BUS 442 Ch. 7 Business Ethics Fundamentals

Illustrative of Amoral

Early: Police departments and their very exclusive stipulations (women were likely to be excluded) Nestle: Infant formulas in third-world countries Sears: Misleading customers and selling unneeded parts (accidentally committed fraud, and didn't defraud)

Business Ethics

Ethics: Discipline that deals with moral duty and obligation, a set of moral principles and values Business Ethics: The morality and fairness in behavior, actions and practices that take place business-wise

What Ought to Be?

Managers help in identifying this answer, what management should do in a situation Several years ago, this started with a view on society and not with long-term (should instead be applied with managers now, no need for this vision)

Normative Ethics

Concerned with supplying and justifying a coherent moral system of thinking and judging, uncovering, developing, and justifying principles intended to guide behavior, actions, and decisions (WHAT IT SHOULD BE) Might be based on common sense (fairness and truth) or critical thinking upon ethical analysis (interest, rights, duty, virtue based); THIS IS WHAT THE COURSE IS OVER

Major Approaches

Conventional: How common society views business ethics (common sense) Principles: Ethics principles or guidelines justify and direct behavior, actions, and policies Ethical Tests: Short, practical questions that guide ethical decision making, behavior, and practices.

Conventional Approach to B.E. and Ethical Egoism (pt. 1)

Decisions, practices, or policies are compared to prevailing norms and society Challenge is to find which norms to use that are prevailing Ethical egoism is the principle based on the idea that the individual should maximize their own self interests as a legit factor (WIDELY HELD)

Descriptive Ethics

Describing, characterizing, and studying the morality of a people, org., culture, or society; it compares moral codes, systems, practices, beliefs, and values (WHAT IS OCCURRING BEHAVIOR-WISE, not what SHOULD)

Media Reports and Ethics

Difficult to tell if media catches scandals more often or if ethics have deteriorated; Martha Stewart and Bernie Madoff created a lot of coverage Other shows like 60 Minutes have kept ethics in the public eye, as well as websites like YouTube

Illustrative Cases of Immoral Management

Enron: Securities fraud and inflation of profits to disguise debts and cause shortages Madoff: Ponzi scheme to obtain funds for personal gain Ashleymadison.com: Immoral mission (cheating on spouse encouraged) Procter & Gamble: Espionage through going through trash Survey Results; Practices, such as theft, racism, and cheating that were immoral

Ethics and the Law

Ethical behavior is usually close to behavior required by law; law and ethics usually overlap because law embodies the notions of ethics, but ONLY the codified ethics Sometimes the law is unethical, though the law is the minimum standard of ethical behavior The HP and Enron scandals show confusion b/w law and ethics The law does not address all realms of which ethics might be tested, so both are distinct

Society Changing?

Ethics issues are arguably traced to changing society; what was considered ethical in the past is unethical, and vice versa; greed by execs have only made the issue rise Corp. boards have fallen on their top-exec duty, resulting in the continuation of scandals and the widening of the ethical problem

Different Sources of Values

Ethics/values are related; since ethics are values that drive behaviors, wrongness is, in reality, the manifestation of the ethical beliefs held by the individual Values are the concepts of the worth of certain ideas and shape one's ethics A way to see values is to consider forces outside and from the organization

Operating Strategy of Immoral

Exploiting opportunities for corporate or personal gain. Making enough money regardless of what it takes.

Sources External to Organization

External: The broad sociocultural values that have emerged through time by society. Religious: This is intertwined with ethics because the biblical tradition builds the core of the importance of work Philosophical: Reasoning for principles or morals, such as relativism and postmodernism Cultural: The synthesis of societal norms and values emanating from everyday living Legal: The most definitive force that defines what is and isn't ethical Professional: Values that are emanated from professional organizations

From What Is to What Ought to Be

In practicality, we cannot achieve our ideals, but they help form a foundation for future ethical practices, the core of normative ethics We ought to do what we can or must do, we should look what we intend, permit, and are able to accomplish

Operating Strategy of Moral

Live by sound ethical standards and through them, seek only economic opportunities that are within these standards Integrity strategy is the conception of ethics as the driving force of an organization. Ethical values aide in finding opportunities, org. system designs, and decision-making processes.

Levels of Moral Development

Moral development goes through a process of three (two-staged) levels which people evolve with thinking.

Integrity Strategy

Some good practices: Guiding values/commitments that are clear and make sense Leaders are committed, credible, and willing to take action Espoused values are integrated to normal channels of management decision-making Organization's systems and structures support and reinforce its values All managers have the skills, knowledge and competencies to make decisions

Making Ethical Judgments (pt. 2)

Questions in mind: 1) True nature of the action 2) Prevailing norms of acceptability 3) Value judgments are being made by someone about the action, as well as the perceptions of applicable norms Biggest problem with conventional is ethical relativism (picking and choosing norms to justify actions and maximize freedom)

Making Moral Management Actionable

Self-analysis and introspection will eventually be the way in which managers will recognize the need to move from immoral/amoral to moral Senior management has the leadership responsibility to encourage this movement. Amoral is ultimately and existing, undesirable condition that cannot be easily remedied; immoral and amoral must be manageable to make moral management actionable.

Habits of Moral Leaders

Seven habits of moral leaders: Passion to do right Morally proactive Consider all stakeholders Strong ethical character Obsession with fairness Undertake principled decision-making Integrate ethics wisdom with management wisdom

Introduction (pt. 2)

2008 Wall Street scandals also hurt; the Erron and WS eras Enron: Companies and CEOs (Enron, Tyco); ethics were most problematic at the lower and middle-level management levels The result of Enron was securities and accounting fraud, conspiracy to inflate profits, corrupt corporate cultures, and tax evasion

The Motivation

Altruistic: Believing in the cause Self-Interest: Benefits from other things Selfish Motive: To look good in others' eyes Regardless, the actions are best to be made regardless of these three actions; we will soon know if knowledge of such value of ethics will fuel ethics.

Immoral Management

An approach that is devoid of ethical principles or precepts and at the same time implies a positive and active opposition to what is ethical. Model states that one's motives are selfish and only care about personal gains (profitability is the goal) Legal standards are regarded as only barriers that prevent it from achieving it's goals

Tolerance of Moral Disagreement

An extension of a managerial aptitude that is present in practically all decision-making situations managers face; the ability to tolerate differences with other individuals.

Models of Management Ethics

Immoral, moral, and amoral are the models of ethical management Developing a clear understanding of the range of the approaches in which ethics or morality is a defining characteristic is a major goal Identifying the amoral model is also a major goal

PO on Ethics (pt. 3)

When "times are tough, ethics improve", when times thrive, ethics drop; ethics problems continue on regardless A renewed interest in business ethics, ethics courses, values, morals, gives a bright outlook.

Ethics, Economics, Law in a Venn Diagram

Circles represent ethical, legal, and economic responsibility Complete overlap: profit, legal, ethical (best) Eth + Leg: Not profitable Eth + Eco: Caution! Leg + Eco: Caution!

Amoral Management

Isn't just a middle ground, but is a different concent in of itself.

Positive Ethical Behaviors

Giving proper credit Straightforward and honest Employee equality Responsible steward of company assets Resisting unethical pressures Recognize/reward ethical behavior Talking about the importance of ethics.

Developing Moral Judgment

It is helpful to know how some people develop moral judgment. The major research that looks at individual development of morals is Kohlberg's levels of moral development.

Sources Internal to Organization

Individual working within the organization can cause sources internal to arise: Respect for authority Loyalty to organization Conform to principles/practices Performance/results > everything else The first three norms = "the calculus of the bottom line" Multiple or triple-bottom line are just being seen

Intentional and Unintentional

Intentional: No factoring in ethical considerations into decisions, actions, and behaviors because they believe business activity resides in a realm where moral judgments apply (different rules apply in business) Unintentional: Casual, careless about, or inattentive to the fact that their decisions may have negative effects Unconscious bias: People have unaware biases that prevent them from being objective. Four sources of unintentional: implicit forms of prejudice, favor of own group, conflict of interest, tendency to overclaim credit Structural aspects of accounting bias, ambiguity (self-serving conclusions), attachment (staying with client in good graces), and approval (reviewing may cause biases when being endorsed) Familiarity: More willing to harm strangers than individuals they know Discounting: Minimizing decisions that don't have immediate consequences Escalation: Accountant/businessperson allows judgments to accumulate and become large

Introduction (pt. 1)

Interest in business ethics has increased within the past 30 years, as well as thanks to scandals. This interest has only grown to a preoccupation or obsession. The Enron scandal was the big catalyst that caused it, performing the Enron Effect. Such pushed in an age to increased legislation about increasing financial controls (accountability of CEOs/CFOs)

Illust. of Moral

McCulloch: Withdrew from Chain Saw Manufacturers' Assoc. because of their refusal to adhere to higher safety standards Navistar: Stopping job layoffs by locating them into the needy areas Merck: No one would fund their drug, so they gave it away for free to treat river blindness

Public Opinion on Ethics (pt. 1)

Never been high, only seen as a contradiction and there is a fine line between exec and crook; they say average, very bad ethics in 2008 poll (48% avg., 38% poor) 2009 said Americans were more likely than business execs to express negativity (saying that moral compass is in the wrong direction, D/F grade in honest and ethics, and some Americans believe ethics are not used in both real life and actual business)

Operating of Amoral

Not to bridle managers with excessive ethical structure but to permit free rein within unspoken, understood tenets of the free enterprise system Compliance strategy: Submission to the law as its driving force (to comply towards ethics or integrity by the law)

Ethics of Care

One criticism made is that the research is based on a man's behavior, women perceive themselves to look at relationship maintenance and hurt avoidance Women move through three levels: self, establish connections and participate, and needs of others Some research doesn't show differences in genders Goal is to show moral development stages exist and awareness of one's own approaches to dealing with people of all stages is the best course for the organization

Conventional Approach to B.E. and Ethical Egoism (pt. 2)

One's conscience would be seen as a legit source of norms, but often poked fun at. When norms from multiple sources conflict, problems arise; TV shows can cause conflicts

Preconventional, Conventional, and Postconventional Levels

Pre: Level 1, from reaction-to-punishment to seeking-of-rewards; can influence adults as well; looks mostly at SELF Con: Level 2, from good boy/nice girl (living up to expectations) to law-and-order morality (norms are expected or needed); looks mostly at OTHERS Post: Level 3, from social-contract orientation to universal ethical principle orientation; looks mostly at HUMANKIND (rise above right and wrong and be able to justify or defend)

Making Ethical Judgments (pt. 1)

Room for variability on ethical (right, just, fair) depends on many things. Decision, action, or practice Practice to prevailing norms of acceptability (society's or another thing's standard of acceptable/unacceptable) Recognition of value judgments (what occurred by perception and what norms really are) Consensuses are more likely to be made to principle than practice (might privately engage in such practices), might cause a double standard

What Is?

Scientific and used to find the ethical behavior around us; we are real and we make mistakes

Moral Identification and Ordering

The ability to discern the relevance or non-relevance of moral factors that are introduced into a decision-making decision. Ranking particular things based on importance to the person

Moral Imagination

The ability to perceive that a web of competing economic relationships is, at the same time, a web of moral/ethical relationships. Those that look at the moral side can be able to look at the ethical scenario

Moral Evaluation

The decision phase of moral judgment and entails essential skills, such as coherence and consistency that have proved to be effective principle in other contexts.

Introduction (pt. 4)

Trust in business will take a long time to recover (micro and macro effects) Macro: Entire business system is put into question (level of maintaining its legitimacy in a complex world) Micro: Individual companies, managers, and employees must go through an onslaught of ethic challenges

Moral Management

The highest standards of ethical behavior or professional standards of conduct Management seeks to only succeed within the confines of ethical precepts and standards on society's norms. Profit, legality, and ethics are all required and desirable (will not pursue one without the others)

PO on Ethics (pt. 2)

The leader in commissioning the survey said that America faces a lack of confidence in the financial system and corporate America Broad level: General perception of ethics Narrow level: Specific perceptions of an organization The scandals that occurred have contributed to a trust gap. Fewer employees have reported misconduct, whistleblowing increased, ethical culture grew stronger, pressures of committed violations declined, BUT retaliation towards those who report misconduct increased

Integration of Managerial/Moral Competence

The underlying concept of learning how morality is changing and being implimented

Moral Obligation

The wisdom that requires the intuitive or learned understanding that moral threads are woven into the fabric of decision making

Elements of Moral Judgment

There are elements that are needed to help create moral and ethical judgment Moral imagination Morial identification/ordering Moral evaluation Tolerance of moral disagreement and ambiguity Integration of managerial/moral competence Moral obligation

Hypotheses of Management Morality

There are many, but the three are best to illustrate the point Population Hyp.: Approximation of a normal curve (amoral in the middle, tails = immoral and moral), a self-serving bias might come into play if presented Individual Hyp.: Each of these three models can operate at various times and under various circumstances Amoral Management: Another problem coming into play is the amount of people wanting to be amoral (business considered neutral)

Introduction (pt. 3)

Wall Street scandals were mostly made by companies. Some argue that the violations were rather bad judgments on risk and returns (recklessly using money) Unethical to lend money without checking a person's status (job, income, assets). This is called risk-return calcs., but many think it is a euphemism for questionable practices. Some say it was caused by greed (going for profit without calculating risk).

Four Important Ethics Questions

What is? (Descriptive) What ought to be? (Normative) How to get from #1 to #2? (Practicality) The motivation? The questions may be asked on 5 levels: Personally Organization Industry/Profession Societal Global