by Oliver Laasch , Center for Responsible Management Education (CRME) and Roger N. Conaway ,

1. by Oliver Laasch, Center for Responsible Management Education (CRME) and Roger N. Conaway, Tecnológicode Monterrey (ITESM)

3. After reading this chapter…

5. “We Are Innocent!” Are You Really? • Innocent implicitly had developed an ethical corporate identity of high values and literally had “innocence” in anything the company did. Innocent claimed to be all natural and organic, to use green electricity, and to apply fair sourcing practices. • “A sad day for independent and ethical business,” “You just killed your business,” “Your business is tainted” are but a few of the comments made by customers after Innocent accepted major funding from The Coca-Cola Company (TC) in 2009.

6. ETHICS: MANAGING FOR MORAL EXCELLENCE

7. Origins of business ethics

8. Table 5.1 Milestones in the Development of Business Ethics

9. Figure 5.2 Figureheads and Central Ideas of Business Ethics

10. Figure 5.3 The Development of Business Ethics

11. Institutionalization, Status Quo, and Future • Business implementation • Ninety-six percent of Fortune 500 companies have a code of ethics. • Budgets and staffing for the ethics and compliance functions are expected to remain stable and even slightly increase. • Ethics and compliance officer • Ethics & Compliance Officer Association (ECOA) • Annual rankings • E.g. “World´s Most Ethical” (WME) Companies “Ethics Quotient” • Organizations dealing with business ethics in practice • Better Business Bureau (BBB), the Business Roundtable (BRT), and the Ethics Resource Center (ERC)

12. Basic concepts of business ethics

13. Food for Thought

14. Defining Business Ethics and Related Concepts Business ethics Levels of Analysis Individual ethicsis the study of moral issues as encountered by single individuals. Organizational ethics is the study of moral issues on an organizational level. Economic ethics is the study of systemic moral issues of the economy. • Business ethicsis the interdisciplinary study of ethical problems in business.

15. Figure 5.4 Levels of Analysis in Business Ethics

16. Moral Dilemma • A moral dilemma is a situation where right or wrong is questioned through a set of alternative actions that are likely to have significant effects on oneself and others. • Is the decision to be made likely to have significant effects on others? • Does the decision to be made provide choices and alternative actions? • Is the decision perceived as ethically relevant, about moral right or wrong?

17. Figure 5.5 The Relationship between Ethics, Law, and Compliance

18. Morality and Values • Morality describes norms, values, and beliefs that define right and wrong for a specific individual, or a group in a certain situation. • Values are aspired ideal goals, beliefs, and concepts that shape thinking and actions.

19. Categories of Values • Persons: Persons must be protected. • e.g. justice, fairness, and equality • Virtue: Attached to a “good” character. • e.g. honesty, self-discipline, and responsibility • Happiness: Search for happiness. • e.g. security, personal gain, and contentment • Relationship: Social nature of human beings. • e.g. caring, participation, and community • Goals: Achieving business purpose. • e.g. productivity, efficiency, and growth

20. Figure 5.6 A Nexus of Opposing Views on Business Ethics

21. Figure 5.7Business Ethics: Functions, Domains, and Disciplines

22. Domain I Normative ethics

23. Food for Thought

24. Figure 5.8 Major Moral Ethical Theories

25. Virtue Ethics: “Be Virtuous!” • Virtue ethics judges decisions as right that are taken based on a virtuous mind-set and congruent with a good, “virtuous” life.

26. Groups of Virtues • To the inside • courage and self-control • To the outside • generosity, magnificence, magnanimity, and sociability • Toward fairness • justice

27. Deontology: “Follow Higher Rules and Duties!” • Deontologyjudges right or wrong by referring to higher duties that must be derived from universal rules.

28. Deriving Higher Duties Through Kant´s ThreeMaxims • Universal law and the golden rule • Would you want your action to become universally lawgiving? Would you wish everybody else to act the same way? • Noninstrumentalization, or end in itself: • Do you treat rational (human) beings as means or as an end? It is desired not to use human beings for a certain purpose, but instead to align your action for the good of humanity. • The kingdom of ends • Would other rational beings who are part of the society, or the “kingdom of ends,” and who applied rules one and two, judge as you did?

29. Consequentialism: Judge by the Outcome! • Consequentialism is the moral theory judging right or wrong based on outcomes. • Utilitarianism bases judgments of right and wrong on the principle of creating the greatest happiness possible for all affected by a decision.

30. ComplementaryConsequentialistDecisionCriteria • 1. Act utilitarianism • “Does the single act I am conducting create more pleasure or pain?” • 2. Rule utilitarianism • “Does the type of behavior in general create more pleasure or pain?” • 3. Distribution fairness • “Are costs and benefits created and distributed fairly?”

31. Figure 5.9 A 360-Degree Ethics Assessment

32. Domain II descriptive ethics

33. Food for Thought

34. DescriptiveEthics • Descriptive ethics • serves to describe, understand, influence, and predict moral behavior of individuals and groups.

35. Figure 5.10 Components of Ethical Decisions and Actions

36. Figure 5.11 Individual and Situational Influences on the Components of Ethical Decision and Action

37. Individual versus SituationalFactors • Individual factors are all factors uniquely associated with the individual decision maker that can be divided into demographic and psychological factors. • Situational factorsare all external factors influencing a decisionthat can be divided into issue-related and context-related factors.

38. Individual Factors Demographic Psychological Moral philosophy and ethical judgment Intelligence and need for cognition Locus of control Values and attitudes Awareness and moral imagination • Age • Gender • National and cultural characteristics • Religion • Education • Employment

39. SituationalFactors Issue-related factors Context-related factors Significant others Rewards and sanctions Organization size, structure, and bureaucracy Ethics management tools Culture and climate National and cultural context Industry type Competitiveness • Moral intensity • Moral framing • Moral complexity

40. Domain III ethics management

41. Food for Thought

42. Ethics Management and RelatedTerms • Ethics management is the process of managing ethical problems through management tools. • Ethical managementdescribes individual managers’ ethical behavior in their immediate sphere of managerial influence. • Ethics performance is the sum of right and wrong decisions and behaviors in a specific entity and for a determined time period. • Moral excellence is an above-average ethics performance.

43. Figure 5.14 Assessing Ethics Performance through All Components of Ethical Decision and Action

44. Figure 5.15 Ethics Performance Assessment Approaches

45. Figure 5.16 Ethics Performance Models Based on Moral Development

46. Figure 5.17 Implemented Ethics Checklist: Types and Exemplary Items

47. Table 5.3 Ethics Performance Assessment Methods: Different Assessment Types and Scopes

48. Figure 5.18 The Ethics Value Chain of Ethics Management Tools and Their Contribution to the Ethics Performance Margin

49. Tools forEthics Management • Ethics management toolsare managerial means by which to improve ethics performance. • Departmental ethics management tools are standard management instruments used throughout mainstream business departments and functions to improve ethical performance. • Specialized ethics management tools are tools with the purpose of managing ethics throughout the whole organization.

50. SpecializedEthics Management Tools • Normative leadership • Codes of ethical conduct • Organizational structure • Ethics departments and officers • Feedback mechanisms • Whistleblowing, councils, ombudsmen, and audits