Business Ethics - Unit One
Defining Ethics and Business Ethics
Ethics Defined: Ethics is the discipline that examines one’s moral standards or the moral standards of society to evaluate their reasonableness and their implications for one’s life.
General Principles: It refers to the principles of conduct governing an individual or a group, such as personal ethics or accounting ethics.
Study of Morality: Ethics is fundamentally the study of morality, focusing on standards of what is right and wrong, and good and evil.
Application of Standards: The discipline examines how standards apply to our lives and determines whether these standards are based on reasonable or unreasonable foundations.
Business Ethics Defined: A specialized study of moral right and wrong that concentrates on moral standards as they apply to business institutions, organizations, and behavior.
Workplace Practicality: In a practical sense, it involves knowing what is right or wrong in the workplace and consistently doing what is right, particularly regarding the effects of products/services and relationships with stakeholders.
Types of Ethics
Descriptive/Comparative Ethics: - This is an investigation that seeks to describe what business people actually do and, more importantly, explain why they do it. - It describes how people behave and what sorts of moral standards they claim to follow. - It incorporates research from multifaceted fields including anthropology, psychology, sociology, and history to understand moral norms and beliefs.
Normative Ethics: - This involves an investigation that attempts to reach conclusions about what things are good or bad or what actions are right or wrong. - Unlike descriptive ethics, normative ethics involves creating or evaluating moral standards to figure out what people should do, rather than just what they are doing. - It assesses whether current moral behavior is reasonable.
Meta/Analytic Ethics: - This involves drawing broader conclusions about the very nature of morality, often concluding that morality is relative. - This position argues that there are no moral standards independent of social groups. Therefore, whatever a social group decides is right is effectively right, and there is nothing "above" the group to appeal to for challenging those standards.
Applied Ethics: - This is the philosophical examination from a moral standpoint of particular issues in private and public life that are matters of moral judgment. - It uses philosophical methods to identify the morally correct course of action in specific fields. - Bioethics Examples: Identifying correct approaches to euthanasia, the allocation of scarce health resources, or the use of human embryos in research. - Environmental Ethics Examples: Examining the duties of whistleblowers to the general public versus their loyalty to employers. - Distinction: Applied ethics is distinct from normative ethics because it focuses on identifying specific courses of action rather than general beliefs of right and wrong.
Arguments For and Against Ethics in Business
Reasons Why Businesses Should Be Ethical: - Ethics applies to all human activities; business is a human activity. - Business cannot survive without ethics. - Ethics is consistent with profit-seeking; customers, employees, and the general public care about ethical behavior. - Studies suggest ethics does not detract from profits and may actually contribute to them. - Unethical ways of increasing profits (e.g., harmful pollution, deceptive advertising, concealing product hazards, fraud, bribery, tax evasion, price-fixing) ultimately injure society.
The Prisoner’s Dilemma Argument: - This scenario involves two parties choosing between cooperation and non-cooperation. - If both cooperate, both gain a benefit. - If both do not cooperate, neither gets the benefit. - If one cooperates and the other does not, the cooperator suffers a loss while the non-cooperator gains a benefit. - Conclusion: Cooperation is more advantageous than continuously trying to take advantage of others, especially in recurring relationships.
Arguments Against Ethics in Business: - Some argue that ethical standards should only apply to the behavior of individuals, not institutions. - Business managers should single-mindedly pursue the interests of the business and ignore external ethical considerations. - In a free-market economy, the pursuit of profit alone is believed by some to ensure maximum social benefit, allegedly making business ethics unnecessary. - A manager’s primary obligation is perceived as loyalty to the company regardless of ethics. - The belief that as long as companies obey the law, they are fulfilling their total duty.
Globalization, Multinationals, and Business Ethics
Globalization Defined: The worldwide process by which the economic and social systems of nations have become connected, facilitating the flow of goods, money, culture, and people.
Multinational Corporations (MNCs): These are companies that maintain manufacturing, marketing, service, or administrative operations in several "host" countries. - Examples: Adidas, Apple, Coca-Cola, Heineken.
New Ethical Dilemmas Produced by Globalization: - MNCs can escape environmental regulations and labor laws by shifting operations to different countries. - They can shift raw materials, goods, and capital to escape taxes. - They encounter different moral codes (e.g., child labor, bribery) that may conflict with their home standards. - They may transfer technologies or products into developing countries that are not ready to assimilate them safely.
Key Ethical Issues in Global Business: - Questionable marketing and safety practices. - Sweatshops and labor abuse. - Corruption, bribery, and questionable payments.
Business Ethics and Cultural Differences
Ethical Relativism: - The theory that because different societies have different ethical beliefs, there is no rational way of determining whether an action is right or wrong other than by asking whether the people of a specific society believe it is. - It makes the philosophical assertion that there is no standard of right or wrong apart from the morality of a culture.
Examples of Varied Cultural Practices: - Polygamy, abortion, infanticide, homosexuality, racial and sexual discrimination, and families abandoning the aged to die during times of hardship.
Criticisms of Ethical Relativism: - It is illogical to assume that all answers to an ethical question are equally correct. - Relativism is incoherent: if it were true, we could never criticize practices like child slavery, apartheid in South Africa, or the Nazi treatment of Jews in the $1930s$, provided they conformed to their own societal standards. - It privileges current moral standards: it assumes a society's standards cannot be mistaken and gives them a place above criticism.
Actions for Improving International Ethics: - Create global codes of conduct (set by corporations or international organizations). - Integrate ethics into a global strategy. - Suspend activities in host countries where ethical standards cannot be met. - Create ethical impact statements.
Understanding Morality and Moral Standards
Ethics vs. Morality: - Ethics: A kind of investigation, including both the activity of investigating and the results of that investigation. - Morality: The subject matter (norms and values) that ethics investigates.
Morality Defined: The norms regarding actions believed to be morally right and wrong, and the values placed on objects believed to be good or bad (e.g., "always tell the truth," "honesty is good," "injustice is bad").
Sources of Moral Standards: Family, friends, school, television, and music.
Moral Standards Definition: Standards relating to human behavior and the distinction between right and wrong behavior, often based on a sense of conscience or conventionally accepted conduct.
Non-moral Standards: Standards used to judge good/bad or right/wrong in contexts other than morality. - Examples: Etiquette (manners), Law (legal right/wrong), Aesthetics (art), and Athletics (how a game is played).
Characteristics of Moral Standards
Matters of Serious Injury or Benefit: They deal with matters that can seriously harm or help humans (e.g., standards against theft, murder, child abuse, and fraud).
Not Established by Authority: They are not established or changed by authoritative bodies; their validity rests on the adequacy of the reasons that support them.
Preferred over Self-Interest: Moral standards should be preferred over other values, including personal gain. It is wrong to choose self-interest over morality.
Impartial Considerations: They are based on impartial views; it is irrelevant if you benefit from a lie while another is harmed—the lie remains wrong.
Special Emotions and Vocabulary: They are associated with emotions like guilt, shame, and remorse. If one acts contrary to a moral standard, they characterize themselves as "immoral."
Corporate Responsibility Debate
Individual View: Some theorists maintain moral notions apply only to individuals, arguing corporations are like machines, not people.
Corporate View: Others argue corporations act like individuals with specific objectives that can be moral or immoral.
Case Study (Arthur Andersen, ): The Justice Department charged the firm with obstruction of justice for shredding Enron-related documents. Critics argued people commit crimes, not companies, but corporations have policies and cultures that direct those individuals, suggesting a hybrid view of accountability.
Moral Development and Moral Reasoning
Moral Development: As people mature, they change their values deeply. Children avoid pain (self-absorbed), while adolescents internalize standards based on the expectations of family and society.
Kohlberg’s Six Stages of Moral Development: - Level One: Pre-conventional (Ages - ): - Stage 1 (Punishment and Obedience): Physical consequences determine goodness. Actions are taken to avoid punishment. - Stage 2 (Instrument and Relativity): Right actions satisfy the child’s needs. - Level Two: Conventional (Ages - ): - Stage 3 (Interpersonal Concordance): Good behavior is living up to the expectations of those for whom one feels loyalty and affection (family/friends). - Stage 4 (Law and Order): Right and wrong are determined by loyalty to one's nation or society. - Level Three: Post-conventional (Ages ): - Stage 5 (Social Contract): Awareness of conflicting views; emphasis on fair ways of reaching consensus through agreement and due process. - Stage 6 (Universal Ethical Principles): Right action defined by moral principles chosen for their logical universality and consistency.
Moral Reasoning: The process by which human behaviors, policies, or institutions are judged against moral standards. - Components: (a) Understanding moral standards; (b) Evidence/information showing if the subject meets or violates those standards. - Evaluation Criteria: Logical arguments, accurate/relevant factual evidence (e.g., statistics), and consistent moral standards.
Ethical Issues and Dilemmas
Kinds of Ethical Issues: - Systemic Issues: Questions about economic, political, or legal systems (e.g., morality of capitalism). - Corporate Issues: Questions about a specific company’s activities, policies, or structure. - Individual Issues: Questions about a specific person’s character, decisions, or behavior within an organization.
Ethical Dilemma Defined: A complex situation involving a mental conflict between moral imperatives, where obeying one results in transgressing another. It is a choice between two options where neither is perfectly acceptable.
Dilemma Examples: - Case 1: A new technology improves service but requires layoffs. The owner must choose between client service/growth and employee loyalty. - Case 2: Deciding whether or not to turn in a friend.
Three-Step Process for Resolution: - 1. Analyze the consequences (likely outcomes). - 2. Analyze the actions (what needs to be done). - 3. Make a decision.
Case Study: B.F. Goodrich (Vandivier)
The Scenario: B.F. Goodrich won a military contract for aircraft brakes. Vandivier was responsible for the test report.
The Conflict: The brakes failed specifications, but superiors pressured Vandivier to falsify test data.
The Choice: Falsify the report and violate principles, or refuse and face being fired.
Vandivier’s Moral Standards: The right to tell the truth, the wrongness of endangering lives, the belief that integrity is good, and the belief that dishonesty is bad.
Questions & Discussion
Group Activity Tasks: - Define ethics, business ethics, and morality. - Provide statements for ethics in business (Group 1). - Provide statements against ethics in business (Group 2).
Plenary Review Questions: - Explain the difference between moral and non-moral standards with examples. - Discuss the relevance of business ethics in organizations and globalization. - Briefly explain different types of ethics (Descriptive, Normative, Meta, Applied).