© 2005 by Nelson, a division of Thomson Canada Limited. Ethics of Business: The Theory 1.

© 2005 by Nelson, a division of Thomson Canada Limited.

Ethics of Business: The Theory

1


What would you do if… ?

Phyllis Cramer and the new shoplifting policy at her

department storeIf you were Phyllis, what would

you do?2

© 2005 by Nelson, a division of Thomson Canada Limited. 3

High Profile Ethical Scandals in Business

• Wall Street Meltdown: The ethics of Sub-prime mortgages

• WorldCom / Enron: Accounting fraud

• Shell: Proposed sinking of North Sea oil rig

• New York Times: Plagiarism• NBC: Faking the evidence• Walkerton: Falsifying

records• UofT Law School Students:

Lying about grades to employers

© 2005 by Nelson, a division of Thomson Canada Limited. Chapter 5

Copyright © 2008 McGraw-Hill Ryerson Ltd. 4

Ethical Implications in Business• Owners

– fair and accurate disclosure

• Employees– hiring; firing; wages;

privacy; discrimination; honesty; conflicts of interest; insider information

• Consumers – dishonest advertising;

product safety

• Competitors– non-competitive

behaviour; industrial espionage

• Suppliers– kickbacks; gifts; bribes

• Government– legal compliance;

lobbying

• Society – respect for environment;

corporate giving



Influences on Ethical Behaviour • Individual morals• National and ethnic cultures• Government legislation and

regulation• The legal system• Religion• Colleagues or peers• Education



Influences on Ethical Behaviour• Media• Corporate mission, vision, and

values statements• Union contracts• Competitive behaviour• Activists or advocacy groups (NGOs)• Business or industry organizations• Professional associations



Business Ethics • Ethics of business: rules, standards,

codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations.

• Value judgments: subjective evaluations of what is considered important.

• Moral standards: the means by which individuals judge their actions and the actions of others.


Copyright © 2008 McGraw-Hill Ryerson Ltd.

8

Economic Efficiency Ethic• Judges the moral implications of a

decision by its economic consequences and provides the moral justification for a market system.

• Adam Smith: By focusing on efficient operations, profits are maximized, and society ultimately benefits.


Government Requirements Ethic• The acceptance of

a code of laws as the governing rules of society or as a contract with society that determines what is considered right or appropriate behaviour.

9Chapter 5Copyright © 2008 McGraw-Hill Ryerson Ltd.


Ethics and the Law

• Law often represents an ethical minimum

• Ethics often represents a standard that exceeds the legal minimum

Ethics Law

Frequent Overlap


Ethics, Economics, and Law



Self-Interest (Ethical Egoism)• Individuals or corporations set their

own standards for judging the ethical implications of their actions; only the individual’s values and standards are the basis for actions.

• Self-interest not necessarily the same as: selfishness, greed, disregard for the rights and interests of others, hedonism, or materialism.



13

Utilitarian Ethic

• Focuses on the distribution of benefits and harms to all stakeholders with the view to maximizing benefits.

• “The greatest good for the greatest number.”



14

Universal Rules Ethic

• Ensures that managers or corporations have the same moral obligations in morally similar situations.

• Treat people as means in themselves (i.e., with respect) and never as a means to one’s own ends.



15

Ethics of Caring

• Gives attention to specific individuals or stakeholders harmed or disadvantaged and their particular circumstances.

• Golden rule: Do unto others as you would want done to you.



16

Individual Rights Ethic

• Relies on a list of agreed upon rights for everyone that will be upheld by everyone and that becomes the basis for deciding what is right, just, or fair.

• Examples: Rights to safety, information, privacy, property.

• Rule-based?



Ethics of Justice• Considers that moral decisions are

based on the primacy of a single value: justice.

• Different types of justice:– Procedural justice– Corrective justice– Retributive justice– Distributive justice

• Mostly ends-based?



18

Personal Virtues Ethic

• An individual’s or corporation’s behaviour is based upon being a good person or corporate citizen with traits such as courage, honesty, wisdom, temperance, and generosity.

• Ask: How would I feel if my actions were explained on television?


Making Ethical Decisions


Four Essentials Factors at Play

1. Forensic Accounting: The 20% Angel Rule

2. Self-interested Consequences: The 60% Rule

3. Social Norms of Fairness: The Last 20%

4. The Domino Effect


Three Models of Management Ethics

ImmoralManagement

ImmoralManagement

A style devoid of ethical principles and active opposition to what is ethicalA style devoid of ethical principles and active opposition to what is ethical

MoralManagement

MoralManagement

Conforms to high standards of ethical behaviorConforms to high standards of ethical behavior

AmoralManagement

AmoralManagement

Intentional: does not consider ethical factors

Unintentional: casual or careless about ethical factors

Intentional: does not consider ethical factors

Unintentional: casual or careless about ethical factors


Characteristics of Immoral Managers• Intentionally do wrong• Self-centered and self-absorbed• Care only about self or organization’s

profits• Actively oppose what is right, fair, or just• Exhibit no concern for stakeholders• Are the “bad guys”• An ethics course probably would not help

them


Characteristics of Moral Managers

• Conform to high level of ethical or right behavior• Conform to high level of personal and

professional standards• Ethical leadership is commonplace• Goal is to succeed within confines of sound

ethical precepts• High integrity is displayed• Embrace letter and spirit of the law• Possess an acute moral sense and moral maturity• Are the “good guys”


Characteristics of Amoral Managers

Intentionally Amoral Managers: • Don’t think ethics and business should “mix”• Business and ethics exist in separate spheres• A vanishing breed

Unintentionally Amoral Managers:• Don’t consider the ethical dimension of decision

making• Don’t “think ethically”• Have no “ethics buds”• Well-intentioned, but morally casual or unconscious• Ethical gears are in neutral


Three Models of Management Morality and Emphasis on CSR

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© 2005 by Nelson, a division of Thomson Canada Limited. Ethics of Business: The Theory 1.

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