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  • There is an appropriate caution about influencing behavior within a classroom. Part of this hesitation involves the potential for abuse; expecting teachers to influence behavior may be viewed as permission for teachers to impose their own views on students. Many believe that teachers should remain value-neutral in the classroom and respect a student’s own views. Another part of this concern is that there can be a narrow line between motivating students and manipulating students. There are many ways to influence someone’s behavior, including threats, guilt, pressure, bullying, intimidation. Some of the executives involved in the worst of the recent corporate scandals were very good at using some of these means to motivate the people who worked for them. Presumably, none of these approaches belong in a college classroom, and especially not in an ethical classroom. But not all forms of influencing behavior raise such concerns. There is a major difference between manipulating someone and persuading someone, between threats and reasons. This textbook resolves the tension between knowledge and behavior by emphasizing ethical judgment, ethical deliberation, ethical decision-making. We agree with those who believe that an ethics class should strive to produce more ethical behavior among the students who enroll. But we believe that the only academically and ethically legitimate way to do this is through careful, and reasoned decision-making. Our fundamental assumption is that a process of rational decision-making, a process that involves careful thought and deliberation, can and will result in behavior that is both more reasonable and more ethical.
  • Example : Perhaps this view is not surprising after all. Consider any course within a business school curriculum. Doesn’t a management course aim to create better managers? Wouldn’t we judge as a failure any finance or accounting course that denied a connection between the course material and financial or accounting practice? Every course in a business school assumes a connection between what is taught in the classroom and appropriate business behavior. Classes in management, accounting, finance, marketing all aim to influence students’ behavior. All assume that the knowledge and reasoning skills learned in the classroom will lead to better decisions-making and therefore better behavior within a business context. A business ethics class is no different. While few teachers think that it is our role to tell students the right answers and proclaim what they ought to think and how they ought to live, fewer still think that there should be no connection between knowledge and behavior. Our role should not be to preach ethical dogma to a passive audience, but to treat students as active learners and engage them in an active process of thinking, questioning, and deliberating. Taking Socrates as our model, philosophical ethics rejects the view that passive obedience to authority or the simple acceptance of customary norms is an adequate ethical perspective. Teaching ethics must, on this view, involve students thinking for themselves. The decision-making model that will be presented in the next chapter offers one process of such ethical analysis, deliberation, and reasoning.
  • Definitions: Ethics is not something one abides by when convenient and then discards if too much trouble. All too often, firms in distress say they can’t “afford” to be ethical when their very existence is on the line. The bottom line is that they can’t afford not to be ethical at that point. [ Process: Later you’ll ask participants if there’s anything they would quit their job over. At this slide, you want to point out that firms, too, should have limits. There should be things they shouldn’t do and, if standing by their ethics means failing to survive, maybe they weren’t meant to survive.]
  • Social sciences such as psychology and sociology also examine human decision-making and actions, but these sciences are descriptive rather than normative. They provide an account of how and why people do act the way they do; as a normative discipline, ethics seeks an account of how and why people should act, rather than how they do act.
  • Ethical business leadership is exactly this skill: to create the circumstances in which good people are able to do good, and bad people are prevented from doing bad. Example: The Enron case provides an example. Sherron Watkins, an Enron vice president, seemed to understand fully the corruption and deception that was occurring within the company and she took some small steps to address the problems. But when it became clear that her concerns might be used against her by her boss, she backed off. So, too, with some of the Arthur Andersen auditors involved. When some individuals raised concerns about Enron’s accounting practices, their supervisors pointed out that the $100 million annual revenues generated by the Enron account provided good reasons to back off. The Decision Point, below, exemplifies the culture present at Enron during the heat of its downfall. Refer to: DECISION POINT Sherron Watkins
  • In essence, managerial decision-making will always involve both aspects of ethics. Each decision made by a business manager not only involves a personal decision, but also involves making a decision on behalf of, and in the name of, an organization that exists within a particular social, legal, and political environment. Within a business setting, individuals will constantly be asked to make decisions affecting both their own personal integrity and their social responsibilities. Refer to: Decision Point Management and Ethics
  • Company’s core values could refer to financial, religious, legal, historical, nutritional, political, scientific, and aesthetic values.
  • Example: One approach to Malden Mills, from the perspective of ethics, steps back from the facts of the situation to raise such questions as: What should the manager do? What are the rights and responsibilities involved? What advice ought Feuerstein’s tax accountant or human resource manager offer? What good will come from this situation? Is Feuerstein being fair, just, virtuous, kind, loyal, trustworthy ? This normative approach to business is at the center of business ethics. Ethical decision-making involves the basic categories, concepts, and language of ethics: shoulds, oughts, rights and responsibilities, goodness, fairness, justice, virtue, kindness, loyalty, trustworthiness, honesty, and the like.
  • Can’t the law answer our ethical dilemmas? [ Process: ask the participants to answer the slide’s questions.]
  • Consider one law that has significant impact of business decision-making: the Americans with Disability Act. This law requires employers to make reasonable accommodations for employees with disabilities. But what counts as a disability and what counts as a reasonable accommodation? Over the years, claims have been made that relevant disabilities include obesity, depression, dyslexia, arthritis, hearing loss, high blood pressure, facial scars, and the fear of heights. Whether or not such conditions are covered under the law will depend on a number of factors, including how severe the illness is and how it affects the employee’s ability to work. Imagine that you are a corporate human resource manager and an employee asks that you make reasonable accommodations for her allergy? How would you decide if allergies and hay-fever are disabilities under the Americans with Disabilities Act? The legal answer is ambiguous. The law offers general rules that get specified in case law. Most of the laws that concern business are based on past cases that establish legal precedents. Each precedent applies general rules to the specific circumstances of an individual case. In most business situations, asking “Is this legal?” is really to ask “Are these circumstances similar enough to past cases that the conclusions reached in those cases will also apply here?” Since there will always be some differences between cases, this will always remain an open question. Thus, there is not unambiguous answer to the conscientious business manager who wishes simply to obey the law. One simply cannot find the applicable rule, apply it to the situation, and deduce a decision from it.
  • According to this tradition, science is the great arbiter of truth. Science provides the methods and procedures for determining what is true. Thus, the scientific method can be thought of as the answer to the fundamental questions of theoretical reason: What should we believe?
  • These traditions, or what are often referred to as ethical theories, explain and defend various norms, standards, values, and principles that contribute to responsible ethical decision-making.
  • Lec1

    1. 1. BUSINESS ETHICS Lecture 1 AP. Azmi Ariffin MBA, CA (M), IIAMcGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. ETHICS IS TOUGHER THAN YOUTHINK . . .A person with outward courage dares to die.A person with inward courage dares to live. - Lao Tzu 1-2
    3. 3. CHAPTER 1 – The Nature of Moralityo Ethics & business ethicso Ethics deals with individual character and the moral rules that govern and limit our conduct. It investigates questions of right and wrong, duty and obligation and moral responsibility.o Business ethics is the study of what constitutes right and wrong (or good and bad) human conduct in a business context. Closely related moral questions arise in other organizational contexts. 1-3
    4. 4. Moral vs nonmoral standardso Moral standards concern behavior that is of serious consequence to human welfare, that can profoundly injure or benefit people.o Moral standards take priority over other standards, including self-interest.o The soundness of moral standards depends on the adequacy of the reasons that support/justify them – depends on the quality of the arguments/reasoning that supports them. 1-4
    5. 5. Morality & etiquetteo Etiquette refers to the norms of correct conduct in polite society/more generally to any special code of social behavior/courtesy.o Example of good etiquette – say “please” when requesting & “thank you” when receiving & to hold a door open for someone entering immediately behind you.o Example of bad etiquette – to chew with your mouth open or to pick your nose when talking to someone.o Violations of etiquette can have moral implications.o Example: the male boss who refers to female subordinates as “honey” or “doll” shows bad manners. The female employees can raise moral issues concerning equal treatment and denial of dignity to human beings. 1-5
    6. 6. Morality and lawo There are four kinds of law: statutes, regulations, common law & constitutional law.o Statuteso Laws enacted by legislative bodies. Congress & state legislatures enact statutes.o Example: The law that defines & prohibits theft is stature.o Administrative regulationso Legislatures often set up boards/agencies whose functions include issuing detailed regulations of certain kinds of conduct.o Example: state legislatures establish licensing boards to formulate regulations for the licensing of physicians & nurses. 1-6
    7. 7. Morality and lawo Common lawo Laws applied in the English-speaking world when there were few statutes.o Courts frequently wrote opinions explaining the bases of their decisions in specific cases, including the legal principles they deemed appropriate.o Each of these opinions became a precedent for later decisions in similar cases.o Constitutional lawo Refers to court rulings on the requirements of the Constitution & the constitutionality of legislation.o Although the courts cannot make laws, they have far-reaching powers to rule on the constitutionality of laws & to declare them valid. 1-7
    8. 8. o People sometimes confuse legality & morality – the legality of an action does not guarantee that it is morally right.o An action can be illegal but morally righto An action that is legal can be morally wrongo It may have perfectly legal for the chairman of a profitable company to lay off 125 workers & use three-quarters of the money saved to boost his pay & that of the company’s other top manager, but the morality of his doing so is open to debate. 1-8
    9. 9. Professional codeso Professional codes of ethics – the rules that are supposed to govern the conduct of members of a given profession.o The members of a profession are understood to have agreed to abide by those rules as a condition of their engaging in that profession.o Sometimes those codes are unwritten & are part of the common understanding of members of a profession. 1-9
    10. 10. Where do moral standards come from?o Our early upbringing, the behavior of those around us, the explicit & implicit standards of our culture, our own experiences & our critical reflections on those experiences.o For philosophers, the important issues is not where our moral principles came from, but whether they can be justified. 1-10
    11. 11. Religion & moralityo Religion involves not only a formal system of worship but also prescriptions for social relationships.o Morality is not necessary based on religion – the issues is whether those beliefs can be justified. 1-11
    12. 12. Ethical relativismo The theory that what is right is determined by what a culture/society says is right.o Example: abortion is condemned as immoral in Ireland but is practiced as a morally neutral form of birth control in Japan.o Thus, for the ethical relativist there is no absolute ethical standard independent of cultural context, no criterion of right & wrong by which to judge other than that of particular societies. 1-12
    13. 13. Ethical relativism (cont’d)o Ethical disagreement does not imply that all opinions are equally correct. Moreover, ethical relativism has unsatisfactory implications:o It undermines any moral criticism of the practices of other societies as long as their actions conform to their own standards.o For the relativist there is no such thing as ethical progress. Although moralities may change, they cannot get better/worse.o It makes no sense from the relativist’s point of view for people to criticize principles/practices accepted by their own society. 1-13
    14. 14. Ethical relativism (cont’d)o According to Albert Carr, a number of things that we normally think of as wrong are really permissible in a business context.o Example: lying about one’s age on a resume, deceptive packaging, automobile companies’ neglect of car safety. 1-14
    15. 15. Conscienceo People can & unfortunately sometimes do, go against their moral principles, but we would doubt that they sincerely held the principle in question if violating it did not bother their conscience.o Example: When you were very young, you were probably told to tell the truth & to return something you filched to its proper owner. 1-15
    16. 16. The limits of conscience:1. When we are genuinely perplexed over what we ought to do, we are trying to figure out what our conscience ought to be saying to us2. It may not always be good for us to follow our conscience – because they didn’t think through the implications of what they were doing or perhaps because they failed to internalize strongly enough the appropriate moral principles & a person’s conscience might disturb the person about something that is perfectly all right.o 1-16
    17. 17. Moral principles & self-interesto Example: imagine that you are in your car hurrying home along a quiet road, trying hard to get there in time to see the kickoff of an important football game. You pass an acquaintance who is having car trouble. He doesn’t recognize you. As a dedicated fan, you would much prefer to keep on going than to stop & help him, thus missing at least part of the game. You might rationalize that someone else will eventually come along & help him if you don’t, but deep down you know that you really ought to stop. On the other hand, self interest seems to say, “Keep going”. 1-17
    18. 18. Moral principles & self-interest (Cont’d)o Should you follow your self-interest or your moral principles?o From the moral point of view, you should follow your moral principles.o But from the selfish point of view, you should look out solely for “number one”.o Your choice will depend on your character, on the kind of person you are, which depends in part on how you were raised.o Individuals who care only about their own happiness will generally be less happy than those who care about others. 1-18
    19. 19. Individual integrity & responsibilityOrganizational normso Major characteristics of organization is the shared acceptance of organizational rules by its members.o Group cohesiveness requires that individual members commit themselves – relinquish some of their personal freedom in order to further organizational goals.o According to recent survey by the American Management Association, pressure to meet unrealistic business objectives & deadlines is the leading cause of unethical business conduct 1-19
    20. 20. Conformityo Organizations exert pressure on their members to conform to norms & goals.o Sometimes, some people didn’t want to seem different, even though they continued to believe their judgments were correct, the majority couldn’t be wrong.o Groupthink happens when pressure for unanimity within a highly cohesive group overwhelms its members’ desire/ability to appraise the situation realistically & consider alternative courses of action.o Members of the group close their eyes to negative information, ignore warnings that the group may be mistaken & discount outside ideas that might contradict the thinking or the decisions of the group. 1-20
    21. 21. Diffusion of responsibility o Diffusion of responsibility inside an organization can weaken people’s sense of moral responsibility. o They tend to see themselves simply as small players in a process o No control and are unaccountable o I’m just doing my job 1-21
    22. 22. o Defensible moral judgmentso Moral judgments should be supported by moral standards & relevant facts.o Patterns of defense & challenge:4. Evaluating the factual claims5. Challenging the moral standard6. Defending the moral standard7. Revising & modifying the argument 1-22
    23. 23. Requirements for moral judgments:o Should be logicalo Able to support our moral judgments with reasons & evidence rather than basing them solely on emotion, sentiment or social or personal preference.o Our moral judgments should be logically compatible with our other moral & nonmoral beliefs – avoid inconsistency.o Should be based on factso Information should actually relate to the judgment, should be complete or inclusive of all significant data, accurate or true.o Should be based on acceptable moral principleso Reliable moral judgments must be based on sound moral principles – principles that are unambiguous & can withstand critical scrutiny & rational criticism. 1-23
    24. 24. BUSINESS ETHICS IS A PROCESS OFRESPONSIBLE DECISION-MAKING The scandals and ruin experienced since the Enron collapse were brought about by ethical failures. We will discuss a decision-making model that can help individuals to understand such failures and avoid future business and personal tragedies. Why explore ethics in business? Because Ethics Failures = Business Failures 1-24
    25. 25. AN ETHICAL CORPORATECLIMATE . . . “…is either developing or deteriorating, enriching itself or impoverishing itself. It needs constant care and attention.” Study by the Woodstock Center Georgetown University, D.C. 1-25
    26. 26. AN ETHICAL CORPORATE CLIMATE… “…the hottest places in hell are reserved for those who, in a period of moral crisis, maintain their neutrality.” - Dante“In morality, as in literature – or in any field of human creativity – indifference is the enemy; indifference to evil is worse than evil.” - Elie Wiesel, Nobel Peace Prize Laureate 1-26
    27. 27. WHY IS ETHICS IMPORTANT IN THEBUSINESS ENVIRONMENT? Consider the range of people who were harmed by the collapse of Enron.  Stockholders lost over $1 billion in stock value.  Thousands of employees lost their jobs, their retirement funds, and their health care benefits.  Consumers in California suffered from energy shortages and blackouts that were caused by Enron’s manipulation of the market.  Hundreds of businesses that worked with Enron as suppliers suffered economic loss with the loss of a large client. 1-27
    28. 28. WHY IS ETHICS IMPORTANT IN THEBUSINESS ENVIRONMENT? Enron’s accounting firm, Arthur Andersen, went out of business as a direct result. The wider Houston community was also hurt by the loss of a major employer and community benefactor. Families of employees, investors, suppliers were also hurt. Many of the individuals directly involved will themselves suffer criminal and civil punishment, including prison sentences for some. 1-28
    29. 29. Multiply the harms by the dozens of othercompanies implicated in similar scandals andone gets an idea of why ethics is no longerdismissed as irrelevant. The consequences of unethical behavior and unethical business institutions are too serious for too many people to be ignored. 1-29
    30. 30. “STAKEHOLDERS” The decisions made within a business firm will affect many more people than only an individual. Ethically responsible business decision-making must move beyond a narrow concern with stockholders, and consider the impact that decisions will have on a wide range of stakeholders. A business stakeholder will be anyone who affects or is affected by decisions made within the firm. Failure to consider these additional stakeholders will have a detrimental impact on those stakeholders, stockholders, and on the firm’s long-term sustainability. 1-30
    31. 31. WHY CARE ABOUT ETHICS? Unethical behavior creates financial and marketing risks. A company can go out of business, and its employees can go to jail, if no one is paying attention to the ethical standards of the firm. A firm’s ethical reputation can provide a competitive advantage, or disadvantage. Consumer boycotts give even the most skeptical business leader reason to pay attention to ethics. Managing ethically can also pay significant dividends in organizational structure and efficiency. Trust, loyalty, commitment, creativity, and initiative are just some of the organizational benefits that are more likely to flourish within ethically stable and credible organizations. 1-31
    32. 32. REALITY CHECKWhy be good?The Institute for Business, Technology and Ethics suggests thefollowing “Nine Good Reasons” to run a business ethically:6. Litigation/indictment avoidance7. Regulatory freedom8. Public acceptance9. Investor confidence10. Supplier/partner trust11. Customer loyalty12. Employee performance13. Personal pride14. It’s right 1-32
    33. 33. DOES “RIGHT” OR “INTEGRITY” HAVEREWARDS? “While the headlines are going to all the guys who are doing it wrong, there is a very strong corps of people who are really committed to doing it right. Part of doing it right is youre not doing it to get headlines. Youre doing it to really make a difference in the lives of people.”-- Georgetown College President Bill Crouch, speaking at a business ethics conference sponsored by the Ethical Leadership Institute. ("Strong Ethics Help Businesses Succeed, Conference Speakers Say," AP, Mar. 25) 1-33
    34. 34. BUSINESS ETHICS AS ETHICALDECISION-MAKING Decisions which follow from a process of thoughtful and conscientious reasoning will be more responsible and ethical decisions. Responsible decision-making and deliberation will result in more responsible behavior. What is the point of a business ethics course?  Ethics refers not only to an academic discipline, but to that arena of human life studied by this academic discipline, namely, how human beings should properly live their lives.  An ethics course will not change your capacity to think, but it could stimulate your choices of what to think about. 1-34
    35. 35. BUSINESS ETHICS AS ETHICALDECISION-MAKING An ethics class strives to produce more ethical behavior among the students who enroll. But the only academically and ethically legitimate way to do this is through careful and reasoned decision-making. A process of rational decision-making, a process that involves careful thought and deliberation, can and will result in behavior that is both more reasonable and more ethical. 1-35
    36. 36. SO, WHAT DO WE MEAN BY “ETHICS?” 1-36
    37. 37. ETHICS IS NOT THIS: 1-37
    38. 38. WHAT IS “ETHICS?” At its most basic level, ethics is concerned with how we act and how we live our lives. 1-38
    39. 39. WHAT IS “ETHICS?” Ethics involves what is perhaps the most monumental question any human being can ask: How should we live? Ethics is, in this sense, practical, having to do with how we act, choose, behave, do things. Philosophers often emphasize that ethics is normative, in that it deals with our reasoning about how we should act. 1-39
    40. 40. WHAT IS “ETHICS?” How should we live? This fundamental question of ethics can be interpreted in two ways. "We" can mean each one of us individually, or it might mean all of us collectively. In the first sense, this is a question about how I should live my life, how I should act, what I should do, what kind of person I should be. This meaning of ethics is sometimes referred to as morality, and it is the aspect of ethics that we refer to by the phrase “personal integrity.” 1-40
    41. 41. PERSONAL RESPONSIBILITY VS.SOCIAL RESPONSIBILITY? There will be many times within a business setting where an individual will need to step back and ask: What should I do? How should I act? Social ethics raises questions of justice, public policy, law, civic virtues, organizational structure, and political philosophy. In the second sense, “How should we live?” refers to how we live together in a community. Business ethics is concerned with how business institutions ought to be structured, about corporate social responsibility, and about making decisions that will impact many people other than the individual decision-maker. 1-41
    42. 42. PERSONAL RESPONSIBILITY VS.SOCIAL RESPONSIBILITY? This aspect of business ethics asks us to examine business institutions from a social rather than an individual perspective. We refer to this broader social aspect of ethics as decision-making for social responsibility. 1-42
    43. 43. ETHICAL NORMS AND VALUES Values = Those beliefs that incline us to act or to choose in one way rather than another. A company’s core values, for example, are those beliefs and principles that provide the ultimate guide in its decision- making. Individuals can have their own personal values and, importantly, institutions also have values. 1-43
    44. 44. DISTINGUISHING VALUES One way to distinguish various types of values is in terms of the ends that they serve.  Financial values serve monetary ends, religious values serve spiritual ends, aesthetic values serve the end of beauty, legal values serve law, order, and justice, and so forth.  Different types of values are distinguished by the various ends served by those acts and choices. So, how are ethical values to be distinguished from these other types of values? What ends are served by ethics?  Ethical values are those beliefs and principles that impartially promote human well-being. 1-44
    45. 45. LEGAL RESPONSIBILITIES VS.ETHICAL RESPONSIBILITIES The law provides a very important guide to ethical decision- making, but legal norms and ethical norms are not identical nor do they always agree. Over the last decade, many corporations have established ethics programs and hired ethics officers who are charged with managing corporate ethics programs. Much good work gets done by ethics officers, but it is fair to say that much of this focuses on compliance issues. The Sarbanes-Oxley Act created a dramatic and vast new layer of legal compliance issues. 1-45
    46. 46. CAN’T THE LAW ANSWER THEQUESTION OF RIGHT OR WRONG? What’s good about this approach? What’s challenging (negative) about this approach? 1-46
    47. 47. WHY LEGAL COMPLIANCE ISINSUFFICIENT? Holding that obedience to the law is sufficient to fulfill one’s ethical duties begs the question of whether the law, itself, is ethical. Societies that value individual freedom will be reluctant to legally require more than just an ethical minimum. On a practical level, telling business that its ethical responsibilities end with obedience to the law is just inviting more legal regulation. The law cannot possibly anticipate every new dilemma that businesses might face; so, often, there may not be a regulation for the particular dilemma that confronts a business leader. The perspective that compliance is enough relies on a misleading understanding of law. 1-47
    48. 48. REALITY CHECKETHICS GOES MAINSTREAM! A 2003 poll by Deloitte of 5,000 directors of the top 4,000 publicly traded companies reported that 98 percent believed that an ethics and compliance program was an essential part of corporate governance. Over 80 percent had developed formal codes of ethics beyond those required by Sarbanes-Oxley, and over 90 percent included statements concerning the company’s obligations to employees, shareholders, suppliers, customers, and the community at large in their corporate code of ethics. 1-48
    49. 49. HOW IS ETHICAL DECISION-MAKINGDIFFERENT FROM OTHER DECISION-MAKING? Ethics is practical and normative Ethics is therefore a vital element of practical reasoning: reasoning about what we should do, and is distinguished from theoretical reasoning, which is reasoning about what we should believe. Theoretical reason is the pursuit of truth, which is the highest standard for what we should believe. 1-49
    50. 50. PHILOSOPHICAL ETHICS ANDTHEORIES Is there a comparable methodology or procedure for deciding what we should do and how we should act? There are guidelines that can provide direction and criteria for decisions that are more or less reasonable and responsible: philosophical ethics. Ethical theories are patterns of thinking, or methodologies, to help us decide what to do. 1-50
    51. 51. End of Lecture 1 1-51

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