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Topic 1

The Importance of Business Ethics

The Nature of Business Ethics

Ethical Issues in Business

Rationalizing our Actions

Prepared by Dr. Razia Irfan (Spring


2016)

Which of the following are unethical business practices


A company relies onchild slave labor that is working in dangerous
conditions
A supermarket passes a rule of 8 hour duty per day (6 days per week)
for its employees
Chefs at a restaurant are required to cover their hair while handling
food
A cigarette manufacturer uses advertising that targets kids try to
create the image of smokers being cool
A multinational energy and metal trading company have faced
accusations of stealing oil from South Sudan.
An energy producer dealing in oil, natural gas and petrochemicals
The avoid
Ethisphere
Institute,
a nine-year-old
consulting
firm based
in of
millions
of dollars
of taxes management
and dump billions
of gallons
worth
Scottsdale,
AZ, is ainto
player
in the crowded
field of corporate ethics rating. For the last
toxic waste
Ecuadorian
rainforest

eight years it has put out a list it labels the Worlds Most Ethical Companies. 2014,
some of which are :

3M Company
(industrial manufacturing)
USA
Adobe Systems Inc. ( computer software)
USA
CISCO Systems Inc. (telecommunications)
USA
Cleveland Clinic
(healthcare services)
USA
Interntl Hospitals Construcn Co. (Construction)
Saudi Arabia
Kellogg Company (food & beverage )
USA
Ford Motor
(automobiles)
USA
Worlds Most Ethical Companies http://www.forbes.com/sites/susanadams/2014/03/20/the-worlds-most-ethical-companies/#5fe9f6dd4d16

The Nature of Business


Ethics

Morality
The standards that an individual or a
group has about what is right and
wrong or good and evil.

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80186.jpg

Prepared by Dr. Razia Irfan (Spring


2016)

The Nature of Business


Ethics

Morality
Moral standards
The norms about the
kinds of actions
believed to be morally
right and wrong as well
as the values placed on
what we believe to be
morally good and
morally bad.

Non-Moral Standards

The standards by
which we judge what is
good or bad and right
or wrong in a nonmoral way.

Prepared by Dr. Razia Irfan (Spring


2016)

e Nature of Business Ethics

Characteristics of moral standards


Involve significant wrongs or benefits
Not established by authority figures
Should be preferred to other values including
self-interest
Based on impartial considerations
Felt to be universal. (everyone should live up
to that standard).
Associated with special emotions and
vocabulary.
Prepared by Dr. Razia Irfan (Spring
2016)

he Nature of Business Ethics

Ethics

the discipline that examines ones moral


standards or the moral standards of a
society to evaluate their
reasonableness and their
implications for ones life.
Word Ethics derived from the Latin word Ethics
and Greek word ethikos, -- pertain to character.
Ethics involves the basic concepts and fundamental
principles of decent human conduct.
Ethics involves the study of universal values. (i.e
equality of men and women, human/ natural rights,
obedience to the law, concern for health and safety,
concern for the natural environment etc.)
Prepared by Dr. Razia Irfan (Spring
2016)

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he Nature of Business Ethics

Ethics
Ethical practice involves action that
best serves the ideas of honesty,
integrity, morality and good
management practices.
Philip Wheel Wright says- Ethics is the
branch of philosophy which is the
systematic study of selective
choice, of the standards of right
and wrong and by which it may
ultimately be directed.
Prepared by Dr. Razia Irfan (Spring
http://authoru.org/wp2016)

e Nature of Business Ethics

Objectives of ethics

Define the greatest good of man and establish a


standard for this
Set moral standards and establish norms of behavior

Assess what is moral and what is immoral


Apply judgment upon human behavior based on the set
standards and norms

Prescribe recommendations about Dos and Donts

Express an opinion about human conduct in general


Prepared by Dr. Razia Irfan (Spring
2016)

he Nature of Business Ethics

Objectives of ethics
A) Analysis and Evaluation:
Ethical analysis and ethical diagnosis of past events,
happenings, clarifying the standards, uncover the moral
values, habits of thought.
Ethics provides rational methods for answering the
present situation and related future issues. Wellequipped information is a must to achieve this second
objective, a careful assessment of relevant information
will lead to balanced judgments.
B) Approaches to resolve ethical dilemmas:
It provides therapeutic advice when facing the present
dilemmas and future dangers.
Only the condition,Prepared
which
requires a true identification of
by Dr. Razia Irfan (Spring
2016)

The Nature of Business Ethics

Business ethics

Business ethics is a specialized study of moral right


and wrong that concentrates on moral standards as
they apply to business institutions, organizations,
and behavior.

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517368.jpg

Business ethics is a study of


- Our moral standards insofar as they apply to
business.

- How reasonable or unreasonable moral standards


we have absorbed from society are.
- The implications of our moral standards have for
Prepared by Dr. Razia Irfan (Spring
business activities.
2016)

The Nature of Business Ethics

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Significance of Business Ethics


Good business ethics promotes good
business.
This statement is supported by the research
findings of some well-known authorities
Raymond Baumhart, Brener & Molander, and
Strom & Ruch.
It was clear from their findings that only
those businesses can develop on a
long-term base that conducts activities
on ethical grounds.
Prepared by Dr. Razia Irfan (Spring
2016)

Reasons why ethics have a key role in business


Positive
consequences
Businesses depend on
mutual trust and
confidence, so ethical
businesses will have
positive consequences

Goodwill of the
business and
businessman
Ethical behavior will lead
to a strong public image
which is a symptom of
success in the long run

Self satisfaction

Encourage others

A businessman is first a
member of society, so
inner satisfaction would
only be gained with
ethical decisions

When ethical businesses


make profits, this
motivates others and
encourages them to
follow business ethics

New management
An important feature is
that it follows a code of
conduct, which remains
on all the principles of
service to humanity.
Prepared by Dr. Razia Irfan (Spring
2016)

Protection both
sides
An ethical organization
has sincere businessmen
with higher levels of
commitment.

Success and
development
Ethical conduct of
business leads to
development and series
of success

Types of Ethical ethical


Issues

questions about
the social,
political, legal,
System
or economic
ic
systems within
which
companies
operate.
ethical
questions about
a particular
Corpor
corporation and
its policies,
ate
culture, climate,
impact, or
actions.
ethical
questions about
a particular
Individ
individuals
ual
decisions,
behavior, or
Prepared by Dr. Razia Irfan (Spring
character.
2016)

Can ethical qualities be


attributed to
corporations?
View #1: corporations, like people, act
intentionally and have moral rights, and
obligations, and are morally responsible.

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to.com/canstock10320249.jpg

View #2: it makes no sense to attribute ethical


qualities to corporations since they are not like
people but more like machines; only humans can
have ethical qualities.
View #3: humans carry out the corporations
actions so they are morally responsible for what
they do and ethical qualities apply in a primary
sense to them; corporations have ethical
qualities only in a derivative sense.
Prepared by Dr. Razia Irfan (Spring

Copyright 2012 Pearson


2016) Education, Inc. All rights reserved.

Arguments for and against


business
ethics
Supporting business ethics
Ethics applies to all human activities.
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.

Against business ethics

In a free market economy, the


pursuit of profit will ensure
maximum social benefit so business
ethics is not needed.
A managers most important
obligation is loyalty to the company
regardless of ethics.
So long as companies obey the law
Prepared by Dr. Razia Irfan (Spring
they will do all that ethics requires.
2016)

Corporate Social Responsibility (CSR)


Corporate social responsibility refers
to a corporations responsibilities or
obligations toward society.
Business ethics is both a part of
corporate social responsibility and
part of the justification for corporate
social responsibility.
Shareholder vs. Stakeholder Theory
Copyright 2012 Pearson Education, Inc. All rights reserved.

Ethical Issues in Business

New Issues in Business Ethics


Advances in technology often create new issues for
business ethics.
Currently, advances in information technology are
creating new issues in business ethics.
Biotechnology has created yet another host of difficult
ethical issues
Increasing connections between the economic and
social systems of different nations, known as
globalization, has also created new issues in
business ethics.
Copyright 2012 Pearson Education, Inc. All rights reserved.

New Issues in Business Ethics


Important definitions
Information technology: the use of extremely powerful and
compact computers, the Internet, wireless communications,
digitization, and numerous other technologies and that have
enables us to capture, manipulate, and move information in new
and creative ways.
multinational corporation: A company that maintains
manufacturing, marketing, service, or administrative operations
in several "host" companies
Cyberspace: A term used to denote the existence of information
on an electronic network of linked computer systems
Genetic engineering: A large variety of new techniques that
allows change in the genes of the cells of humans, animals and
plants
Copyright 2012 Pearson Education, Inc. All

Globalization
Many of the pressing issues in business
ethics are related to globalization driven
by multinational corporations

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Globalization is:
Blamed for many ills including rising
inequality, cultural losses, a "race to the
bottom" (lower wages, environmental
standard, etc. to attract foreign
companies), introduction of inappropriate
technologies into developing countries.

Beneficial in that it has brought great


benefits to developing countries
including job skills, income,
technology, a decrease in poverty,
specialization.

Differences among nations


- Include differences in law,
governments, practices, levels of
development, cultural
understandings.
- Raise the question whether
managers in foreign countries should
follow local standards or their home
standards.
Copyright 2012 Pearson Education, Inc. All

Resolving Cross-Cultural Ethical Differences


Moral Relativism: the theory that there are no
ethical standards that are absolutely true and that
apply or should be applied to the companies and
people of all societies.

Objections to Moral Relativism:

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Some moral standards are found in all societies;

Moral differences do not logically imply relativism;


Relativism has incoherent consequences;
Relativism privileges whatever moral standards are
widely accepted in a society.
Copyright 2012 Pearson Education, Inc. All

According to the Integrative Social Contracts


Theory (ISCT), there are two kinds of moral
standards:
Moral standards

Hypernorms:
those moral standards that
should be applied to people in
all societies.

Microsocial norms:
those norms that differ from one
community to another and that
should be applied to people only if
their community accepts those
particular norms.

Rationalizing our Actions

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Moral Reasoning :
The reasoning process by which human behaviors,
institutions, or policies are judged to be in accordance
with or in violation of moral standards.
Moral reasoning involves:
The moral
standards by
which we
evaluate
things

Information
about what
is being
evaluated

A moral
judgment
about what
is being
evaluated.

Moral reasoning should be logical, rely on information that


is accurate, relevant and complete and be consistent.

Rationalizing our
Actions

Moral development

The psychologist Lawrence Kohlberg conducted 20 years of


research and found that there are 6 identifiable stages of
development of a persons ability to deal with moral issues
Kohlbergs Three Levels of Moral Development
First Level: Pre-conventional Stages person follows his own point of
view only
Stage One: punishment and obedience
Stage Two: instrumental and relative
orientation

orientation

Second Level: Conventional Stages person takes point of view of


similar people
too
Stage Three: interpersonal concordance
Stage Four: law and order orientation
orientation

Third Level: Post-conventional Stages person can judge moral


principles of society
Stage Five: social contract orientation

Stage Six: universal principles orientation

Rationalizing our
ActionsFour

Steps Leading to Ethical Behavior

Step One: Recognizing a situation is an ethical situation.


Requires framing it as one that requires ethical reasoning
Situation is likely to be seen as ethical when:
involves serious harm that is concentrated, likely, proximate, imminent, and potentially violates our
moral standards
Obstacles to recognizing a situation:
Euphemistic labeling, justifying our actions, advantageous comparisons, displacement of
responsibility, diffusion of responsibility, distorting the harm, and dehumanization, and attribution of
blame.
Step Two: Judging the ethical course of action.
Requires moral reasoning that applies our moral standards to the information we have about a
situation.
Requires realizing that information about a situation may be distorted by biased theories about the
world, about others, and about oneself.
Step Three: Deciding to do the ethical course of action.
Deciding to do what is ethical can be influenced by:
The culture of an organizationpeoples decisions to do what is ethical are greatly influenced by
their surroundings.
Moral seductionorganizations can also generate a form of moral seduction 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:
Ones strength or weakness of will
Ones belief about the locus of control of ones actions

Copyright 2012 Pearson Education, Inc. All rights

Rationalizing our
Actions

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).
Person did so of his or her own free will (freedom).
Copyright 2012 Pearson Education, Inc. All

Rationalizing our
Actions

Factors that Mitigate Moral Responsibility

Minimal contribution
In general, the less ones actual actions 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 still be doubtful about some important facts, or may have
doubts about the moral standards involved, or doubts about how
seriously wrong the action is.
Difficulty
A person may find it difficult to avoid a certain course of action
because he or she is subjected to threats or duress of some sort or
because avoiding that course of action will impose heavy costs on
the person.
Moral responsibility is not Mitigated by:
The cooperation of others
Following orders
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