CHAPTER 5

Business Ethics and Ethical Decision Making

Chapter Objectives

• To define and describe the importance of business ethics

• To understand the diverse and complex nature of existing and emerging ethical issues

• To discuss the individual factors that influence ethical or unethical decisions

• To explore the effect of organizational relationships on ethical decision making

• To evaluate the role of opportunity in ethical or unethical decisions

Business Ethics

Principles and standards that guide the behavior of individuals and groups in the world of business

Ethical Issues in Business

An ethical issue is a problem, situation, or opportunity requiring an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical.

Ethical Issues in Business

• Honesty and fairness• Conflict of interest• Fraud• Discrimination• Information technology

The Ethical Decision Making Process

• Factors that influence the ethical decision-making process include:– Individual factors – Organizational relationships – Opportunity

• The strongest factor influencing employee behavior is organizational relationships.

Moral Philosophies

• Consequentialism• Egoism• Utilitarianism• Ethical formalism• Justice theory

Stages of Moral Development

• Punishment and obedience• Individual instrumental purpose and exchange• Mutual interpersonal, expectation, relationships, and

conformity• Social justice and conscience maintenance• Prior rights, social contract, or utility• Universal ethical principles

Kohlberg’s Model

• People progress through the previous six stages.• Cognitive moral development should be viewed

as a continuum.• People’s moral beliefs and behavior change as

they gain education and experience.• There are universal values by which

people in the highest level of moraldevelopment abide.

Social Needs that Motivate Ethical/Unethical Behavior

• Need for achievement• Need for affiliation• Need for power

Corporate Culture

• Values, beliefs, goals, norms, and rituals shared by members or employees of an organization.– What is important?– How do we treat each other?– How do we do things around here?

Significant Others

Superiors, peers, and subordinates in the organization who influence the ethical decision-making process

Opportunity

• Conditions that limit barriers or provide rewards:– Financial gain– Recognition– Promotion– Positive feelings from a job well done

How to Create EthicalRelationships in Business

• Listen and learn.• Identify the ethical issue.• Create and analyze options.• Identify the best options.• Explain decision and resolve any differences

that may arise.

Creating an Ethical Climate

Top managers, employees, and stakeholders must support the philosophy that all organizations have responsibilities that extend beyond legal and economic obligations.