Business Ethics Assignment

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Business Ethics Concepts & Cases

Manuel G. Velasquez

Chapter One

Basic Principles: Ethics and Business

Introduction

This course/text takes the view that ethical behavior is the best long-term business strategy

Ethical course of action is not always clear to a company’s managers

This course/text aims to clarify the ethical issues you may face in business life/as a manager

It is NOT designed to give you moral advice, and NOT trying to persuade you to act in certain moral ways

Purpose of the course/text is to provide you with a deeper knowledge of the nature of ethical principles and concepts and an understanding of how you can use this knowledge to deal with the ethical choices you will encounter in the business world

This type of knowledge and skill should help you steer your way through ethical decisions and deal with ethical uncertainties in a more adequate and informed manner

Ethics and Morality

Ethics is the study of morality.

Morality = The standards that an individual or a group has about what is right and wrong, or good and evil.

Example: B.F. Goodrich A7-D Fraud

Moral Standards = norms about the kinds of actions that are morally right and wrong, as well as the values placed on what is morally good or bad.

Non-Moral Standards: The standards by which we judge what is good or bad and right or wrong in a non-moral way.

Six Characteristics of Moral Standards

Involve significant injuries or benefits

Not established by authority figures

Should be preferred to other values including self-interest

Based on impartial considerations

Associated with special emotions and vocabulary.

Felt to be universal

What is Business Ethics?

Broadly, ethics is the discipline that examines one’s moral standards or the moral standards of a society to evaluate their reasonableness and their implications for one’s life.

Business ethics is a specialized study of moral right and wrong that concentrates on moral standards as they apply to business institutions, organizations, and behavior.

Types of Ethical Issues

Systemic—ethical questions about the social, political, legal, or economic systems within which companies operate.

Corporate—ethical questions about a particular corporation and its policies, culture, climate, impact, or actions.

Individual—ethical questions about a particular individual’s decisions, behavior, or character.

Can ethical qualities be attributed to corporations?

View #1: corporations, like people, act intentionally and have moral rights, and obligations, and are morally responsible.

View #2: it makes no sense to attribute ethical qualities to corporations since they are not like people but more like machines; only humans can have ethical qualities.

View #3: humans carry out the corporation’s actions so they are morally responsible for what they do and ethical qualities apply in a primary sense to them; corporations have ethical qualities only in a derivative sense.

Arguments Against Business Ethics

In a free market economy, the pursuit of profit will ensure maximum social benefit so business ethics is not needed.

A manager’s most important obligation is loyalty to the company regardless of ethics.

So long as companies obey the law, they will do all that ethics requires.

Arguments Supporting Business Ethics

Ethics applies to all human activities.

Business cannot survive without ethics.

Ethics is consistent with profit seeking.

Customers, employees, and people in general care about ethics.

Studies suggest ethics does not detract from profits and seems to contribute to profits.

Corporate Social Responsibility

Corporate social responsibility refers to a corporation’s responsibilities or obligations toward society.

Business ethics is both a part of corporate social responsibility and part of the justification for corporate social responsibility.

Shareholder vs. Stakeholder Theory

New Issues in Business Ethics

Advances in technology often create new issues for business ethics.

Currently, advances in information technology are creating new issues in business ethics.

Increasing connections between the economic and social systems of different nations, known as “globalization”, has also created new issues in business ethics.

Resolving Cross-Cultural Ethical Differences

Moral Relativism = the theory that there are no ethical standards that are absolutely true and that apply or should be applied to the companies and people of all societies.

Objections to Moral Relativism:

Some moral standards are found in all societies;

Moral differences do not logically imply relativism;

Relativism has incoherent consequences;

Relativism privileges whatever moral standards are widely accepted in a society.

Resolving Cross-Cultural Ethical Differences

According to the Integrative Social Contracts Theory (ISCT), there are two kinds of moral standards:

Hypernorms: those moral standards that should be applied to people in all societies.

Microsocial norms: those norms that differ from one community to another and that should be applied to people only if their community accepts those particular norms.

Kohlberg’s Three Levels of Moral Development

First Level: Pre-conventional Stages

Stage One: punishment and obedience orientation

Stage Two: instrumental and relative orientation

Second Level: Conventional Stages

Stage One: interpersonal concordance orientation

Stage Two: law and order orientation

Third Level: Post-conventional Stages

Stage One: social contract orientation

Stage Two: universal principles orientation

Pre-conventional

Stage 1: Punishment and Obedience – demands of authority figures, pleasant and painful consequences of an act define what is right/wrong

Stage 2: Instrumental and Relative – right actions are those through which one satisfies his/her own needs, recognize that others have needs/desires too and uses this knowledge to get what he/she wants, behave in the right way toward others so others will do the same toward him/her

Conventional

Stage 3: Interpersonal Concordance – good behavior is living up to the expectations of those for whom the person feels loyalty, affection and trust as family and friends. Right action is conforming to one’s role as a good son, daughter, friend. Wants to be liked and thought well of.

Stage 4: right or wrong based on loyalty to one’s nation, society. Laws and norms of society should be followed so society will continue to function well, distinguishes social obligations from individual ones(the ones personal relationships require)

Post-conventional

Stage 5: Social contract – become aware that people have conflicting moral views, but fair ways of reaching consensus, all moral values and norms are relative and should be tolerated

Stage 6: Universal moral principles – right action defined in terms of moral principles chosen because of their resonableness, universality and consistency like principles dealing with justice, social welfare, human rights, human dignity etc.

Ethical principles

Welfare – overall impact of our decisions on people’s welfare

Duty – (obligation) a moral requirement to act in a certain way

Rights – entitlement whereby a person is due certain treatment from others

Fairness – (justice)equal treatment or different treatment according to some justified difference

Honesty – duty to tell the truth, important to develop trust

Dignity – all people deserve respect as human beings, denied when people are subject to violence, coercion, manipulation, degradation, risk of serious injury or death

Integrity – person of character or virtue who holds the right values and has the courage of his/her convictions (above 6)

Moral Reasoning

The reasoning process by which human behaviors, institutions, or policies are judged to be in accordance with or in violation of moral standards.

Moral reasoning involves:

The moral standards by which we evaluate things

Information about what is being evaluated

A moral judgment about what is being evaluated.

Analyzing moral reasoning

Criteria to use when evaluating how good a piece of moral reasoning is:

Be logical – make the person’s moral standards explicit, understand the evidence the person offers, know the person’s conclusion

Factual evidence cited should be accurate, relevant and complete

Be consistent – with each other, with other standards and beliefs and accept the consequences of applying one’s moral standards consistently to all persons in similar circumstances.

Four Steps Leading to Ethical Behavior

Step One: Recognizing a situation as an ethical situation.

Requires framing it as one that requires ethical reasoning

Situation is likely to be seen as ethical when:

involves serious harm that is concentrated, likely, proximate, imminent, and potentially violates our moral standards

Obstacles to recognizing a situation:

Euphemistic labeling, justifying our actions, advantageous comparisons, displacement of responsibility, diffusion of responsibility, distorting the harm, and dehumanization, and attribution of blame.

Six criteria to frame a situation as ethical

Does the situation involve the infliction of serious harm on one or more people?

Is the harm concentrated on its victims – each victim will, or already has, sustained a significant amount of harm?

Is it likely that the harm will occur (or has actually occured)?

Are the victims proximate-- close or accessible to us?

Will the harm occur fairly soon(or has it already occured?

Is there a possibility the infliction of harm violates the moral standards we or most people accept?

Obstacles to recognize a situation

Euphemistic labeling – use euphemism to change or veil the way we see a situation

Ex: firing OR downsizing, rightsizing, outsourcing

torture OR enhanced interrogation techniques

Rationalizing our actions – tell ourselves that the harm is justified because of a worthy or moral cause

Ex: terrorist planting a bomb – courageous fighter against a brutal oppressor

Diminishing comparisons – seeing a situation in the context of

other larger evils, make the harms appear minor

Ex: stealing office supplies and saying this is minor in comparison to what the company has done to me

Obstacles (cont.)

Displacement of responsibility – see the harm inflicted by whoever told us to do it

Ex: they ordered me to do what I did

Diffusion of responsibility – see yourself as playing a small role in a large group that is responsible from the harm

Ex: I was just one person out of a lot of people

Disregarding or distorting the harm: deny the harm

Ex: there is no good evidence, victims exaggerated the injuries to sue the company

Dehumanizing the victim – think of victims we injure as not real or not full human beings

Ex: during war dehumanize enemies (parasites)

Obstacles (cont.)

Redirecting blame: blame what we have done on our adversary or on the circumstances so we see ourselves as innocent victims provoked by others or by the circumstances

Ex: firing a worker – deserved it, started it, I was forced to fire to establish authority

These obstacles can prevent us from framing a situation as ethical:

without our knowledge

delibaretely use it to avoid framing – not to admit we did something wrong

Four Steps Leading to Ethical Behavior

Step Two: Judging the ethical course of action.

Requires moral reasoning that applies our moral standards to the information we have about a situation.

Requires realizing that information about a situation may be distorted by biased theories about the world, about others, and about oneself.

Step 2

Attempts to get info can be affected by biases.

A bias is an assumption that distorts our beliefs, perceptions and understanding

Biased theories about the world – how the world works

* Ignore low probability consequences, discount the role of chance in assessing risks, do not consider all stakeholders, ignore the possibility that public will find out, discount consequences far in the future, do not consider indirect effects

Biased theories about others – how we differ from them and what members of certain groups are like

Ethnocentrism – what we(our nation, group, culture) do seems normal, ordinary, good while what they do seem foreign, strange, less good. Our way is superior, their way is inferior -- leads to discrimination

Stereotypes – beliefs we have about members of any group – lead to unfair and false decisions about people

Biased theories about oneself – we believe we are more capable, insightful, courteous, honest, ethical and fair than others and are overconfident about our ability to control random events, what we know, overestimate our ability to be objective

These biases may make us confident that we are right when we are completely wrong

Four Steps Leading to Ethical Behavior

Step Three: Deciding to do the ethical course of action.

Deciding to do what is ethical can be influenced by:

The culture of an organization—people’s decisions to do what is ethical are greatly influenced by their surroundings.

Moral seduction—organizations can also generate a form of “moral seduction” that can exert subtle pressures that can gradually lead an ethical person into decisions to do what he or she knows is wrong.

Four Steps Leading to Ethical Behavior

Step Four: Carrying out the ethical decision.

Factors that influence whether a person carries out their ethical decision include:

One’s strength or weakness of will

One’s belief about the locus of control of one’s actions

One’s willingness to obey authority figures

Moral Responsibility

Three Components of Moral Responsibility

Person caused or helped cause the injury, or failed to prevent it when he or she could and should have (causality).

Person did so knowing what he or she was doing (knowledge).

Person did so of his or her own free will (freedom).

Moral responsibility

1. Causality – caused or helped cause it or failed to prevent it when s(he) could and should have

People cannot be responsible for all injuries they know and fail to prevent (saving all the members of all starving groups in the world)

A person is responsible for failing to prevent an injury when the person had an obligation – requires some sort of special relationship to the injury or injured party.

2. Knowledge – the person must know what s(he) is doing. If a person is ignorant of the fact that his or her actions will injure someone else – cannot be morally responsible

* Exception one – a person deliberately stays ignorant to escape responsibility

* Exception two – a person negligently fails to take necessary steps to find out about something s(he) knows is important

Two kinds of ignorance – ignorance of facts and ignorance of moral standards

3. Freedom – a person must act of his or her free will -- acts deliberately and purposefully, not forced by uncontrollable mental impulse or external force.

A person is not morally responsible when he or she is physically forced to do something that injures another person or when a person’s mind is psychologically impaired in a way that prevents control over actions.

Factors that Mitigate Moral Responsibility

Minimal contribution

In general, the less one’s actual actions contribute to the outcome of an act, the less one is morally responsible for that outcome.

Uncertainty

A person may be fairly convinced that doing something is wrong yet may still be doubtful about some important facts, or may have doubts about the moral standards involved, or doubts about how seriously wrong the action is.

Difficulty

A person may find it difficult to avoid a certain course of action because he or she is subjected to threats or duress of some sort or because avoiding that course of action will impose heavy costs on the person.

Rationalization

When determining moral responsibility – judge your uncertainties, the difficulty of avoiding or preventing the act, your level of contribution and weigh these against how serious the wrong is

Popular rationalizations used: (mostly inadequate attempts to escape responsibility)

Everybody does it

There is no rule against it

If I didn’t do it somebody else would

The company owed it to me

There are worse things

I was just following orders

My boss made me do it

That’s not my job

They had it coming to them

People like that deserve what they get

Moral responsibility is not removed nor mitigated by the cooperation of others and following orders.

Cooperating with evil: loyal agent’s argument – if an employee loyally does what the company ordered him/her to do, it is the company not the employee who should be held responsible

When I know that if I follow an order, I will be cooperating with evil, I must do everything I can to summon the strength and courage to refuse.