Chapter 4: Ethics and Ethical Reasoning

Defining ethics and business ethics Evaluating why businesses should be ethical Knowing why ethical problems occur in business Identifying managerial values as influencing ethical decision making Recognizing how people’s spirituality influences their ethical behavior Understanding stages of moral reasoning Analyzing ethical problems using generally accepted ethics theories

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Chapter 4Ethics and Ethical ReasoningCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCh. 4: Key Learning ObjectivesDefining ethics and business ethicsEvaluating why businesses should be ethicalKnowing why ethical problems occur in businessIdentifying managerial values as influencing ethical decision makingRecognizing how people’s spirituality influences their ethical behaviorUnderstanding stages of moral reasoningAnalyzing ethical problems using generally accepted ethics theories4-*The Meaning of EthicsEthicsA conception of right and wrong conductTells us whether our behavior is moral or immoral Deals with fundamental human relationships—how we think and behave toward others and want them to think and behave toward usEthical PrinciplesGuides to moral behaviorBusiness EthicsApplication of general ethical ideas to business behavior4-*Sources of EthicsNotions of right and wrong come from many sourcesReligious beliefsFamily background EducationCommunity/neighborhoodMedia influencesThese experiences create a concept of ethics, morality, and socially acceptable behavior in each personActs as a moral compass to guide an individual when ethical dilemmas arise 4-*Ethical RelativismConcept which holds that ethical behavior should be defined by various periods in time in history, a society’s traditions, the special circumstances of the moment, or personal opinionThe meaning given to ethics would be relative to time, place, circumstance, and the person/s involved There would be no universal ethical standards on which people around the globe could agree 4-*Observations of Unethical Behavior at WorkFigure 4.1 4-*Five Key Reasons Business Should Be EthicalTo meet demands of business stakeholdersAbout three-fourths of employees surveyed in 2007 believe their firms are considering the environment, employee well-being, and the interests of society and the community.Meeting demands of stakeholders is good business To enhance business performanceResearch shows linkage between ethically responsible behavior and favorable corporate financial performance Imparts trust, promoting positive alliances among business partners4-*Five Key Reasons Business Should Be EthicalTo comply with legal requirementsTwo legal requirements provide direction for companies interested in being more ethical in their business operationsU.S. Corporate Sentencing GuidelinesSarbanes-Oxley Act of 2002Although they apply only to U.S.-based firms, these legal requirements also provide a model for firms that operate outside the United States 4-*U.S. Corporate Sentencing GuidelinesEstablish standards and procedures to reduce criminal conductAssign high-level officer(s) responsibility for complianceNot assign discretionary authority to “risky” individualsEffectively communicate standards and procedures through trainingTake reasonable steps to ensure compliance—monitor and audit systems, maintain and publicize reporting systemsEnforce standards and procedures through disciplinary mechanismsFollowing detection of offense, respond appropriately and prevent reoccurrence4-*Sarbanes-Oxley Act of 2002Born from the ethics scandals at Enron, WorldCom, TycoSeeks to ensure that firms maintain high ethical standards in how they conduct and monitor business operationsRequires executives to vouch for the accuracy of a firm’s financial reportsRequires executives to pay back bonuses based on earnings that are later proved fraudulentEstablished strict rules fro auditing firmsIn 2006 and 2007 regulation loosening occurred when the SEC provided more relaxed guidelines to parts of the Sarbanes-Oxley Act4-*To prevent or minimize harmOverriding principle that business should “do no harm”Examples include not harming society with toxic waste, protecting business from unethical employees and unethical competitorsTo promote personal moralityKnowing one works in a supportive ethical climate contributes to sense of psychological security People want to work for companies that do the right thingFive Key Reasons Business Should Be Ethical4-*Why Ethical Problems Occur in BusinessFour Primary ReasonsPersonal gain and selfish interestCompetitive pressure on profitsConflicts of interestCross-cultural contradictions4-*Why Ethical Problems Occur in BusinessFigure 4.34-* Core Elements of Ethical Character: Managers’ Values Managers are key to whether a company and its employees will act ethically or unethicallyThe values held my managers will serve as models for others who work at the companyDifferences in ethical stances of U.S. versus European managers and employees Younger generation of managers more concerned about ethics/social responsibilityA company’s CSR performance is a major factor when selecting a new employer for today’s graduating MBAs4-*Spirituality in the WorkplacePersonal belief in a supreme being, religious organization, power of nature or some other life-guiding forceOrganizations have responded to the increased attention to spirituality and religion at work by attempting to accommodate their employeesOpponents of spirituality at work point to the myriad of implementation issues as grounds for keeping spirituality out of the workplaceIssues include which religion should be promoted, and need for recognizing diversity of religious beliefs4-*Stages of Moral DevelopmentFrom childhood to mature adulthood people move up in their moral reasoningEarliest stages of reasoning are ego-centeredMost developed stages are principle-centeredMost managers make decisions based on criteria in levels 3 and 4Company executives’ reasoning has wide implications both inside and outside the organization4-*Stages of Moral Development and Ethical ReasoningFigure 4.44-*Analyzing Ethical Dilemmas in BusinessBusiness managers and employees need a set of decision guidelines that will shape their thinking when on-the-job ethics issues occurThese guidelines should help themIdentify and analyze the nature of an ethical problem, andDecide which course of action is likely to produce an ethical result4-*Four Methods of Ethical ReasoningVirtuesValues and character are critical determining factorsUtilitarianCompares benefits and costs of a decision, policy or actionCosts and benefits can be economic, social or humanRightsPerson or group is entitled to something or to be treated in a certain wayExamples of basic human rights are right to life, safety, and due processJustice Means benefits and burdens are distributed equally, according to some accepted rule4-*Four Methods of Ethical ReasoningFigure 4.54-*Applying Ethical Reasoning to Business ActivitiesCan use the virtues, utility, rights, and justice framework as a tool to analyze real business ethics dilemmasOnce the ethical analysis is complete, the decision maker should ask the question: Do all of the above ethics approaches lead to the same decision?If all the answers are “Yes”, the proposed action is ethicalIf all the answers are “No”, the action is not ethical and needs to be reconsideredIf “Yes” and “No” answers are mixed, you must decide which takes priority4-*
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