O.C. Ferrell, UNM

Linda Ferrell, UNM

Using Principles as a Foundation for Teaching Business Ethics

What are principles?

• Laws of the universe that pertain to human relationships & human organizations

• Fairness, equity, justice, duty, liberty, distributive justice

• Self-evident, self validating natural laws-they don’t shift or change

-they provide constant direction

• Objective & external providing vision & direction

Adapted from Stephen Covey (1991) Principle Centered Leadership.

What are ethical principles?

What it right or wrongUniversal & absoluteHave been derived from consensus & can

relate to religion & philosophy as sources of content

Examples include private property, freedom of speech, golden rule…

What are values?

Beliefs of an individual or culture Not universal Subjective & internal Stem from personal choice Evolve from socialization & family influences Evolve from personal discoveries & experience ‘Our take on life’ or ‘lens on the world’ The appropriate application of values to daily

life results in ‘integrity based behaviors’

Difference between principles & values…

• Values are relative, principles are absolute

• Principles are ‘true north’ on the compass providing constant direction & guidance for behavior

How are ‘Principles & Values’ Used?

• Principles-the basis for rules-used in decision making as rules & laws

(absolute)

• Values

-the basis of norms-the foundation of culture-assist decision making in gray areas

Integrity—Act with honesty in all situations

Trust—Build trust in all stakeholder relationships

Accountability—Accept responsibility for all decisions

Transparency—Maintain open and truthful communications

Fairness—Engage in fair competition and create equitable and just relationships

Respect—Honor the rights, freedoms, views, and property of others

Rule of Law—Comply with the spirit and intent of laws and regulations

Viability—Create long-term value for all relevant stakeholders.

Daniels Fund Ethics Initiative Principles

Examples of Business Principles…

Top executives will build trust into all stakeholder relationships

A company’s business operations should be transparent to shareholders, employees & the public as its executives stand by the integrity of their decisions

A company will respect the rights, freedoms & views of its employees

A company will respect the property of others & comply with all legal requirements related to intellectual property

A company will create long-term value for all relevant stakeholders

A company will engage in fair competition & comply with both the letter and spirit of the laws regulating competitionDavid Batstone (2003) Saving the Corporate Soul, Jossey-Bass.

More Business PrinciplesA company will strive for balance, diversity

and equality in its relationships with workers, customers and suppliers

A company will pursue international trade & production based on respect for the rights of workers & citizens of trade partner nations

The worker will be treated as a valuable team member, not just as a hired hand

You have to make decisions. But you don’t have to be tough to succeed in business. All you have to do is treat people decently and you will be amazed at how they will respond. Bill Daniels

David Batstone (2003) Saving the Corporate Soul, Jossey-Bass.

More Business Principles The environment will be treated as a silent stakeholder,

a party to which the company is wholly accountable A company will strive for balance, diversity, and

equality in its relationships with workers, customers, and suppliers

A company will pursue international trade & production based on respect for the rights of workers & citizens of trade partner nations

The worker will be treated as a valuable team member, not just as a hired hand

You have to make decisions. But you don’t have to be tough to succeed in business. All you have to do is treat people decently and you will be amazed at how they will respond. Bill Daniels

David Batstone (2003) Saving the Corporate Soul, Jossey-Bass.

Principle Centered Companies…

Southwest Airlines

Johnson & Johnson

Procter & Gamble

Applied Materials

A study of these ‘principled’ companies over 15 years showed that they delivered a total shareholder return of 43% while the S&P average was 19%.

David Batstone (2003) Saving the Corporate Soul, Jossey-Bass.

Principles vs. Practices

Principles• “Why we do” (foundation)

Practices• “What we do” (actions)

If you teach practices without principles, you make individuals dependent upon you or others for further direction & cannot be assured they will take the ‘high road’.

Outcomes of Principle Driven Business Ethics

Individuals understanding the importance of principles & guided values will select to work for principled organizations & reinforce the company’s reputation

Principled companies will maintain their reputation by the avoidance of negative publicity & litigation

Business relationships will be managed more efficiently & effectively through networks of principled businesses

Turnover will be reduced by having valued, ‘good fit’ employees that understand & support the ethical organizational culture

Data from the Ethisphere Institute indicates that the World’s Most Ethical Companies have significantly higher stock performance than the S&P 500 and FTSE 100.