INTRODUCTION TO ETHICS

Nature of Business Ethics

 Ethics defined  Principles of conduct governing individual or group

OR study of morality

 Investigation that includes activity of investigating as well as results of investigation

Nature of Business Ethics

 Morality – standards that individual or group has about what is right & wrong or good & evil

 Moral standards – norms about kinds of actions believed to be morally right & wrong as well as values placed on what we believe to be morally god & morally bad

 Moral norms  “Always tell the truth”  “It’s wrong to kill innocent people”

 Moral values  “Honesty is good”  “Injustice is bad”

Nature of Business Ethics

 Nonmoral standards – standards by which we judge what is good or bad and right or wrong in nonmoral way  Standards of etiquette

 Rules of behavior set by parents

 Judgments of right or wrong are based on standards or norms

Nature of Business Ethics

 Moral norms  “Do not harm other people”

 Do not lie to other people”

 “Do not steal”

 Nonmoral norms (conventional)  “Do not eat with your mouth open”

 “Do not chew gum in class”

 “Do not wear socks that do not match”

Nature of Business Ethics

 Moral norms & nonmoral norms  From age of three we can distinguish moral & nonmoral

norms

 From age of three we tend to think that moral norms are more serious than nonmoral norms & apply everywhere independent of what people say

 Ability to distinguish moral between from nonmoral norms is innate & universal

Nature of Business Ethics

 Characteristics of moral standards  Involve serious wrongs or significant benefits

 Preferred to other values including self-interest

 Not established by authority figures

 Felt to be universal

 Associated with special emotions & vocabulary  Act contrary to moral standard

 “I feel guilty, ashamed, or remorseful”

 Describe behavior as “immoral” or “wrong”

 Experience loss of self-esteem

Nature of Business Ethics

 Ethics – discipline that examines one’s moral standards or moral standards of society to evaluate their reasonableness & their implication for one’s life

Nature of Business Ethics

 Normative study – investigation that attempts to reach conclusions about what things are bad or wrong or about what actions are right or wrong  Aims to discover what ought to be

 Descriptive study – investigation that attempts to describe or explain the world without reaching any conclusions about whether world is as it should be

Nature of Business Ethics

 Business ethics – specialized study of moral right & wrong that concentrates on moral standards as they apply to business institutions, organizations & behavior

Nature of Business Ethics

 Kinds of ethical issues  Systemic – social, political, legal or economic systems

 Corporate – corruption & its policies, culture, climate

 Individual – decisions, behavior or character

Ethics Research

 Focus of ethics research – seeks to explain why people behave in manner consistent with generally accepted norms of morality & why they sometimes violate those norms

Ethics Research

 Prescriptive – how people ought to act suing various codes & principles  Legal ethics  Medical ethics  Economics

 Descriptive – scientific studies to observes how people tend to act based on certain individual & situational characteristics  Psychology

Ethics Research

 Some studies focus on unethical behavior—behaviors that clearly violates accepted norms of society  Discrimination

 Falsifying financial information

 Violating environmental regulations

 Prevalence of unethical behavior  Research suggests that 76% of employees have observed

illegal or unethical conduct within past 12 months

Ethics Research

 Some studies focus on “merely ethical behavior”  Behavior that adheres to minimally accepted standard

of morality  Obeying labor laws

 Complying with formal rules & contracts

Ethics Research

 Some studies focus on “especially ethical behavior”  Behaviors that exceed minimally accepted standard of

morality  Charitable giving

 Whistleblowing

Four Component Model of Ethical Decision Making

 Why do some authorities behave in unethically while others engage in ethical behavior?

 Four-component model of ethical decision making  Ethical behaviors result from multistage sequence

1) Moral awareness

2) Moral judgment

3) Moral intent

4) Ethical behavior

Four Component Model of Ethical Decision Making

Four Component Model of Ethical Decision Making

 Moral awareness  Authority recognizes that moral issue exists in situation

or principle is relevant

Four Component Model of Ethical Decision Making

 Recognizing situation as ethical  Framing it as one that requires ethical reasoning

 Situation seen as ethical when it involves serious harm that is concentrated, likely, proximate, imminent & potentially violates moral standards

Four Component Model of Ethical Decision Making

 Recognizing situation as ethical  Obstacles to recognizing situation is ethical  Euphemistic labelling – “downsizing”, “collateral damage” or

“enhanced interrogation techniques”  Rationalizing our actions – terrorist sees himself or herself as

courageous fighter against brutal oppressor  Diminishing comparisons – make harms appear minor  Displacement of responsibility – “I was just following orders”  Diffusion of responsibility – “I wasn’t very involved in situation”  Distorting the harm – “No good evidence that anyone was hurt”  Dehumanizing victim – victims not real or not full human beings  Redirecting blame – innocent victim provoked by others or by

circumstances

Four Component Model of Ethical Decision Making

 Moral awareness depends on characteristics of issue itself  Moral intensity – degree to which issue has ethical

urgency  Potential for harm is perceived to be high

 Act that would injure 1,000 people vs. 10 people

 Social pressure surrounding it  Act violates social norm vs. act that seems similar to what

everyone else is doing

Four Component Model of Ethical Decision Making

Four Component Model of Ethical Decision Making

 Moral awareness depends on way authorities observe & perceive events

 Moral attentiveness  Degree to which people chronically perceive &

consider issues of morality  Likely to report that they face several ethical dilemmas in

typical day

 Regularly think about issues of morality

 Enjoy pondering moral issues

Four Component Model of Ethical Decision Making

 Moral judgment  Recognize moral issue exists but unable to determine

whether given course of action is right or wrong

 Theory of cognitive moral development (Kohlberg)  As people mature, they move through stages of moral

development  Authorities that operate at more mature stages should

demonstrate better moral judgement

Four Component Model of Ethical Decision Making

 Theory of cognitive moral development (Kohlberg)  Preconventional stage – right vs. wrong viewed in

terms of consequences of cations for individual

 Desire to obtain pleasure & avoid pain  Relationships remain self-interested

 “You scratch my back, I’ll scratch yours”

 Children seek to avoid punishment

 Children obey laws

Four Component Model of Ethical Decision Making

 Theory of cognitive moral development (Kohlberg)  Conventional stage – right vs. wrong is refenced to

expectations of family & society  Seek approval of friends & family, conforming to

stereotypes about what is right  Later, emphasize laws, rule & orders  “Doing one’s duty” & “Maintaining social order”

 Research suggests that most adults are at conventional stage

Four Component Model of Ethical Decision Making

 Theory of cognitive moral development (Kohlberg)  Principle (or postconventional stage) – right vs. wrong

referenced to set of defined, established moral principles  Research suggests that 20% of Americans are at this

stage

 Moral principles serves as prescriptive guides for making moral judgments

Four Component Model of Ethical Decision Making

 Moral principles used in principle stage  Consequentialist  Utilitarianism – greatest good for greatest number

 Egoisim – pursue short-term or long-term interests

Four Component Model of Ethical Decision Making

 Nonconsequentialist  Ethics of duties – act should be performable by

everyone with no harm; act should respect human dignity; act should be endorsed by others

 Ethics of rights – act respects right of others (life, liberty, justice, etc.)

 Virtue ethics – lead “good life” by adhering to virtues (wisdom, honesty, courage, etc.)

Four Component Model of Ethical Decision Making

 Biases prevent us from getting information to make moral judgment  Biased theories about the world  Do not consider all stakeholders

 Ignore possibility that public will find out

 Discount consequences relatively far in the future

 Do not take account of indirect effects

Four Component Model of Ethical Decision Making

 Biases prevent us from getting information to make moral judgment  Biased theories about others  “We” differ from “them”

 “Our” way is superior to “their” way is inferior

 Ethnocentrism

 Stereotypes

Four Component Model of Ethical Decision Making

 Biases prevent us from getting information to make moral judgment  Biased theories about oneself  We believe that we are more capable, insightful,

courteous, honest, ethical & fair than others

 Overconfident in our ability to control random events

Four Component Model of Ethical Decision Making

 Moral intent  Authority’s degree of commitment to moral course of

action  Situational factors encourage people to go against moral

convictions  Unethical cultures

 Economic pressures from assigned goals or specific incentives

Four Component Model of Ethical Decision Making

 Decisions to do what is ethical is influenced by our surroundings  Ethical culture – kind of behavior organization

encourages or discourages by repeated use of examples of behavior, incentives for ethical behavior, clear rules, rewards for exemplary conduct

Four Component Model of Ethical Decision Making

 Moral identity – degree to which person identifies as moral person  Define themselves as compassionate, generous, kind,

fair & hardworking  “Moderates” its effects of moral judgment on ethical

behavior

Four Component Model of Ethical Decision Making

 Good intentions do not always result in good behavior  Ego strength – ability to resist impulses & to follow

one’s convictions

 Locus of control – whether person believes that what happens to him or her is due primarily within his or her control or the result of external forces (e.g., fate or chance)

 Willingness to obey authority figures

Four Component Model of Ethical Decision Making

 Tend to be ethical if:  Morally aware

 Sophisticated moral judgment

 Posses strong moral intent

Ethical Behavior & Emotions

 Recent research begun to examine relationship between emotions & moral attitudes  Four component model of decision making  Assumes that ethical decision making based on higher order

cognitive processes

 Moral emotions  Sympathy for those suffering  Guilt about own unethical behavior  Anger about injustice to others  Disgust at violations to moral norms

 Numerous studies suggest that moral reactions based on feeling rather than “cold” cognition

Ethical Behavior & Emotions

 Case of Phineas Gage  While setting explosive, 3 foot 7 inch bar flew into his

lower left jaw & out through top of his head

Ethical Behavior & Emotions

 Intellectual abilities unharmed  Could read & speak & performed well on cognitive

ability tests

 BUT lost ability to experience emotion which took his ability to reason  Made irrational choices behaving erratically & against

his self interests

Ethical Behavior & Emotions

 Case of Phineas Gage  “… emotions may not be intruders in bastion of reason

at all: they may be enmeshed in networks, for worse and for better”

 Must have ability to experience emotions to be rational  Emotions provide information that helps think process

 Good decision making employs both thinking & feeling

 Emotions are necessary for moral reasoning

Ethical Behavior & Emotions

 Consider time when you hurt someone  Did you feel angry or upset with yourself?

 Consider time when you have seen someone else treated unfairly  Did you feel contempt for person acting unfairly, or did you

engage in “cool” rational calculus of justice of situation?

 Sense of emotion prompts ethical behavior  Donating money to help others  Apologizing & making amends  Intervening on behalf of those who have been mistreated

Business Law

Tenth Edition

Chapter 42

Ethics and Social Responsibility of Business

Business Law

Tenth Edition

Chapter 34

Small Business, Entrepreneurship, and General Partnerships