Business Ethics

Principles of ManagementCore Principles

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Individual v. Business Ethics

• Each of us has a view of what is right or wrong.

• A manager takes his/her personal ethics with them in to the organization.

• That company also has an organizational view of what is right or wrong in terms of the business decisions it makes.

Learning Objectives• Be able to explain what business ethics is.• Be able to recognize an ethical problem.• Be able to identify the stakeholders impacted by an

ethical problem.• Evaluate solutions to the ethical problem using the

different ethical philosophies.• Make a decision and support your decision explaining

the impact on different stakeholders.• Identify steps for preventing the ethical problem from

occurring again.

Defining Business Ethics

• Ethics Generally (definitions)– Focus on what is right and wrong– Inquiry into morality – Standards governing how we behave

• Business Ethics– Comprises moral principles and standards that

guide behavior in business situations– What is right and wrong in a business setting?

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Company ABC

ManagerSmith

EthicalDilemmaIs perceived

How a manager handles the situation depends on:

Person• Individual Characteristics• Personal ethics• Stage of Moral Development

Organization• Culture• Values• What is rewarded/punished

Dilemma Itself• Importance to person• Importance to organization• Importance to society

Ethical Decision Making

Role of Stakeholders• Stakeholders are people who have a stake or interest

in the success of the organization.• Examples of Stakeholders:

– Employees, customers, investors, suppliers, the community– Also may include competitors, government, media, interest

groups• Stakeholders may have different views on whether a

company’s actions are right or wrong.• Difficult to satisfy the goals and needs of all

stakeholders but managers should consider them prior to making decisions.

• Ethical Dilemma - When stakeholder needs and goals are in conflict and the manager must make a decision

Utilitarianism• Philosophers John Stuart Mill (1806-1873) and

Jeremy Bentham (1784-1832)• Good consequences for society• Decision maker seeks alternative actions and

evaluates the costs/benefits of each action on all persons in the foreseeable future

• The right decision is the one that provides the greatest total benefit

• Critics say can’t consider all alternatives and ignoring individual rights and justice

Deontology (Rights View)• Philosopher Immanual Kant (1724-1804)• Decision maker must focus on the individual rights

of people impacted by the decision• It also focuses on how people are treated in the

decision making process• Equal respect must be given to all persons • Some decisions are wrong regardless of the social

utility that may result

• Critics argue that this theory fails to take what is best for society into account.

Ethical Decision Making• There are different moral philosophies to guide

decision making• These are lenses through which a person looks at

a situation for guidance of what is right or wrong• Often the decision will be the same, but different

reasoning is used to get to that decision -- but that is not always the case.

Utilitarianism(greatest good for the most people)

Deontology(Rights View)

Two Most Common Moral Philosophies

Which Business Decision is Ethical?

• Evaluate the decision through the lenses of the utilitarian view as well as the deontological view

• Also consider –– TV Rule– Professional Ethics– Virtue Ethics

Legal v. Ethical

• What is legal is ethical?

• What is ethical is legal?

• What is illegal is unethical?

• What is unethical is illegal?

Making Ethics Part of Day-to-Day Operations

• Build an ethical culture• Mission and values of organization must support

ethical culture• Managers must lead by example and walk the

walk• Train, expect, reward ethical behavior• Make ethics a job qualification• Develop ethical policies and codes of behavior• Monitor and control activities to encourage ethical

behavior• Hold regular ethical audits• Designate staff and resources to foster and

support the ethical culture

Keys to Effective Ethics Training

• Teach employees how to identify the ethical dimensions of a decision

• Help employees understand the ambiguity involved when making ethical decisions

• Give employees the tools and authority to address ethical issues

• Make employees aware that their individual actions form the ethical behavior of the company

• Make managers and support available to assist in ethical conflict resolution

• Eliminate the belief that unethical behavior is ever justified

Code of Ethics• Code of Ethics is a set of formal statements of what an

organization expects as “right” business behavior• May be found within a Business Code of Conduct• Code of Ethics may contain values such as:

– Trustworthiness– Respect – Responsibility– Fairness– Caring– Citizenship

Office of Social Responsibility & Ethics

• Separate office and personnel• Manage organization’s ethics and legal

compliance programs• Dedicated to fostering ethical behavior• Usually does not report directly to the board

of directors• May hire outside support or hire within

Social Responsibility• Social Responsibility is a type of ethics• It addresses to what degree a company views its obligation

to the community or society.• Traditionally, business was believed to only be responsible

to its owners and shareholders, and its primary goal was to make a profit.

• Some businesses take a broader view that their purpose is also to have a positive impact on society.

• Most businesses fall somewhere in between the extremes and have some component of their business that tries to make the community or world a better place.

Examples of Social Responsibility

• Green Management or recycling programs• Support for community programs• Contributions to local schools• Programs to encourage healthy lifestyle• Researching for alternative fuels• Commit to reduce pollution or construct “eco-

friendly” buildings• Provide aid or supplies in times of disasters