Fundamental of Business Ethics: Ragil Sriharto Feb Ugm

Fundamental
of Business Ethics
Ragil Sriharto
FEB UGM
Copyright © 2012 Pearson Education, Inc. All rights reserved.

Today’s Agenda
•  Syllabus
•  What is Ethics and Business Ethics
•  Ethics and Law
•  Moral responsibility
•  Kohlberg’s moral development
•  Why Business Ethics is important?


Types of Issues in Business Ethics
•  Bribery: manipulate people by buying

influence
•  Coercion: control people by force or threat
•  Deception: manipulate people and firms by
misleading them
•  Theft: taking of something that does not
belong to you
•  Unfair discrimination: denial of normal
privileges to persons because of their sex, race,
age, nationality or religion.
Observations of unethical behavior at work
Percentage of type of observed misconduct:

Unsafe working conditions 56%
Deceptive sales practices 56%
Mishandling proprietary or confidential information 50%
Violations of privacy rights 38%
Shipping low-quality or unsafe products 37%
Employment discrimination 36%
Sexual harassment 34%
Altering product quality or safety test results 32%
Antitrust violations or unfair competitive practices 32%
Environmental breaches 31%
Source: 2000 Organizational Integrity Survey: A Summary, Integrity Management Services, KPMG LLP
Ethics and Morality
•  Ethics is the study of morality.
–  Morality = The standards that an individual or a group has
about what is right and wrong, or good and evil.
–  Moral Standards = norms about the kinds of acJons that
are morally right and wrong, as well as the values placed
on what is morally good or bad.
•  Expressed in general rules: e.g. always tell the truth, it is wrong to
kill people
–  Non-‐Moral Standards: The standards by which we judge
what is good or bad and right or wrong in a non-‐moral
way. E.g. eJqueQe

Moral vs Non. Moral Standard
Moral Standard Non-‐Moral Standard
•  Do not harm other •  Do not eat with your
people mouth open
•  Do not lie to other •  Do not chew gum in
people class
•  Do not steal what •  Do not wear sox
belongs to others that do not match

Five CharacterisJcs of Moral Standards
•  Involve serious maQers (significant injuries or
benefits)
•  Should be preferred to other values including
self-‐interest
•  Not established by authority figures
–  Moral standard are universal
–  Non-‐moral standard (e.g. law) is not universal,
specific jurisdicJon

Five CharacterisJcs of Moral
Standards
•  Based on imparJal consideraJons
–  Moral point of view
•  Associated with special emoJons and
vocabulary.
–  Feel guilty, ashamed, immoral, wrong

What is Ethics?
•  Broadly, ethics is the discipline that examines
one’s moral standards or the moral standards
of a society to evaluate their reasonableness
and their implicaJons for one’s life.
–  Examine:
•  Reasonable or not
•  What does it imply
•  Make sense or not
•  Why should I

What is Ethics?
The ulJmate aim of ethics is to develop a body

of moral standard that a person feel are
reasonable to hold, standard that a person has
thought about carefully and have decided to
accept and apply in his/her life

Kohlberg’s Three Levels of Moral
Development
•  First Level: Pre-‐convenJonal Stages
–  Stage One: punishment and obedience orientaJon
–  Stage Two: instrumental and relaJve orientaJon (take and
give)
•  Second Level: ConvenJonal Stages
–  Stage One: interpersonal concordance orientaJon (social
circle expectaJon)
–  Stage Two: law and order orientaJon
•  Third Level: Post-‐convenJonal Stages
–  Stage One: social contract orientaJon (relaJve-‐tolerance)
–  Stage Two: universal principles orientaJon (moral
standard is chosen because of reasonableness,
universality, consistency)
Kohlberg’s T hree L evels
Stages of moral development and
o f Moral
Development
ethical reasoning
Age group Development stage and Basis of ethics
major ethics referent reasoning
Mature adulthood Stage 6 Universal principles: Principle-centered
Justice, fairness, universal reasoning
human rights
Mature adulthood Stage 5 Moral beliefs above Principle-centered
and beyond specific social reasoning
custom: Human rights, social
contract, broad constitutional
principles
Adulthood Stage 4 Society at large: Society-and-law
Customs, traditions, laws centered reasoning
Early adulthood, Stage 3 Social groups: Friends, Group-centered
adolescence school, coworkers, family reasoning
Adolescence, Stage 2 Reward seeking: Ego-centered

youth Self-interest, own needs, reasoning
reciprocity
Childhood Stage 1 Punishment avoidance: Ego-centered
Punishment avoidance, reasoning
obedience to power
Source: Adapted from Lawrence Kohlberg, The Philosophy of Moral Development (New York: Harper & Row, 1981).
Moral Reasoning
•  The reasoning process by which human
behaviors, insJtuJons, or policies are judged
to be in accordance with or in violaJon of
moral standards.
•  Moral reasoning involves:
–  The moral standards by which we evaluate things
–  InformaJon about what is being evaluated
–  A moral judgment about what is being evaluated.

Moral Reasoning
Moral Standard Factual InformaJon Moral judgment on

concerning the policy, the rightness or
InsJtuJon, or behavior wrongness of the
under consideraJon policy, insJtuJon, or
behavior
Example: a Example: in Indonesia, Example:

society is unjust people below the Indonesian society
if it does not poverty line do not is unjust
treat people have access to basic
equally needs

Moral Responsibility
•  Three Components of Moral Responsibility
–  Person caused or helped cause the injury, or
failed to prevent it when he or she could and
should have (causality).
–  Person did so knowing what he or she was doing
(knowledge).
•  Ignorance of fact and moral standards
–  Person did so of his or her own free will
(freedom).

Factors that MiJgate Moral
Responsibility
•  Minimal contribuJon
–  In general, the less one’s actual acJons contribute to the
outcome of an act, the less one is morally responsible for that
outcome.
•  Uncertainty
–  A person may be fairly convinced that doing something is wrong
yet may sJll be doub[ul about some important facts, or may
have doubts about the moral standards involved, or doubts
about how seriously wrong the acJon is.
•  Difficulty
–  A person may find it difficult to avoid a certain course of acJon
because he or she is subjected to threats or duress of some sort
or because avoiding that course of acJon will impose heavy
costs on the person.

Ethics and the Law
Neither laws nor

ethics are fixed
principles

Ethics and the Law
•  Ethical beliefs •  Laws can
lead to the
development of
change or
laws and disappear as
regulations to ethical beliefs
prevent certain change
behaviors or
encourage others

Four Steps Leading to Ethical Behavior
•  Step One: Recognizing a situaJon is an ethical
situaJon.
–  Requires framing it as one that requires ethical
reasoning
–  SituaJon is likely to be seen as ethical when:
•  involves serious harm that is concentrated, likely, proximate,
imminent, and potenJally violates our moral standards
–  Obstacles to recognizing a situaJon:
•  EuphemisJc labeling, jusJfying our acJons, advantageous
comparisons, displacement of responsibility, diffusion of
responsibility, distorJng the harm, and dehumanizaJon, and
aQribuJon of blame.

•  Step Two: Judging the ethical course of acJon.
–  Requires moral reasoning that applies our moral
standards to the informaJon we have about a
situaJon.
–  Requires realizing that informaJon about a
situaJon may be distorted by biased theories
about the world, about others, and about oneself.

•  Step Three: Deciding to do the ethical course
of acJon.
–  Deciding to do what is ethical can be influenced
by:
•  The culture of an organizaJon—people’s decisions to
do what is ethical are greatly influenced by their
surroundings.
•  Moral seducJon—organizaJons can also generate a
form of “moral seducJon” that can exert subtle
pressures that can gradually lead an ethical person into
decisions to do what he or she knows is wrong.

•  Step Four: Carrying out the ethical decision.

–  Factors that influence whether a person carries

out their ethical decision include:

•  One’s strength or weakness of will

•  One’s belief about the locus of control of one’s acJons

What is Business Ethics?

•  Business ethics is a specialized study of moral
right and wrong that concentrates on moral
standards as they apply to business
insJtuJons, organizaJons, and behavior.

Types of Ethical Issues
•  Systemic—ethical quesJons about the social,
poliJcal, legal, or economic systems within
which companies operate.
•  Corporate—ethical quesJons about a
parJcular corporaJon and its policies, culture,
climate, impact, or acJons.
•  Individual—ethical quesJons about a
parJcular individual’s decisions, behavior, or
character.

Can ethical qualiJes be aQributed to
corporaJons?
•  View #1: corporaJons, like people, act intenJonally
and have moral rights, and obligaJons, and are morally
responsible.
•  View #2: it makes no sense to aQribute ethical qualiJes
to corporaJons since they are not like people but more
like machines; only humans can have ethical qualiJes.
•  View #3: humans carry out the corporaJon’s acJons so
they are morally responsible for what they do and
ethical qualiJes apply in a primary sense to them;
corporaJons have ethical qualiJes only in a derivaJve
sense.

Arguments Against Business Ethics
•  In a free market economy, the pursuit of profit
will ensure maximum social benefit so
business ethics is not needed.
–  Market not always perfectly compeJJve
–  Increasing profit but not beneficial, instead injure
the society
–  Producing for majority doesn’t always serve
minority needs

Arguments Against Business Ethics
•  A manager’s most important obligaJon is
loyalty to the company regardless of ethics.
–  Managers’ obligaJon are actually limited
•  So long as companies obey the law they will
do all that ethics requires.
–  What is legal is not always ethical
•  Many moral standard have been incorporated by the
law; law may be changed when moral standard
changes.

Arguments SupporJng Business Ethics
•  Ethics applies to all human acJviJes.
•  Business cannot survive without ethics.
•  Ethics is consistent with profit seeking.
•  Customers, employees, and people in general
care about ethics.
•  Studies suggest ethics does not detract from
profits and seems to contribute to profits.

The Importance of Ethics in Business
•  The Micro Perspective: the importance

of ethics within an organization/person
–  Obtaining trust
•  Expectation of competence performance
•  Expectation of fiduciary responsibility
–  Trust in business will:
•  Reduces cost
•  Make life more pleasant
•  Improves efficiency

Why should business be ethical?
•  Fulfill public expectation for business.

•  Prevent harming others.
•  Seek profitability.
•  Improve business relations and employee productivity.
•  Reduce penalties
•  Protect business from others.

•  Protect employees from their employers.
•  Promote personal morality.

Why should managers behave
ethically?
The relentless pursuit of self-interest can
lead to a collective disaster when one or
more people start to profit from being
unethical because this encourages other
people to act in the same way

The Importance of Ethics in Business
•  The Macro Perspective: the importance

of ethics within the economic system
–  The right to own and control private
property
–  Freedom of choice in buying and selling
goods and services
–  The availability of accurate information
concerning those goods and services

Effects of Ethical/Unethical
Behavior

New Issues in Business Ethics
•  Advances in technology ojen create new
issues for business ethics.
–  Currently, advances in informaJon technology are
creaJng new issues in business ethics.
–  Patent, piracy
–  Biotechnology
–  Internet fraud

New Issues in Business Ethics
•  Increasing connecJons between the economic
and social systems of different naJons, known
as “globalizaJon”, has also created new issues
in business ethics.
–  Benefit for developing countries
–  Home standard or host standard

Corporate Social Responsibility
•  Corporate social responsibility refers to a
corporaJon’s responsibiliJes or obligaJons
toward society.
•  Business ethics is both a part of corporate
social responsibility and part of the
jusJficaJon for corporate social responsibility.
•  Shareholder vs. Stakeholder Theory

Why ethical problems occur in business
Nature of
Reason ethical Typical Attitude
problem approach
Personal gain Selfish interest Egoistical "I want it!"
and selfish versus others' mentality
interest interests
Competitive Firm's interest Bottom-line "We have to
pressures on versus others' mentality beat the
profits interests others at all
costs!"
Business goals Boss's interests Authoritarian "Do as I say,
versus personal versus mentality or else!"
values subordinates’
values
Cross-cultural Company's Ethnocentric "Foreigners
contradictions interests versus mentality have a funny
diverse cultural notion of
traditions and what's right
values and wrong."

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Fundamental

of Business Ethics

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

• Bribery: manipulate people by buying

Percentage of type of observed misconduct:

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

The ulJmate aim of ethics is to develop a body

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Adolescence, Stage 2 Reward seeking: Ego-centered

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Moral Standard Factual InformaJon Moral judgment on

Example: a Example: in Indonesia, Example:

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Neither laws nor

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

– Factors that inﬂuence whether a person carries

• One’s strength or weakness of will

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

• The Micro Perspective: the importance

Copyright © 2012 Pearson Education, Inc. All rights reserved.

• Fulfill public expectation for business.

• Protect business from others.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

• The Macro Perspective: the importance

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Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Das könnte Ihnen auch gefallen

•  Bribery: manipulate people by buying

–  Factors that inﬂuence whether a person carries

•  One’s strength or weakness of will

•  The Micro Perspective: the importance

•  Fulfill public expectation for business.

•  Protect business from others.

•  The Macro Perspective: the importance