Business Ethics

Chapter 3 -1

Ethics Values, morals, beliefs about right and

wrong or good and bad– The study of right and wrong and of the morality of

choices made by individual

Individual belief and social norms:– Ethical: right and good – Unethical: wrong and bad

• according to some standard of behavior Standard: Subjective - value judgement

– By person, by situation, by culture, etc.

The Escaped Prisoner

A man had been sentenced to prison for ten years. After one year, however, he escaped from prison, moved to a new area of the country, and took on the name of Thompson. For eight years he worked hard, and gradually he saved enough money to buy his own business. He was fair to his customers, gave his employees top wages, and gave most of his own profits to charity. Then one day, Mrs. Jones, an old neighbor, recognized him as the man who had escaped from prison eight years before and whom the police had been looking for.

What is Ethical?

Should Mrs. Jones report Mr. Thompson to the police and have him sent back to prison?

How ethical are the following behaviors?

A beer company engages in an advertising campaign that is targeted to undergraduate college students, many of whom are under the legal drinking age.

A rental car company strongly advises customers to purchase insurance when renting a car. Although most personal car insurance covers the insured motorist when driving a rental car, most rental car customers are not aware of this.

Importance of business ethics

The true difference between a successful business and the others is not in overall strategy, not in organizational structure, not in management system. The true difference is in management style, human resource policies, and the most importantly, in spirits and (shared) value and beliefs.

•理查德 帕斯卡尔 ,美国哈佛大学•安东尼 阿索斯 ,斯坦福大学

（ 1988）

Elements of economic development (Japan)Spirit 50%Law and order 40%Capital 10%

(Source unknown)

Values and Spirits“The Six Pillars of Character”

• Trustworthiness• Respect

• Responsibility• Fairness

• Caring• Citizenship

For more detail, go to the website by clicking on this hotlink.Source: Josephson Institute of Ethics, “Resources: Making Ethical Decisions- The

Six Pillars of Character,” http://www.josephsoninstitute.org/MED/MED-2sixpillars.htm.

Employee Work Ethics

Most desired values at workplace Responsible and honest (85%) Capable (65%) Imaginative (55%) Logical (49%) Obedient, clean, polite, forgiving

Schmidt and Posner, 1982, study of 1460 managers

Business Ethical IssuesFairness and honesty

Business people are expected to refrain from knowingly deceiving, misrepresenting, or intimidating others

Organizational relationshipsA business person should put the welfare of others

and that of the organization above their own personal welfare

Conflict of interestIssues arise when a business person takes

advantage of a situation for personal gain rather than for the employer’s interest

CommunicationsBusiness communications that are false, misleading,

or deceptive are both illegal and unethical

Managerial Ethics(norms)

Areas of Concern Sample Issues

Relationship of the firm to the employee

Hiring and firingWages and working conditionsPrivacy

Relationship of the employee to the firm

Conflict of interestSecrecyHonesty Expense accounts

Relationship of the firm to customers

Fairness of pricingHonesty in advertisingProduct safetyRight of privacy

Managerial ethics:

Organization toward employees– Non-discrimination; salaries and

payments; guidance to employee behaviors

Employee toward the organization– Conflicts of interests; confidentiality;

honesty Organization toward other agents

– Advertising; financial disclosure; purchasing; …

Law and Ethics: common norms

Law:– Interpretation and application

Ambiguity in reality

Common Ethical Norms

Utility: benefit optimization Rights: respect others’ rights Justice: fair Caring: responsibility

Moral Principles: what is right and proper

Universalism: everyone under the same circumstances should be expected to act in the same way.

Reversibility: individuals making the decision would be willing to be treated in the same way.

Dignity and liberty: preserves basic humanity of individuals and provides opportunities for greater freedom.

Moral Principles: what is right and proper

Utilitarianism: generates the greatest amount of good for most people while producing no harm.

Distributive justice: least advantages individuals are benefited

Personal morality: consistent with a set of guidelines.

Value Maturity:Self centered level

Moral value resides in external, quasi-physical happenings, or in quasi-physical needs, rather than in person and standards

1.Obedience and punishment oriented.

2. Naively egotistic oriented. Actions that satisfies self needs are right ones. Relativism of value, orientation to exchange and reciprocity

Value Maturity:Conformity level

Moral value resides in performing good and right roles, in maintaining conventional order and expectations of others

3.Good boy orientation. Approval. Pleasing.

4. Orientation of doing duty, showing respect to authority, maintaining social order.

Value Maturity:Principled level

Moral value resides in conformity by self to shared or sharable standards, rights, duties

5. Contractual legalistic orientation. Rules for agreements. Avoid violations of wills & rights of others.

6. Conscience of principle orientation. Logical and consistency. Mutual respect and trust

Why obey laws and rules:

Self centered: get awarded or avoid punishment.

Conformist: learned and accepted.

Principled: internalized principles supersede laws and rules.

Debate: Can Ethics Be Taught?

YESLearn factors that influence decision-making (individual beliefs and values, pressure from peers and managers, and opportunity)Learn how to analyze the ethical dilemmas faced by today’s practicing managersLearn the principles of ethical decision making to understand why decision makers behave as they doApply what they have learned to ethical dilemmas they face.

NOAn individual’s beliefs, values, and morals are developed long before he or she enters school or begins a career. Every person’s morality is shaped by his or her social experience (family, friends, school, and church), therefore a simple ethics course can not change a person’s deep-rooted and long-held beliefs and values. Learning ethical principles does not guarantee that they will be used.Behaviors will not be changed.

Factors Affecting Ethical Behavior

Source: Based on O. C. Ferrell and Larry Gresham, “A Contingency Framework for Understanding Ethical Decision Making in Marketing,” Journal of Marketing, Summer

1985, p. 89.

Factors Affecting Ethical BehaviorIndividual factors

– Individual knowledge of an issue– Personal values– Personal goals

Social factors– Cultural norms– Coworkers– Significant others– Use of the Internet

Opportunity– Presence of opportunity– Ethical codes– Enforcement

Encouraging Ethical Behavior External to a specific organization

– Governmental legislation and regulations– Trade association guidelines

Within an organization– Code of ethics

• A written guide to acceptable and ethical behavior as defined by an organization that outlines policies, standards, and punishments

– Organizational environment• Management direction• Employee training• Ethics officer

Whistle-blowing– Informing the press or government officials about

unethical practices within one’s organization