ETHICS AND VALUES IN BUSINESS

Sources of Ethical Norms

Fellow Local Regions of

Workers Community Country

Family Profession
The Individual
One’s Self-
Interest and
Friends Conscience Employer

The Law Religious Society at

Beliefs Large

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 Business Ethics:
Meaning, Types, Approaches (1 of 2)
Ethics – is the discipline that deals with moral
duty and obligation.
Moral Conduct - relates to principles of right,
wrong, and fairness in behavior.
Business Ethics -
• Is concerned with morality and fairness in
behavior, actions, and practices that take place
within a business context.
• Is the study of practices in organizations and is a
quest to determine whether these practices are
acceptable or not.
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 Three Major Approaches
to Business Ethics
Conventional Approach -
• Based on how the average person views
business ethics, and on common sense.
Principles Approach -
• Based on the use of ethics principles to justify
and direct behavior, actions, and policies.
Ethical Tests Approach -
• Based on short, practical questions to guide
ethical decision making and behavior and
practices.
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 The Conventional Approach
to Business Ethics
The conventional approach to business ethics involves a
comparison of a decision or practice to prevailing societal
norms.
Decision, Behavior, Prevailing Norms
or Practice of Acceptability

Ethical Egoism -
• An ethical principle based on the idea that the individual
should seek to maximize his or her own self interests as a
legitimate factor.
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 Business Ethics:
Meaning, Types, Approaches (2 of 2)
Descriptive Ethics -
• Involves describing, characterizing, and studying
morality.
• Focuses on what is occurring.
Normative Ethics -
• Focuses on what ought or should be occurring.
• Demands a more meaningful moral anchor than
just “everyone is doing it.”
Normative Ethics is our primary concern in this text
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 Business Ethics Today versus Earlier
Periods
Society’s Expectations
of Business Ethics
Expected and Actual Levels
of Business Ethics

Ethical Problem

Actual
Ethical Problem Business Ethics

1960s Time 2010

9
 Two Hypotheses Regarding
Moral Management Models
Population hypothesis
• The distribution of the three models
approximate a normal curve, with the amoral
group occupying the large middle part of the
curve and the moral and immoral categories
occupying the tails.
Individual hypothesis
• Within the individual manager, these three
models may operate at various times and
under various circumstances.
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 Three Models of
Management Ethics
Immoral Management -
• An approach devoid of ethical principles and an
active opposition to what is ethical.
• The operating strategy of immoral management is
focused on exploiting opportunities for corporate or
personal gain.
Moral Management -
• Conforms to highest standards of ethical behavior
or professional standards of conduct.
Amoral Management –
• Different in nature from the others, it has two kinds:
• Intentional: Does not consider ethical factors.
• Unintentional: Casual or careless about ethical
factors.
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Characteristics of Immoral Managers-
These Managers:
• Intentionally do wrong
• Are Self-centered and self-absorbed
• Care only about self or organization’s profits or
success
• Actively oppose what is right, fair, or just
• Exhibit no concern for stakeholders
• Are the “bad guys”
• An ethics course probably would not help
them

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Examples of Immoral Management -
• Stealing petty cash
• Cheating on expense reports
• Taking credit for another’s accomplishments
• Lying on time sheets
• Coming into work hungover
• Telling a demeaning joke
• Taking office supplies for personal use
• Showing preferential treatment toward certain
employees
• Rewarding employees who display wrong
behaviors
• Harassing a fellow employee
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Characteristics of Amoral Managers-
Intentionally Amoral Managers
• Don’t think ethics and business should “mix.”
• Business and ethics exist in separate spheres.
• A vanishing breed.
Unintentionally Amoral Managers
• Don’t consider the ethical dimension of decision-
making.
• Don’t “think ethically.”
• Have no “ethics buds.”
• Well-intentioned, but morally casual or
unconscious.
• Ethical gears are in neutral.

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 Habits of Moral Leaders -
1. They have a passion to do right.
2. They are morally proactive.
3. They consider all stakeholders.
4. They have a strong ethical character.
5. They have an obsession with fairness.
6. They undertake principled decision-
making.
7. They integrate ethics wisdom with
management wisdom.
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Characteristics of Moral Managers
These Managers:
• Conform to the highest standards of ethical
behavior or professional standards of
conduct.
• Ethical Leadership is commonplace.
• Their goal is to succeed within the confines
of sound ethical precepts
• Demonstrate high integrity in thinking,
speaking and doing.
• Follow both the letter and the spirit of the
law
• Possess an acute moral sense and moral
maturity
• Moral managers are the “good guys”
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 Positive Ethical Behaviors
of Moral Leaders -
• Giving proper credit where it is due
• Being straightforward and honest with other
employees
• Treating all employees equally
• Being a responsible steward of company assets
• Resisting pressure to act unethically
• Recognizing and rewarding ethical behavior of
others
• Talking about the importance of ethics and
compliance on a regular basis
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 Making Moral Management
Actionable -
• The characteristics of immoral, moral and
amoral management provide benchmarks for
managerial self-analysis, and help managers
recognize the need to move from the immoral or
amoral ethic to the moral ethic.
• Amoral management is a morally vacuous
condition that can easily be disguised as an
innocent, practical, bottom-line philosophy. But
it is the bane of the management profession.
• Most managers are not “bad guys,” but
managerial decision-making cannot be ethically
neutral. Both immoral and amoral management
must be discarded and the process of developing
moral judgment begun.
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Three Models of Management
Morality and Emphases on CSR

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Moral Management Models And Acceptance
or Rejection of Stakeholder Thinking

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 Kohlberg’s Model
of Moral Development

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 Why Managers and Employees
Behave Ethically

1. To avoid some punishment

Most of Us
2. To receive some reward

3. To be responsive to family, friends,

or superiors
Many of Us
4. To be a good citizen

Very Few Of Us 5. To do what is right, pursue some ideal

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 Ethics of Care as
Alternative to Kohlberg

Recognize their own needs Level 3

and needs of others

Establish connections and Level 2

participate in social life

Level 1
Self is Sole Object of Concern

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External Sources of a Person’s Values

Religious values

Philosophical values

The Web
Cultural values
of Values

Legal values

Professional values

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Sources Internal to the Organization

Norms prevalent in business include -

• Respect for the authority structure
• Loyalty to bosses and the organization
• Conformity to principles and practices
• Performance counts above all else
• Results count above all else

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 Elements of Moral Judgment -
• Moral imagination
• Moral identification and ordering
• Moral evaluation
• Tolerance of moral disagreement and
ambiguity
• Integration of managerial and moral
competence
• A sense of moral obligation

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Ethics, Economics, and Law –
A Venn Model

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idiomatic antithesis

The golden rule:

Do unto others
 Dilemma 1: Worthwhile Work
Dilemma 2: Work vs. Family
Dilemma 3: Going Along With the Crowd
Dilemma 4: When Leaders Mislead

Dilemma 5: Being a Change Agent

Dilemma 6: Careers and the Common Good

The Six Ethical Dilemmas Every Professional Faces- Kirk O. Hanson

Executive Director, Markkula Center for Applied Ethics, and
John Courtney Murray S.J. University Professor of Social Ethics, Santa Clara University
The Utilitarian Approach
The ethical corporate action is the one that produces the greatest
good and does the least harm for all who are affected-customers,
employees, shareholders, the community, and the environment.
The utilitarian approach deals with consequences; it tries both to
increase the good done and to reduce the harm done.

The Rights Approach

The ethical action is the one that best protects and respects the
moral rights of those affected. Humans have a dignity based on
their human nature per se or on their ability to choose freely what
they do with their lives. On the basis of such dignity, they have a
right to be treated as ends and not merely as means to other ends.
The Fairness or Justice Approach
All equals should be treated equally. We pay people more based on
their harder work or the greater amount that they contribute to an
organization, and say that is fair. But there is a debate over CEO salaries
that are hundreds of times larger than the pay of others; many ask
whether the huge disparity is based on a defensible standard or whether
it is the result of an imbalance of power and hence is unfair.
The Common Good Approach
Our actions should contribute to that life of society- respect and
compassion for all others-especially the vulnerable-are requirements of
such reasoning. Common conditions that are important to the welfare of
everyone. This may be a system of laws, effective police and fire
departments .
The Virtue Approach
These virtues are dispositions and habits that enable us to act according
to the highest potential of our character and on behalf of values like
truth and beauty and aid development of our humanity. Honesty,
courage, compassion, generosity, tolerance, love, fidelity, integrity,
fairness, self-control, and prudence are all examples of virtues
•How would the action or situation we are considering be viewed
by others if it became viral headline news?
•Would we be comfortable reading a Wall Street Journal story that
our company was doing this or letting the current situation
continue for long?
•Would you be comfortable explaining to your spouse or
grandmother what you are about to do?
Will this action produce the best outcomes for everyone affected?
Are we maximizing good and minimizing harm for everyone affected?
Liberty Rights, Welfare Rights, Human Rights
If it is ethical for us to do that, then here comes everybody. What about that?
•Things have value because people value them.
•All people deserve equal respect as ones who give value to things. What I value has no
claim to be “more valuable” than what you value.
•So let others make their own choices based on what they value. Don’t choose for them
except in special circumstances. Children, for example, may not be equal because they
may not know what they really value.
•Those who have made promises, signed contracts, or made other prior commitments
may not be free to act because of these prior choices.
•Effort – some may have worked harder
•Accomplishment – some may have achieved more or performed better
•Contribution – some may have contributed more to the group or society
•Need – some may have a greater need to be served first or receive a larger share
•Seniority – some may have arrived in line first, be older or younger, or have more years
of service
•Contract – a prior agreement about how the distribution should be made.
•Relationship or In-Group Status – some may have a claim because they are members of
my family or a group to which I owe loyalty.
Examples of particular common goods or parts of the common good include an
accessible and affordable public health care system, and effective system of
public safety and security, peace among the nations of the world, a just legal and
political system, and unpolluted natural environment, and a flourishing economic
system.
 Five Principles
Principle 1 - Personal ethical responsibility is inalienable.
Translation: "I was ordered to do it" never justifies unethical conduct. VW case

Principle 2 - Refrain from using physical coercion & threat of physical harm.
(This principle does not refer to psychological pressures.) Builders/Granite/Forestery

Principle 3 - Refrain from fraud and improper deception.

Example: An agreement to engage in business that requires one to exercise due
diligence implies that one agrees that other parties are not required to disclose
publicly accessible information. Satyam

Principle 4 - Honor all terms of one’s contracts.

. Example: One's product must pose no greater risk than those one expressly or
implicitly communicates when marketing the product. McD coffee case

Principle 5 - Treat all parties with equal respect for their autonomy.
Translation: There are no second class citizens in business. Don't discriminate against
socially disfavored groups. The Bangalore New Year issue. Two tumbler system
How Ethical Decisions are Made
Most decisions, including ethical decisions, are
made intuitively.
•While this innate moral sense often gets it right,
as when people get a bad feeling in their “gut”
when they are about to behave unethically, moral
intuition often gets it wrong.
•People must understand factors that can wreak
havoc on moral decision making:
cognitive errors, social and organizational
factors, and situational factors.
Foundational Assumptions
•People make most of their decisions
instinctively rather than rationally.
•People tend to believe that they are leading
ethical lives while doing things that ethical
•people would not do.

Cognitive limitations, social and organizational

pressures, and situational factors make it
hard for even the most well-intentioned people
to act as ethically as they would like.
Cognitive Errors: Heuristics, Biases, and
Rationalizations
•Incrementalism The slippery slope in
which one gets used to minor infractions
and does not notice when minor
infractions give way to major infractions.
•Self-serving bias People gather and
process information in a self-serving way
and fail to see and/or object to unethical
behavior that serves their self-interest.
Loss aversion: Because people detest losses more
than they enjoy gains, they will
make more immoral decisions to avoid a loss than
they would to achieve a gain.
Framing:
People make more or less ethical decisions
depending on how an
issue is framed.
Overconfidence =People have a tendency to believe
they are more ethical than they are,
which inclines them to make decisions with serious
ethical implications without proper reflection.
Social and Organizational Pressures
•Obedience to authority =Complying with the
unethical request of a supervisor.
•Conformity bias=People conform to the behavior of
their peers and justify
unethical behavior because “everyone is doing it.”
 Tangible & abstract
People remember immediate and tangible
factors (e.g., hiding debt will keep the
company’s stock price from falling this
quarter) at the expense of more removed
and abstract factors (e.g., nameless,
faceless shareholders may lose money in
the future if the company
doesn’t “turn it around”).
 Situational Factors
•Time pressure
•People are more likely to act unethically under time
pressure.
•Transparency
•People are more likely to act ethically when actions
are transparent.
•Fatigue
•People are more likely to act unethically when they
are tired.
•Cleanliness
•People are more likely to act ethically when they are
in a clean room.
Moral awareness is the
ability to detect and appreciate the
ethical aspects of a decision that one
must make.

Moral intent is the desire to

act ethically when facing a decision
and overcome the rationalization to
not be ethical “this time.”
Risk of rationalization
Moral decision making is
the ability to produce a reasonable and
defensible answer to an ethical question.
Risk of self serving bias

Moral action involves taking

the necessary steps to transform the
intent to do the right thing into reality.
This includes moral ownership, moral
efficacy, and moral courage.