Business & SocietyEthics, Sustainability, and Stakeholder
ManagementEighth Edition
Archie B. Carroll Ann K. Buchholtz
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Chapter 8Personal and
Organizational Ethics
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Learning Outcomes
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1. Understand the different levels at which business ethics may be addressed.
2. Differentiate between consequence-based and duty-based principles of ethics.
3. Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions.
4. Identify the factors affecting an organization’s ethical culture and provide examples.
5. Describe and explain actions, strategies, or “best practices” to improve an organization’s ethical climate.
3
Chapter Outline• Ethics Issues Arise at Different Levels• Personal and Managerial Ethics• Managing Organizational Ethics• From Moral Decisions to Moral Organizations• Summary
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Organizational Ethics
• Ethical decision making occurs daily in organizations.
• Many managers have no training in ethics or ethical decision making.
• Ethics is vital to business success.
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Levels at Which Ethical Issues May be Addressed
Personal level• Situations faced in our personal lives outside the
context of our employment.Organizational level• Workplace situations faced by managers and
employees.Industry or profession level• A manager or organization might experience
business ethics issues at the industry or professional level.
Societal and global levels• Managers acting in concert through their companies
and industries can bring about constructive changes.6
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Personal and Managerial Ethics
There are three major approaches to ethical decision making1. Conventional Approach
• Discussed in chapter 7.
2. Principles Approach• Managers desire to make decisions based on more
than is provided by the conventional approach to ethics.
• A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course.
3. Ethical Tests Approach• Discussed later in this chapter.
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Types of Ethical Principles or Theories
Teleological theories• Focus on consequences or results.
Deontological theories• Focus on duties.
Aretaic theories• Focus on virtue.
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Principles Approach to Ethics
Major principles of ethics• Utilitarianism• Kant’s Categorical Imperative• Rights• Justice• Principles of care• Virtue ethics• Servant leadership• Golden Rule
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Utilitarianism
• A teleological principle that focuses on acts that produce the greatest good for the greatest number.
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Strengths Weaknesses
Forces thinking about the general welfare of stakeholders
Ignores actions that may be inherently wrong
Allows personal decisions to fit into situational complexities
May conflict with the notion of justice
Difficult to formulate satisfactory rules for decision making
Kant’s Categorical Imperative
• A duty-based, deontological, principle.
Formulations:1. Act only on rules that you would be
willing to see everyone follow.
2. Act to treat humanity in every case as an end and never as a means.
3. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.
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Principle of Rights
Moral rights• Rights that we ought to have based on
moral reasoning.
Principle of rights• Focuses on examining and possibly
protecting individual moral or legal rights.• A negative right is the right to be left
alone.• A positive right is the right to something.
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Principle of Justice
• Involves considering what alternative promotes fair treatment of people.
Types of justice• Distributive• Compensatory• Procedural• Rawlsian
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Ethical Due Process
Process Fairness1. Have employees been given input into the
decision process?
2. Do employees believe the decisions were made and implemented in an appropriate manner?
3. Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made?
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Rawls’s Principles of Justice1. Each person has an equal right to the most
basic liberties compatible with similar liberties for others.
2. Social and economic inequalities are arranged so that they are both: Reasonably expected to be to everyone’s
advantage, and Attached to positions and offices open to
all.
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Ethic of Care and Virtue Ethics
Ethic of care/Principle of caring • Traditional ethics focus too much on the
individual self.• Views the individual as relational, not
individualistic– similar to stakeholder theory.
Virtue ethics • Focuses on individuals becoming
imbued with virtues.• Based on Aristotle and Plato.
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Servant Leadership
Servant leadership• Based on the moral principle of serving
others first, such as employees, customers, and community.
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Characteristics of Servant Leaders
• Listening• Empathy• Healing• Persuasion• Awareness• Foresight• Conceptualization• Commitment to the growth of people• Stewardship• Building community
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The Golden Rule
• Do unto others as you would have them do unto you.
The Golden Rule is:
1. Accepted by most people.
2. Easy to understand.
3. A win-win philosophy.
4. A compass when you need direction.
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A Sketch of Ethical Principles
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The Categorical Imperative
The Means-Ends Ethic
The Conventionalist Ethic
The Might-Equals-Right Ethic
The Disclosure Rule The Organization Ethic
The Golden Rule The Organization Ethic
The Hedonistic Ethic The Professional Ethic
The Intuition Ethic The Proportionality Principle
The Market Ethic The Revelation EthicThe Utilitarian Ethic
Ethical Tests Approach
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Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of Common Sense
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
Factors Affecting the Morality of Managers
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Society’s Moral ClimateBusiness’s Moral ClimateIndustry’s Moral Climate
IndividualOne’s Personal
Situation
Superiors
Policies
Peers
Organization’s Moral Climate
Factors Affecting the Organization’s Moral Climate
1. Behavior of superiors
2. Ethical practices of one’s industry or profession
3. Behavior of one’s peers in the organization
4. Formal organizational policy (or lack thereof)
5. Personal financial need
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Improving Organizational Ethical Culture
• Most organizations are a mix of compliance and emphasizing values like ethics.
Concerns about the compliance orientation1. Could undermine the ways of thinking or
habits of mind that are needed in ethics thinking.
2. Can squeeze out ethics.3. Managers many not consider tougher issues
that a more ethics-focused approach might require.
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Improving Ethical Culture
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Top Management
LeadershipMoral
Management
Ethics Programsand Officers
RealisticObjectives
Ethical Decision-Making Processes
Codes ofConduct
EffectiveCommunication
Ethics Training
CorporateTransparency
Whistle-BlowingMechanisms
Ethics Audits andRisk Assessments
Board of Directors’Oversight
Discipline ofViolators
Pillars of Leadership
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Traits
Mor
al P
erso
nM
oral Manager
Ethical Leadership
Behaviors
DecisionMaking
RoleModeling
EthicsCommunication
Effective Rewards and Discipline
Effective Communication of Ethics
Requires• Written and verbal communication
• Candor
• Fidelity
• Confidentiality
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Features of Ethics Programs
• Written standards of conduct
• Ethics training
• Mechanisms to seek ethics advice or information
• Methods for reporting misconduct anonymously
• Disciplinary measures for employees who violate ethical standards
• Inclusion of ethical conduct in the evaluation of employee performance
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Ethics Officers
• Are in charge of implementing ethics initiatives in the organization.
• The position may be created in response to the Federal Sentencing Guidelines, which reduces penalties to those companies with ethics programs.
• Problem with diminishing organizational status.
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Ethical Decision-Making Process
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Ethics Check
1. Is it legal?2. Is it balanced?3. How will it make me feel about
myself?
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Ethics Quick Test
1. Is the action legal?
2. Does it comply with our values?
3. If you do it, will you feel bad?
4. How will it look in the newspaper?
5. If you know it’s wrong, don’t do it.
6. If you’re not sure, ask.
7. Keep asking until you get an answer.
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Sears’ Ethics Guidelines
1. Is it legal?2. Is it within Sears’ shared beliefs and
policies?3. Is it right/fair/appropriate?4. Would I want everyone to know
about this?5. How will I feel about myself?
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Codes of Conduct
• A way of establishing standards of behavior and communicating them to managers and employees.
• The single most important element of an ethics and compliance program.
• A fairly recent phenomenon.• Codes of conduct positively affect
corporate culture.
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Content of Codes of Conduct
• Employment practices• Employee, client, and vendor information• Public information/communications• Conflicts of interest• Relationships with vendors• Environmental issues• Ethical management practices• Political involvement
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How Codes of Conduct Influence Behavior
Codes of conduct act as a Rule book Signpost Mirror Magnifying glass Shield Smoke detector Fire alarm Club
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Violators of Ethics Standards
• Management must forcefully discipline all violators of ethical norms and standards.
• Many business are unwilling to discipline violators.
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Ethics Hotlines and Whistle Blowing
• Employees must have outlets to anonymously report questionable behaviors.
• Hotlines are the most common way to report corporate fraud.• Can be telephone, web, or email-based.
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Purposes of Ethics Training
1. Learn the fundamentals of business ethics.
2. Learn to solve ethical dilemmas.3. Learn to identify causes of unethical
behavior.4. Learn about common managerial ethical
issues.5. Learn whistle-blowing criteria and
risks.6. Learn to develop a code of ethics and
execute an internal ethical audit.39
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Ethics Audits and Risk Assessments
Ethics Audits• Intended to carefully review such ethics initiatives
as ethics programs, codes of conduct, hotlines, and ethics training programs.
Sustainability Audit • Helps to identify sustainability issues within an
organization.
Fraud Risk Assessment• Review processes that identify and monitor
conditions that may pertain to the company’s exposure to compliance/misconduct risk and to review methods for dealing with concerns.
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Corporate Transparency
Corporate Transparency• A quality, characteristic, or state in which
activities, processes, practices, and decisions that take place in companies become open or visible to the outside world.
• The degree to which an organization: Provides public access to information. Accepts responsibility for its actions. Makes decisions more openly. Establishes incentives for leaders to uphold
standards.
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Board of Director Leadership and Oversight
Leadership and oversight of ethical initiatives by boards is not a given.
The Sarbanes-Oxley Act• Companies are required to protect whistle-
blowers without fear of retaliation.• It is a crime to alter, destroy, conceal,
cover up, or falsify documents to prevent their use in a federal government lawsuit.
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From Moral Decisions to Moral Organizations
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Moral Decisions
Moral Managers
Moral Organizations
Key Terms• Aretaic
theories/principles• Categorical imperative• Codes of conduct• Codes of ethics• Compensatory justice• Compliance orientation• Corporate transparency• Deontological
theories/principles • Distributive justice• Ethical due process• Ethics orientation• Ethical tests• Ethic of care• Ethics audits• Ethics officer• Ethics programs• Golden Rule• Legal rights
• Moral rights• Negative rights• Opacity• Positive rights• Principle of justice• Principle of rights• Principle of utilitarianism• Procedural justice• Process fairness• Rights• Risk assessments• Servant leadership• Sustainability audit• Teleological
theories/principles• Transparency• Utilitarianism• Virtue ethics
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