Emerging Issues in Management (Mgmt 440)

1. Emerging Issues in Management (Mgmt 440) Business Ethics (Chapter 7); Making Ethical Decisions in Business (Chapter 8) Professor Charles H. Smith Fall 2010

2. Introduction to Business Ethics • “Ethics” – study of right and wrong. • “Business ethics” • Study of right and wrong in the context of the business world. • Study of ethics in different context; not study of different type of ethics – business ethics is subset of ethics in general. • While someone’s ethics should be the same all the time, it is natural to have different ethical guidelines at work, at home, in social situations, and in different personal relationships. • Problematic ethical issues encountered frequently in business – however, “applying clear guidelines resolves the vast majority of them.”

3. Two Competing Theories of Business Ethics – Amorality • Business should be amoral and therefore not guided by the full range of society’s ethical standards. • These “compromised ethics” are acceptable since competition causes business’ actions to result in benefits to society. • See Daniel Drew quote on page 191 about adopting different beliefs as Sunday turns into Monday. • Examples – businessperson active in church but then will engage in deceptive business practices. • Student examples.

4. Two Competing Theories of Business Ethics – Moral Unity • Business should be judged by same ethical rules as other parts of society because there should not be different ethics for work and the rest of life. • See J.C. Penney’s story on page 192. • Examples – boss takes phone call from undesirable client or at least tells secretary to advise client that boss does not want to talk to him; businessperson applies principles of his/her religion to business practices (Jim Edson painting). • Student examples.

5. Sources of Business Ethics

6. Source of Business Ethics – Religion • Divine being or will determines what is right and wrong. • Guidelines found in sources such as • Inspired writings – Bible, Koran, Torah. • Doctrine – rules created by people which are supposed to be consistent with inspired writings. • Student examples of business ethics guided by religion.

7. Source of Business Ethics – Philosophy • Informed by wisdom of men as opposed to divine guidance. • Examples include ancient Greeks (Socrates, Plato, Aristotle), philosophers who used logic (Baruch Spinoza, Immanuel Kant), utilitarian thinkers (Bentham, Mill), and the realist school (Machiavelli, Spencer). • Student examples of business ethics guided by philosophy.

8. Source of Business Ethics – Culture • Transmittal between generations of set of traditional values, rules and standards for acceptable behavior. • Two schools of thought • Ethical universalism – human nature is common throughout the world so same basic ethics apply; some room for differences. • Ethical relativism – ethical values created by cultural experience so not possible to have universal standard for ethics. • Student examples of business ethics guided by culture.

9. Source of Business Ethics – Law • The codification or formalization of ethics – all laws are the product of someone’s ethics; e.g., legislator votes for statute due to cultural experience, citizen votes for (or against) Proposition 8 based on religious beliefs. • Regulation of business through threat of • Civil judgment of damages – “you play, you pay.” • Criminal prosecution/punishment. • Student examples of business ethics guided by law.

10. How Companies Manage Ethics – Ethics Programs • An ethics program is “a coordinated application of management methods to prevent law-breaking and promote more ethical behavior.” • Example – GE Code of Conduct (page 211). • Student examples of codes of conduct.

11. How Companies Manage Ethics – Ethics Programs cont. • U.S. Sentencing Commission created minimal requirements to prevent criminal behavior and promote ethics in the workplace • Establish standards and policies. • Create high-level oversight; e.g., board of directors sets standards and policies → high-level executive refines and supervises process → managers have day-to-day responsibilities for implementing process. • Screen out criminals; e.g., background checks for criminal records; “ethics” questions in job interviews (see page 214). • Communicate standards to all employees. • Monitor and set up a hotline. • Enforce standards/discipline violators; e.g., no follow-up = continued ethical and legal problems. • Assess areas of risk/modify the program. • Student examples of these minimal requirements.

12. Fourteen Ethical Principles • Categorical imperative (Kant) • What would happen if everyone – not just one person or company – did the same thing? • Examples – steal small item from office; punch someone in the face. • Student examples. • Conventionalist ethic • Business is a game; actions based on lower ethics which further one’s interest are acceptable if those actions do not violate law. • Examples – resume changes for different jobs; failure to mention unfavorable facts on resume or in job interview. • Student examples.

13. Fourteen Ethical Principles cont. • Disclosure Rule • “Others” or “media” tests – what if others (people close to you or important to your job) knew truth about what I did or plan to do. • Examples – job decision made for illegal reason; affair with co-worker. • Student examples. • Doctrine of the Mean • Virtue achieved through moderation; avoid excessive or virtue-deficient behavior. • Examples – turn off your cell phone during meals; do not check e-mail for 24 hours. • Student examples.

14. Fourteen Ethical Principles cont. • Ends-Means Ethic • “The end [successful result] justifies the means [methods used to gain the successful result].” • Examples – entertaining clients with illegal drugs; industrial espionage; “just win, baby.” • Student examples. • Golden Rule • “Do unto others as you would have them do unto you.” • Examples – giving employees bereavement leave; telling your boss’ supervisor (or your employee) that your boss (or employee) is doing a good job instead of just reporting negatives. • Student examples.

15. Fourteen Ethical Principles cont. • Intuition Ethic • “What is good is simply understood” – reliance on “inner moral sense” and “intuition.” • Examples – businessperson feels comfortable or uncomfortable doing business with new client. • Student examples. • Might-Equals-Right Ethic • What is “right” is determined by what stronger company or person can impose on weaker company or person. • Examples – John D. Rockefeller, Microsoft. • Student examples.

16. Fourteen Ethical Principles cont. • Organization Ethic • “Be loyal to the organization” or put the company’s interest ahead of your own interest. • Examples – employee who does great work for the company but has no personal life; teamwork instead of individual glory. • Student examples. • Principle of Equal Freedom • Right to act unless this action deprives someone else of right. • Examples – talk about your strengths instead of competition’s weaknesses in sales pitch; “your right to swing your fist ends where my nose begins.” • Student examples.

17. Fourteen Ethical Principles cont. • Proportionality Ethic • Set of rules for making decisions having both good and bad consequences • Principle of proportionality (see 5 factors on page 235). • Principle of double effect (see 3 factors on page 235). • Student examples. • Rights Ethic • Everyone has rights that others must respect • Natural rights inferred by reason from study of human nature. • Legal rights are imposed on society as a whole. • Student examples.

18. Fourteen Ethical Principles cont. • Theory of Justice • Act for common good of society and to maintain community. • Examples – constitutional guarantees of equal protection and due process. • Student examples. • Utilitarianism • “The greatest good for the greatest number” or whether benefits are maximized. • Examples – building new school to eliminate overcrowding at other schools; closing branch office because cost of maintaining it is prohibitive. • Student examples.

19. Case Studies • Read the following on your own before class and then discuss with small groups in class • “Today’s verdict is a triumph of our legal system . . .” (pages 186-88). • “Realtors in the Wilderness” (pages 226-28). • “Short Incidents for Ethical Reasoning” (pages 243-47).