Ethics Of Business


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Ethics Of Business-Theory

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Ethics Of Business

  1. 1. Ethics of Business: The Theory
  2. 2. What would you do if… ? Phyllis Cramer and the new shoplifting policy at her department store If you were Phyllis, what would you do?
  3. 3. High Profile Ethical Scandals in Business <ul><li>Wall Street Meltdown: The ethics of Sub-prime mortgages </li></ul><ul><li>WorldCom / Enron: Accounting fraud </li></ul><ul><li>Shell: Proposed sinking of North Sea oil rig </li></ul><ul><li>New York Times: Plagiarism </li></ul><ul><li>NBC: Faking the evidence </li></ul><ul><li>Walkerton: Falsifying records </li></ul><ul><li>UofT Law School Students: Lying about grades to employers </li></ul>
  4. 4. Ethical Implications in Business <ul><li>Owners </li></ul><ul><ul><li>fair and accurate disclosure </li></ul></ul><ul><li>Employees </li></ul><ul><ul><li>hiring; firing; wages; privacy; discrimination; honesty; conflicts of interest; insider information </li></ul></ul><ul><li>Consumers </li></ul><ul><ul><li>dishonest advertising; product safety </li></ul></ul><ul><li>Competitors </li></ul><ul><ul><li>non-competitive behaviour; industrial espionage </li></ul></ul><ul><li>Suppliers </li></ul><ul><ul><li>kickbacks; gifts; bribes </li></ul></ul><ul><li>Government </li></ul><ul><ul><li>legal compliance; lobbying </li></ul></ul><ul><li>Society </li></ul><ul><ul><li>respect for environment; corporate giving </li></ul></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  5. 5. Influences on Ethical Behaviour <ul><li>Individual morals </li></ul><ul><li>National and ethnic cultures </li></ul><ul><li>Government legislation and regulation </li></ul><ul><li>The legal system </li></ul><ul><li>Religion </li></ul><ul><li>Colleagues or peers </li></ul><ul><li>Education </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  6. 6. Influences on Ethical Behaviour <ul><li>Media </li></ul><ul><li>Corporate mission, vision, and values statements </li></ul><ul><li>Union contracts </li></ul><ul><li>Competitive behaviour </li></ul><ul><li>Activists or advocacy groups (NGOs) </li></ul><ul><li>Business or industry organizations </li></ul><ul><li>Professional associations </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  7. 7. Business Ethics <ul><li>Ethics of business : rules, standards, codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations. </li></ul><ul><li>Value judgments : subjective evaluations of what is considered important. </li></ul><ul><li>Moral standards : the means by which individuals judge their actions and the actions of others. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd. 6
  8. 8. Economic Efficiency Ethic <ul><li>Judges the moral implications of a decision by its economic consequences and provides the moral justification for a market system. </li></ul><ul><li>Adam Smith: By focusing on efficient operations, profits are maximized, and society ultimately benefits. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  9. 9. Government Requirements Ethic <ul><li>The acceptance of a code of laws as the governing rules of society or as a contract with society that determines what is considered right or appropriate behaviour. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  10. 10. Ethics and the Law <ul><li>Law often represents an ethical minimum </li></ul><ul><li>Ethics often represents a standard that exceeds the legal minimum </li></ul>Ethics Law Frequent Overlap
  11. 11. Ethics, Economics, and Law
  12. 12. Self-Interest (Ethical Egoism) <ul><li>Individuals or corporations set their own standards for judging the ethical implications of their actions; only the individual’s values and standards are the basis for actions. </li></ul><ul><li>Self-interest not necessarily the same as: selfishness, greed, disregard for the rights and interests of others, hedonism, or materialism. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  13. 13. Utilitarian Ethic <ul><li>Focuses on the distribution of benefits and harms to all stakeholders with the view to maximizing benefits. </li></ul><ul><li>“ The greatest good for the greatest number.” </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  14. 14. Universal Rules Ethic <ul><li>Ensures that managers or corporations have the same moral obligations in morally similar situations. </li></ul><ul><li>Treat people as means in themselves (i.e., with respect) and never as a means to one’s own ends. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  15. 15. Ethics of Caring <ul><li>Gives attention to specific individuals or stakeholders harmed or disadvantaged and their particular circumstances. </li></ul><ul><li>Golden rule: Do unto others as you would want done to you. </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  16. 16. Individual Rights Ethic <ul><li>Relies on a list of agreed upon rights for everyone that will be upheld by everyone and that becomes the basis for deciding what is right, just, or fair. </li></ul><ul><li>Examples: Rights to safety, information, privacy, property. </li></ul><ul><li>Rule-based? </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  17. 17. Ethics of Justice <ul><li>Considers that moral decisions are based on the primacy of a single value: justice. </li></ul><ul><li>Different types of justice: </li></ul><ul><ul><li>Procedural justice </li></ul></ul><ul><ul><li>Corrective justice </li></ul></ul><ul><ul><li>Retributive justice </li></ul></ul><ul><ul><li>Distributive justice </li></ul></ul><ul><li>Mostly ends-based? </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  18. 18. Personal Virtues Ethic <ul><li>An individual’s or corporation’s behaviour is based upon being a good person or corporate citizen with traits such as courage, honesty, wisdom, temperance, and generosity. </li></ul><ul><li>Ask: How would I feel if my actions were explained on television? </li></ul>Chapter 5 Copyright © 2008 McGraw-Hill Ryerson Ltd.
  19. 19. Making Ethical Decisions
  20. 20. Four Essentials Factors at Play <ul><li>Forensic Accounting: The 20% Angel Rule </li></ul><ul><li>Self-interested Consequences: The 60% Rule </li></ul><ul><li>Social Norms of Fairness: The Last 20% </li></ul><ul><li>The Domino Effect </li></ul>
  21. 21. Three Models of Management Ethics Immoral Management A style devoid of ethical principles and active opposition to what is ethical Moral Management Conforms to high standards of ethical behavior Amoral Management <ul><li>Intentional: does not consider ethical factors </li></ul><ul><li>Unintentional: casual or careless about ethical factors </li></ul>
  22. 22. Characteristics of Immoral Managers <ul><li>Intentionally do wrong </li></ul><ul><li>Self-centered and self-absorbed </li></ul><ul><li>Care only about self or organization’s profits </li></ul><ul><li>Actively oppose what is right, fair, or just </li></ul><ul><li>Exhibit no concern for stakeholders </li></ul><ul><li>Are the “bad guys” </li></ul><ul><li>An ethics course probably would not help them </li></ul>
  23. 23. Characteristics of Moral Managers <ul><li>Conform to high level of ethical or right behavior </li></ul><ul><li>Conform to high level of personal and professional standards </li></ul><ul><li>Ethical leadership is commonplace </li></ul><ul><li>Goal is to succeed within confines of sound ethical precepts </li></ul><ul><li>High integrity is displayed </li></ul><ul><li>Embrace letter and spirit of the law </li></ul><ul><li>Possess an acute moral sense and moral maturity </li></ul><ul><li>Are the “good guys” </li></ul>
  24. 24. Characteristics of Amoral Managers <ul><li>Intentionally Amoral Managers: </li></ul><ul><li>Don’t think ethics and business should “mix” </li></ul><ul><li>Business and ethics exist in separate spheres </li></ul><ul><li>A vanishing breed </li></ul><ul><li>Unintentionally Amoral Managers: </li></ul><ul><li>Don’t consider the ethical dimension of decision making </li></ul><ul><li>Don’t “think ethically” </li></ul><ul><li>Have no “ethics buds” </li></ul><ul><li>Well-intentioned, but morally casual or unconscious </li></ul><ul><li>Ethical gears are in neutral </li></ul>
  25. 25. Three Models of Management Morality and Emphasis on CSR