CHAPTER 5 Business Ethics Power Point Presentation Design

Learning Outcomes After studying this chapter, you should be able to: 1. Compare and contrast ethics, business ethics, and managerial ethics 2. Characterize three levels of moral development 3. Identify reasons for unethical behavior and how people justify it 4. List general guides to ethical decision making 5. Compare and contrast virtues, deontological, and utilitarianism guides to ethical decision making 6. Describe the 3 -way ethics test 7. Explain how the 5 Is strategic analysis includes the stakeholder approach and ethics 8. Define the key terms in the chapter © Routledge

Ethics Foundations Ethics The moral standard (or principles) of right and wrong (or moral and immoral), and fairness that influences behavior—what we do and say or our actions. Honesty The moral standard (or principles) of right and wrong (or moral and immoral), and fairness that influences behavior—what we do and say or our actions. Values © Routledge Important desired behaviors that help shape morals or what is considered ethical and unethical.

Universal vs. Relativism Ethics Universal Ethics Ethical concepts are impartial, they apply to everyone, and morals should take precedence over self-interest. © Routledge Relativism Ethics Morals affecting ethical behaviors can change based on time, the circumstances of the situation, and personal opinion.

Business Ethics Foundations Personality Traits and Attitudes The Situation Moral Development Ethical Behavior © Routledge

Levels of Moral Development Postconventional (Principle-Centered) Conventional (Social-Centered) Preconventional (Self-Centered) © Routledge 5. Fairness ethics 6. Universal ethics 3. Social group norms 4. Societal norms 1. Punishment avoidance 2. Reward seeking

Figure 5. 1 Levels of Moral Development Level Description of Motivation, Behavior and Leadership Examples 3. Postconventional (Principle-Centered) • Behavior is motivated by universal principles of right and wrong, regardless of the expectations of the leader or group and possible negative consequences for the behavior. • The common leadership style is participative; it is leadership that is committed to serving others and a higher cause while empowering followers to reach this level. “I don’t lie to customers because lying is wrong. ” 2. Conventional (Social-Centered) • Behavior is motivated by the desire to live up to others’ expectations, to copy the behavior of the leaders or of those in one’s group. Peer pressure is used to enforce group norms. • It is common for lower-level managers to use a similar leadership style of the higher-level managers. “I lie to customers because the other sales reps do it too. ” 1. Preconventional (Self-Centered) • Behavior is motivated by the relativism ethics of self-interest (get rewards and avoid punishment). • The common leadership style is autocratic toward others while using one’s position for personal advantage. “I lie to customers to sell more products and get higher commission checks. ” © Routledge

Business Ethics and Ethical Dilemmas Business ethics Is the application of ethics to issues that arise in business. Ethical dilemma Occurs when a decision must be made in the midst of conflicting interests; there is no simple right and wrong answer and multiple ethical alternatives. Managerial ethics Are responsibilities of managers for developing moral standard policies and procedures to foster, guide and ensure ethical employee behaviors. Moral management Describes the ethical (or unethical ) behaviors of moral, immoral, and amoral managers © Routledge

Business Ethics Myths § Myth 1. Ethics is just a matter of opinion. § Myth 2. There is no point in studying ethics because we all know what is right; it’s just a matter of doing what is ethical. § Myth 3. Business ethics is simple; just follow a guide such as “don’t do anything you wouldn’t want to appear on the front page of the newspaper. ” § Myth 4. You can’t teach and learn business ethics. § Myth 5. We learn ethics as kids and really can’t change our behavior to be more ethical as adults. © Routledge

Why People Use Unethical Behavior Personal Gain, Self-Interest, and Conflict of Interest Cross-Cultural Inconsistency External Pressure Unethical Behavior © Routledge

Influences on Ethical Behavior Personality Traits Competitive Situations Attitudes Ethical Behavior © Routledge

How People Justify Unethical Behavior Ethical rationalization The process of determining motives, reasons, explanations, and justifications that lead to particular decisions and behavior when faced with ethical dilemmas. Justifying unethical behavior The process of convincing oneself that a decision is rational and ethical, when in fact it really serves self-interest or provides an easy way out of the ethical dilemma. © Routledge

Processes Used to Justify Unethical Behavior Relativism ethics Displacement of responsibility Disregard or distortion of consequences Moral justification Diffusion of responsibility Attribution of blame Conventional justification Advantageous comparison Euphemistic labeling © Routledge

Figure 5. 2 Ethical Rationalizations and Unethical Behavior Ethical rationalization: the process of determining motives, reasons, explanations, and justifications that lead to particular decisions and behavior when faced with ethical dilemmas Justification for unethical behavior: relativism ethics, moral justification, conventional justification, displacement of responsibility, diffusion of responsibility, advantageous comparison, disregard or distortion of consequences, attribution of blame, euphemistic labeling Why people use unethical behavior: personal gain, self-interest, conflict of interest, external pressure, cross-cultural inconsistency, personality and attitudes, the situation © Routledge

Figure 5. 5 © Routledge Guides to Ethical Decisions and Behavior Golden rule Advice Four-way test Five-question test Comfort Moral level Common sense Discloser

General Guides to Ethical Decisions © Routledge Golden Rule Advice Moral level Comfort Rights Disclosure Justice 4 -Way Test Common sense 5 -Question Test

Business Ethics Tests Four-way Test (Rotary International) 1. Is it the truth? 2. Is it fair to all concerned? 3. Will it build goodwill and better friendship? 4. Will it be beneficial to all concerned? If you can answer yes to all four questions, the action may be ethical. © Routledge Five-Question Test (Sears, Roebuck and Co. ) 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 it? 5. How will I feel about myself? If you have positive answers to all five questions, the action may be ethical.

Virtues Ethics Guide Character Relationships Integrity Personal Virtue Ethics Ethical Dilemma Decisions © Routledge

Ethical Dilemma Questions to Ask Yourself 1. What character traits does the organization value? Will the behavior of my decision be consistent with the values of the firm? 2. Who do I want to be? 3. What type of person will I be defined as and become if I choose a certain behavior? 4. How will the behavior affect my relationships? © Routledge

Deontological Ethics Guide Right and wrong behaviors © Routledge Standards of Conduct (norms) Ethical decisions and actions

Deontological Questions to Ask Yourself? 1. Does the behavior in the situation violate a standard of conduct or law? 2. Can I rationalize the action as ethical and consistent based on the standards of conduct of the firm, industry, and society, or am I justifying my unethical behavior? 3. If people find out about my behavior, could it lead to action against me and/or my firm (e. g. , lawsuits)? © Routledge

The Generalization Test: Rationalizing Behavior as Being Ethical • To pass the generalization test: Ø The reasons for the action must be consistent with commonly accepted standards of conduct. Ø Everyone in the same situation with the same reasons is likely to exhibit the same behavior. © Routledge

Utilitarianism Ethics Guide • Utilitarianism Ø Refers to making ethical decisions based on a cost- benefits analysis of the consequences (end results) of the behavior or action (means) taken. • Questions to Ask Yourself 1. What is the purpose or objective to be accomplished? 2. What are the likely consequences and the cost–benefit of each alternative action to meet the objective? 3. Do the ends justify the means? 4. How can we work together to benefit relevant stakeholders in the long run? © Routledge

Figure 5. 3 The 13 Guides to Ethical Decision Making and Behavior Virtue Test 10 General Guides Generalization Test © Routledge 1. Golden Rule 2. Moral Level 3. Rights 4. Justice 5. Common Sense 6. Advice 7. Comfort 8. Disclosure 9. 4 -way test 10. 5 -question test Utilitarian Test

Figure 5. 4 The 3 -Way Ethics Test The 3 -way ethics test is used to determine whether an action is ethical. The test has three parts taking into account situational factors: § To pass the virtues test, the behavior must be honest, be based on good character traits, and maintain one’s integrity and relationships. § To pass the generalization test, the reasons for the action must be consistent, and everyone in the same situation with the same reasons will use the same behavior. § To pass the utilitarian test, one specific action will lead to more favorable consequences than any alternative decision. To be ethical, the behavior must pass all three tests. © Routledge

Figure 5. 5 General Electric’s Code of Conduct § Obey the applicable laws and regulations governing our business conduct worldwide. § Foster an atmosphere in which fair employment practices extend to every member of the diverse community. § Be honest, fair, and trustworthy in all your activities and relationships. § Strive to create a safe workplace to protect the environment. § Avoid all conflict of interest between work and personal affairs. § Through leadership at all levels, sustain a culture where ethical conduct is recognized, valued, and exemplified by all employees. © Routledge

Figure 5. 6 Lockheed Martin’s Warning Signs of Unethical Behavior ü It doesn’t matter how it gets done as long as it gets done. ü We didn’t have this conversation. ü Well, maybe just this once. ü Everyone does it. ü No one will ever know. ü This will destroy the competition. ü It sounds too good to be true. ü What’s in it for me? ü Shred that document. ü It’s okay if I don’t gain personally. ü I deserve it. ü We can hide it. ü It’s all for a good cause. © Routledge ü No one will get hurt. ü This is a non-meeting.

Managing Ethics Institute ethics codes, training and communication Consult U. S. Sentencing Guidelines Get directors and top management commitment Have realistic objectives Appoint ethics and compliance officers © Routledge Methods for Managing Ethics Set up ethics advice helplines Discipline ethics violators Conduct ethics audits

Business Nonmarket and Market Strategies and Ethics: 5 Is Strategic Analysis Step 1 Step 2 Step 3 Step 4 Assess the range of moral concerns that strategic stakeholders may have about the issue. Determine the reaction of nonmarket members to the firm’s strategic action concerning the issue. Conduct a cost– benefit analysis to gauge positive or negative media coverage or publicity about the issue. Select the alternatives that represent rational and appropriate integrated strategies. © Routledge

Key Terms business ethics justifying unethical behavior deontological ethics levels of moral development ethical decision guides relativism ethics ethical dilemma utilitarianism ethics ethical rationalization utilitarian test ethics audit universal ethics helpline virtues ethics generalization test virtues ethics test © Routledge