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Business and society ethics sustainability and stakeholder management 9e chapter 7

© 2015 Cengage Learning


Chapter 7

Business Ethics

© 2015 Cengage Learning


Learning Outcomes
1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities of making


ethical judgments.
Explain the conventional approach to business ethics. Differentiate
it from the principles approach and ethical tests approach.
Analyze economic, legal, and ethical aspects of a decision by using
a Venn Model.
Identify and explain three models of management ethics. Give
examples of each.
Describe and discuss Kohlberg’s three levels of developing moral
Identify and discuss the elements of moral judgment.

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Chapter Outline

The Public’s Opinion of Business Ethics
Business Ethics: Meaning, Types, Approaches
Ethics, Economics and Law - A Venn Model
Three Models of Management Ethics?
Making Moral Management Actionable
Developing Moral Judgment
Elements of Moral Judgment

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Business Ethics Scandals
• The public’s interest in business ethics is at
an all-time high, spurred by scandals.

• The Enron scandal impacted business so

greatly it is called “The Enron Effect.” But
then followed more scandals:
• Worldcom,
Worldcom Tyco,
Tyco Arthur Andersen
And then the Wall Street financial scandals:
• AIG,
AIG Bear Stearns,
Stearns Lehman Bros,
Bros Fannie Mae,
Freddie Mac,
Mac and Bernie Madoff

• Business will never be the same.
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The Public’s Opinion
of Business Ethics (1 of 2)
• The public’s view of business ethics has
never been very high.

• Anecdotal evidence suggests that many

people see business ethics as an oxymoron,
and think that there’s only a fine line
between a business executive and a crook.

• A Gallup poll taken in December, 2012,

revealed that only 21 % of the public
thought business executives had high or
very high ethics.
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The Public’s Opinion
of Business Ethics

(2 of 2)

National Business Ethics Survey Findings •Observed ethical misconduct at work has decreased
slightly, from 49% to 45%.
•Reporting bad behavior (whistle-blowing) is on the
rise. from 63% to 65%.
•Retaliation against those who report misconduct has
increased sharply, to 22% experienced retaliation.
•Pressure to compromise is near the all-time high.
•Weak ethical cultures – the percentage of companies
with weak ethics cultures increased to almost record
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Are the Media Reporting Business
Ethics More Vigorously?

It is sometimes difficult to tell whether
business ethics have really deteriorated or
whether the media is doing a more thorough
job of reporting ethics violations.
There is no doubt that news media outlets are
reporting ethical problems more frequently
and fervently.
The media had a field day with the Bernie
Madoff Ponzi scheme which defrauded
thousands of investors out of $50 billion.
Investigate reporting on ethics has been shown
on 60 Minutes, 20/20, Dateline NBC, Rock
Center and Frontline.
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Is Society Changing?
Former U.S. Treasury Secretary, Michael

“People in business have not suddenly become
immoral. What has changed are the contexts in
which corporate decisions are made, the
demands that are being made on business, and
the nature of what is considered proper
corporate conduct.”

•History shows that a good number of what are now
called unethical practices were at one time
considered acceptable.
•Or it may be that those practices never were
acceptable to the public, but because they were not
known, it seemed they were tolerated.
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Business Ethics Today versus Earlier
Expected and Actual Levels
of Business Ethics

Society’s Expectations
of Business Ethics

Ethical Problem
Business Ethics

Ethical Problem


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Business Ethics:
Meaning, Types, Approaches (1 of 2)
Ethics – is the discipline that deals with moral
duty and obligation.

Moral Conduct - relates to principles of right,
wrong, and fairness in behavior.

Business Ethics •Is concerned with morality and fairness in
behavior, actions, and practices that take place
within a business context.
•Is the study of practices in organizations and is a
quest to determine whether these practices are
acceptable or not.
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Business Ethics:
Meaning, Types, Approaches (2 of 2)
Descriptive Ethics •Involves describing, characterizing, and studying
•Focuses on what is occurring.

Normative Ethics •Focuses on what ought or should be occurring.
•Demands a more meaningful moral anchor than
just “everyone is doing it.”
Normative Ethics is our primary concern in this
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Three Major Approaches
to Business Ethics
Conventional Approach •Based on how the average person views business
ethics, and on common sense.

Principles Approach •Based on the use of ethics principles to justify
and direct behavior, actions, and policies.

Ethical Tests Approach •Based on short, practical questions to guide
ethical decision making and behavior and
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The Conventional Approach
to Business Ethics
The conventional approach to business ethics involves a
comparison of a decision or practice to prevailing
societal norms.

Ethical Egoism •An ethical principle based on the idea that the individual
should seek to maximize his or her own self interests as a
legitimate factor.
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Sources of Ethical Norms

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Ethics and the Law
• The law and ethics can overlap in many
• The law is a reflection of what society
thinks are minimal standards of conduct
and behavior.
• Research of illegal corporate behavior
focuses on two questions:
1. What leads firms to behave illegally?
2. What are the consequences of engaging
in illegal behavior?
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Making Ethical Judgments

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The Danger of Ethical Relativism
• A serious danger of using the
conventional approach to business ethics
Ethical Relativism • One picks and chooses which source of
norms one wishes to use based on what
will justify current actions or maximize

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Ethics, Economics, and Law –
A Venn Model

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Three Models of
Management Ethics
Immoral Management •An approach devoid of ethical principles and an active
opposition to what is ethical.
•The operating strategy of immoral management is
focused on exploiting opportunities for corporate or
personal gain.
Moral Management •Conforms to highest standards of ethical behavior or
professional standards of conduct.
Amoral Management –
•Different in nature from the others, it has two kinds:
• Intentional: Does not consider ethical factors.
• Unintentional: Casual or careless about ethical
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Characteristics of Immoral ManagersThese Managers:

Intentionally do wrong

Are Self-centered and self-absorbed

Care only about self or organization’s profits or

Actively oppose what is right,
right fair, or just

Exhibit no concern for stakeholders

Are the “bad guys”

•An ethics course probably would not help them
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Examples 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
• Rewarding employees who display wrong behaviors
• Harassing a fellow employee
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Characteristics of Moral Managers
These Managers:

•Conform to the highest standards of ethical
behavior or professional standards of conduct.
•Ethical Leadership is commonplace.
•Their goal is to succeed within the confines of
sound ethical precepts
•Demonstrate high integrity in thinking,
speaking and doing.
•Follow both the letter and the spirit of the law
•Possess an acute moral sense and moral
•Moral managers are the “good guys”
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Habits of Moral Leaders 1. They have a passion to do right.
2. They are morally proactive.
3. They consider all stakeholders.
4. They have a strong ethical character.
5. They have an obsession with fairness.
6. They undertake principled decisionmaking.
7. They integrate ethics wisdom with
management wisdom.
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