming a whistle-blower is challenging and potentially
hazardous to ones career
Examples of government protection for whistleblowers around
the world shown in next slide
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Whistle-blowing Protection Around the

World
Summary of some legislative efforts to protect whistle-blowers in various countries:
European Union The EU published a charter for whistle-blower protection,
identifying the terms under which commission staff may blow the whistle, imposing
a duty upon officials to report suspected wrongdoing, and outlining the channels for
reporting malpractice.
Ghana A whistle-blower protection act has been proposed to offer rewards and
protection to people who volunteer information leading to the prosecution of whitecollar criminals.
Israel This country adopted whistle-blowing protection legislation that protects
corporate and government workers.
South Africa The Protected Disclosures Act 26 prohibits employers from
subjecting an employee to an occupational detriment (e.g., disciplinary action,
suspension, dismissal, demotion, harassment, etc.) for raising concerns about
unlawful or irregular conduct.
South Korea The Anti-Corruption Act established the Korea Independent
Commission Against Corruption, whose mission includes the encouragement,
protection, and compensation of whistle-blowers.
United Kingdom The U.K. Public Interest Disclosure Act protects most workers
from retaliation by their employers, including dismissal, disciplinary action, or
transfer.
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Stigmas Against Whistle-blowers

Divided loyalties
In some Asian countries, members of the company are treated as family
members and it is considered wrong to report on family members

History
The country may have a tragic history of reporting on others

Logistics
Employees of global companies may be faced with numerous time
zones and language differences that could prevent whistle-blowing or
make it more difficult

Fear of retribution
Despite government laws to protect whistle-blowers, many employees
of global businesses fear retaliation

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THE END

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