Chapter

Key Points• Exploration of real-life business ethics issues• Teleological and deontological approaches to ethical

issues• Kohlberg’s stages of moral development• Corporate ethics codes

2

Business Ethics

Business Ethics vs. Old-Fashioned Greed and Arrogance:

Adelphia—Misuse of corporate funds Arthur Andersen—Auditing irregularities Enron—Off-books partnerships to hide debts and losses Global Crossing—Deceptive accounting Merrill Lynch—Stock fraud Tyco—Misuse of corporate funds WorldCom—Hiding billions in expenses Xerox—Misstating revenues Martha Stuart—Insider trading

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Ethical Dilemmas

Career and Family:

Are career and family goals ethically compatible?

$24.98 Round-Trip San Francisco to Paris:

Was UAL ethically obligated to honor the low, low

fares?

Can purchasers honorably take advantage of the ULA

error?

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Ethical Structures

Religion: Revealed principles and laws provide the foundation for a moral life.

Libertarianism: Ethical theory where right and wrong are measured by ensuring equal opportunity for all to engage in informed choices about their own welfare.

Virtue Ethics: The key to good ethics lies in the classic notion of a good personal character.

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Teleology

Teleological (or consequential) ethical systems are concerned with the consequences of an act rather than the act itself. It includes act-utilitarianism, where one’s goal is to identify the consequences of a particular act to determine whether it is right or wrong, and rule-utilitarianism, which requires one to adhere to all the rules of conduct by which society reaps the greatest value. In sum, the principle to be followed for utilitarian is the greatest good for the greatest number.

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Deontology

Deontological ethical systems hold that a person renders ethical decisions if he or she acts based on what is right, regardless of the consequences of the decision. In this formalistic view of ethics, what is right is based on the categorical imperative, which is the notion that every person should act on only those principles that he or she, as a rational person, would prescribe as universal laws to be applied to the whole of humankind.

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America’s Moral Climate—Part I

1. Teens: Fewer than 1/3 think they will make America a better place.

2. College Students: 95% of 3,000 undergraduate business students polled in 31

universities admit they had cheated in high school or college. 73.6% of new freshman identified being “well off financially”

as a very important objective, whereas 43.1% considered developing a “meaningful philosophy of life” important.

A record 82.6% said they had done volunteer work during the past year.

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America’s Moral Climate—Part II

3. Business Practice: A 2000 KPMG survey of 2,390 employees nationwide found

that 76% had observed what they believed to be illegal and/or unethical conduct on the job.

A 1997 survey of over 1,300 American workers found 56% felt some pressure to act unethically or illegally and 48% admitted they had done so in the past year to meet job demands.

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Testing Honesty Around The World

Reader’s Digest intentionally “lost” more then 1,100 wallets in 117 cities to see how many would be returned. The wallets contained up to $50 along with a name and phone number. Some of the results: 44% were not returned. All wallets in Norway and Denmark were returned. Nearly 70% were returned in the United States.

Source: Lori Joseph and Marcy E. Mullins, “Testing Honesty around the World,” USA TODAY,

May 1, 2001, p. 1A.

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Kohlberg’s Six Universal Stages of Moral Development

Stage 1: Obey rules to avoid punishment.Stage 2: Follow rules only if it is in own interest, but let

others do the same. Conform to secure rewards.Stage 3: Conform to meet expectations of others. Please

others. Adhere to stereotypical images.Stage 4: Doing right is one’s duty. Obey the law. Uphold the

social order.Stage 5: Current laws and values are relative. Laws and duty

are obeyed on rational calculations to serve the greatest number.

Stage 6: Follow self-chosen universal ethical principles. In the event of conflicts, principles override laws.

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Gilligan’s Criticism of Kohlberg’s Stages:

Men tend to take an impersonal, universal view of morality as contrasted with the feminine “voice” that rises more commonly from relationships and concern for the specific needs of others.

Kohlberg’s initial experimental subjects were limited to young males.

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Managerial Ethics: Part I

In a recent study of 600 workers, “Teams that viewed their supervisor as ethical showed a positive correlation with the following outcomes”: .30 with likelihood to expend extra effort to perform beyond

expectations .32 with perceived supervisor effectiveness .35 with job satisfaction.

On the other hand, the perception of unethical leadership was correlated with negative outcomes: -.16 with unethical behavior. -.33 with complaining.

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Managerial Ethics: Part II

If “managers are the ethics teachers of their organizations,” then:

The Enron debacle has made it crystal clear that a failure of ethical leadership at the rarefied heights of a corporation—in the executive suite and boardroom—can destroy a company.

Source: “Do Your Employees See,” located at http://www.bsr.org/BSRMagazine/INDepth/analysis.cfm

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Corporate Ethics Codes

Address such topics as relations with government, matters of personal character, product safety, environmental issues, customer/supplier relations, political contributions, employees’ working conditions, bribery, workplace safety, collective bargaining, freedom of expression and fair trade.

In 1960, 20% of the world’s population living in the richest countries had 30 times the income of the poorest 20%. By 1997, the richest were 74 times richer.

The Ethics Officers Association is exploring the feasibility of developing a standardized ethics assessment system corporations could use to measure and earn certification for excellence in addressing ethics concerns.

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Forestalling Bribery Globally

The Foreign Corrupt Practices Act: The United States’ primary statutory weapon against bribery abroad

The OECD Anti-Bribery Convention: 34 signatory nations by 2002

Inter-American Convention: 25 North and South American signatory nations

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Business Crime

The 2002 Sarbanes-Oxley Act significantly increased penalties for attacking corporate crime by publicly-traded companies.

Federal sentencing guidelines achieve greater consistency and predictability in punishment for both white-collar and street crime.

Whistleblower protection found in the 2002 Sarbanes-Oxley Act, the Whistleblower Protection Act of 1989, state whistle-blower protection statutes, and in some court decisions.

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