GSR Module 1: The Nature Of Business Ethics PDF

GSR (Good Governance and Social Responsibility) Module 1 The Nature of Business Ethics Prepared by: Shirley S. Baric, MBA  Ethics Derived from the Greek word ethos, which refers to those values, norms, beliefs, and expectations that determine how people within a culture live an...

GSR (Good Governance and Social Responsibility) Module 1 The Nature of Business Ethics Prepared by: Shirley S. Baric, MBA  Ethics Derived from the Greek word ethos, which refers to those values, norms, beliefs, and expectations that determine how people within a culture live and act (Hartman, Desjardins and MacDonald, 2018). 1-2  Ethics At its most basic level, ethics is concerned with how we act and how we live our lives (Hartman, Desjardins and MacDonald, 2018).  Ethics Ethics –Refers to the manner how people try to live their lives according to a standard of “right” or “wrong” behavior - in both how people thinks and behave toward others and how people would like them to think and behave toward them. (Ghillyer, 2018). 1-4  Ethics For some, it is a conscious choice to follow a set of moral standards and ethical principles that provide guidance on how they should conduct themselves in their daily lives.  Ethics For others, where the choice is not so clear, they look to the behavior of others to determine what is an acceptable standard of right and wrong, or good and bad.  Factors that Influence Ethics One's upbringing One’s religion One's social traditions and beliefs Society: Structured community of people bound together by similar traditions and customs  Understanding Right and Wrong Moral standards –Are principles by which judgments are made about good and bad behavior based on: Religious beliefs Cultural beliefs Philosophical beliefs  Understanding Right and Wrong Moral standards –Culture: Particular set of attitudes, beliefs, and practices that characterize a group of individuals  Understanding Right and Wrong These beliefs can come from many different sources: –Friends, family, Ethnic Background, Religion, School –The Media – television, radio, newspaper, magazines, the internet –Personal role models and mentors  Understanding Right and Wrong Norms –Those standards or guidelines that establish appropriate and proper behavior Moral Conduct –Relates to principles of right and wrong in behavior  Understanding Right and Wrong Moral norms can usually be expressed as general rules about our actions, such as: –“It is wrong to kill innocent people,” –“Always tell the truth,” –“Actions are right to the extent that they produce happiness.”  Doing the Right Thing If If you asked your friends and family what ethics means to them, you would probably arrive at a list of four basic categories: 1. Simple truth—right and wrong or good and bad. 2. A question of someone’s personal character— his or her integrity. 3. Rules of appropriate individual behavior. 4. Rules of appropriate behavior for a community or society.  Doing the Right Thing 1. A simple truth —also may be expressed as simply doing the right thing. It is something that most people can understand and support. 2. Personal integrity, demonstrated by someone’s behavior—looks at ethics from an external rather than an internal viewpoint.  Doing the Right Thing 3. Rules of appropriate individual behavior represent the idea that the moral standards we develop for ourselves impact our lives on a daily basis in our behavior and the other types of decisions we make. Establishing an ethical ideal for a community or society allows that group of people to live with the confidence that comes from knowing they share a common standard.  Doing the Right Thing 4. Rules of appropriate behavior for a community or society remind us that we must eventually bring our personal value system into a world that is shared with people who will probably have both similar and very different value systems.  Ethical Theories Ethical theories can be divided into three categories: 1. Virtue Ethics 2. Ethics for the Greater Good 3. Universal Ethics  Ethical Theories Virtue Ethics – The Greek Philosopher Aristotle’s belief in individual character and integrity established a concept of living your life according to a commitment to the achievement of a clear ideal – what sort of person would I like to become and how do I go about becoming that persons?  Ethical Theories Virtue Ethics – The problem with virtue ethics is that societies can place different emphasis on different virtues. – For example, Greek society at the time of Aristotle valued wisdom, courage and justice.  Ethical Theories Virtue Ethics – By contrast, Christian societies value faith, hope and charity. – There will be a real danger of value conflict.  Ethical Theories For example: 1.Lying is wrong – but what if you were lying to protect the life of a loved one? 2.Stealing is wrong – but what if you were stealing food for a starving child?  Ethical Theories For example: 3. Killing is wrong – but what if you had to kill someone for self-defense to protect your own life?  Ethical Theories 2. Ethics for the Greater Good –Focus on the greatest good for the greatest number of people. –Originally proposed by Scottish philosopher named David Hume, this approach to ethics is also referred to as utilitarianism.  Ethical Theories 2. Ethics for the Greater Good –The problem of this approach to ethics - If all you focus on is doing for the greatest good for the greatest number of people, NO ONE is accountable for the actions that are taken to achieve that outcome.  Ethical Theories 3. Universal Ethics –Originally attributed to a German philosopher named Immanuel Kant, universal ethics argues that there are certain and universal principles that should apply to all ethical judgments.  Ethical Theories 3. Universal Ethics –Actions are taken out of duty and obligation to a purely moral ideal rather than based on the needs of the situation, since the universal principles are seen to apply to everyone, everywhere, all the time.  Ethical Theories 3. Universal Ethics –The problem is - If all you focus on is abiding by a universal principle, NO ONE is accountable for the consequences of the action taken to abide by those principles.  Ethical Theories 3. Universal Ethics – For example, the current debate over the use of stem cells in researching a cure for Parkinson’s disease. – If you recognize the value of human life above all else as universal ethical principle, how do you justify the use of human embryo in the harvesting of stem cells?  Ethical Dilemma Applied Ethics –The study of how ethical theories are put into action. Ethical Dilemma –A situation in which there is no obvious right or wrong decision, rather a right or right answer.  Resolving Ethical Dilemma Three-step process: 1. Analyze the consequences. - Who will be helped by what you do? - Who will be harmed? - What kind of benefits or harm are we talking about?  Resolving Ethical Dilemma 2. Analyze the actions. - Consider all the options from a different perspective, without thinking of the consequence. - which option offers actions that are least problematic?  Resolving Ethical Dilemma 3. Make a decision. - Take both parts of your analysis into account and make a decision.  Resolving Ethical Dilemma In reality, the “answer” to an ethical dilemma is often the lesser of two evils, it is questionable to assume that there will always be an acceptable answer – it’s more a question of whether or not a person can arrive at an outcome he/she can live with.  Business Ethics Business Ethics –The application of ethical standards to business behavior (Ghillyer, 2018).  Business ethics... comprises principles & standards that guide behavior in the world of business  Business ethics... whether a specific behavior is ethical or unethical is often determined by stakeholders: –investors –customers –the community –Employees – Suppliers  Stakeholders Stakeholder –Someone with a share or interest in a business enterprise  Stakeholder Interests Stakeholders Interest in the Organizations 1. Stockholders -Growth in the or value of company Shareholders stock -Dividend Income  Stakeholder Interests Stakeholders Interest in the Organizations 2. Employees -Stable Employment at a fair rate of pay -A safe and comfortable working environment  Stakeholder Interests Stakeholders Interest in the Organizations 3. Customers -”Fair exchange” – a product or service of acceptable value and quality for the money spent - Safe and reliable  Stakeholder Interests Stakeholders Interest in the Organizations 4. Suppliers/ -Prompt payment for Vendor delivered goods partners -Regular orders with an acceptable profit margin  Stakeholder Interests Stakeholders Interest in the Organizations 5. Retailers/ -Accurate deliveries Wholesalers of quality products on time and at a reasonable cost -Safe and reliable products  Stakeholder Interests Stakeholders Interest in the Organizations 6. Government -Tax Revenue -Operation in compliance with all relevant legislation  Stakeholder Interests Stakeholders Interest in the Organizations 7. Creditors -Principal and interest payments -Repayment of debt according to the agreed schedule  Stakeholder Interests Stakeholders Interest in the Organizations 8. Community -Employment of local residents -Economic growth -Protection of the local environment  Ethical Behavior Ethical behavior –Ethical behavior tends to be good for business and involves demonstrating respect for key moral principles that include honesty, fairness, equality, dignity, diversity and individual rights.  Ethical Behavior Ethical behavior –Acting in ways consistent with what society and individuals typically think are good values.  Unethical Behavior  Unethical behavior is an action that falls outside of what is considered morally right or proper for a person, a profession or an industry.  Unethical Behavior Greatest concern is the involvement of these stakeholders with the actions of the organization and the extent to which they would be impacted by unethical behavior.  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 1. Stockholders -False and or misleading Shareholders financial information on which to base investment  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 1. Stockholders -Loss of stock or value Shareholders -Cancellation of Dividends  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 2. Employees -Loss of employment -Not enough money to pay severance packages or meet pension obligations  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 3. Customers -Poor service quality  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 4. Suppliers -Delayed payment /vendor for delivered goods and services -unpaid invoices when the company declared bankruptcy  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 5. Government -Loss of tax revenue -Failure to comply with all relevant legislation  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 6. Creditors -Loss of principal and interest payments -Failure to repay debt according to agreed schedule  Stakeholder Impact from Unethical Behavior Stakeholders Interest in the Organizations 7. Communities -Unemployed of local residents -Economic decline Three Approaches to Business Ethics 1. Conventional Approach –Based on how normal society today views business ethics 2. Principle Approach - Based upon the use of ethics principles to direct behavior, actions and policies Three Approaches to Business Ethics 3. Ethical Tests Approach –Based on short, practical questions to guide ethical decision making and behavior.  Conventional Approach The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms Prevailing Norms Decision or Practice of Acceptability 60  The Conventional Approach to Business Ethics 1. What is the true nature of the practice, behavior, or decision that occurred? 2. What are society’s (or business’s) prevailing norms of acceptability? 3. What value judgments are being made by someone about the practice or behavior, and what are that person’s perceptions of applicable norms? 61  Code of Ethics Code of Ethics –A company’s written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day.  Kinds of Ethical Issues Kinds of Ethical Issues 1. Systemic 2. Corporate 3. Individual  Kinds of Ethical Issues Systemic issues –Ethical questions about the social, political, legal, or economic systems within which companies operate  Kinds of Ethical Issues Systemic issues Example: –These include questions about the morality of capitalism or of the laws, regulations, industrial structures, and social practices within which businesses operate.  Kinds of Ethical Issues Corporate issues –Ethical questions about a particular corporation and its policies, culture, climate, impact, or actions.  Kinds of Ethical Issues Corporate issues –Examples would be questions about the morality of a corporate decision to invest so many millions of dollars in a project that would probably not generate any profits. In doing this, did the company violate the rights of its stockholders?  Kinds of Ethical Issues Individual issues –Ethical questions about a particular individuals within the company and their behavior and decisions.  Kinds of Ethical Issues Individual issues –Example: The question of whether it was moral for a company’s chairman, to allow his researchers to develop a drug that would probably not generate any profits.  Business and Ethical Relativism  The fact that different cultures have different moral standards, leads many people to adopt the theory of ethical relativism  Business and Ethical Relativism  Ethical or 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.  Business and Ethical Relativism  The ethical relativist holds that a person’s action is morally right if it accords with the ethical standards accepted in that person’s culture, and it is wrong if it violates the ethical standards accepted in that person’s culture.  Business and Ethical Relativism  For example:  The people of certain Arab societies hold that business bribery is morally acceptable, although Americans believe that it is immoral.  Arguments Against Ethics in Business 1. In a free market economy, the pursuit of profit will ensure maximum social benefit so business ethics is not needed. 2. A manager’s most important obligation is loyalty to the company regardless of ethics.  Arguments Against Ethics in Business 3. So long as companies obey the law they will do all that ethics requires.  Arguments Supporting Ethics in Business 1. Ethics applies to all human activities. 2. Business cannot survive without ethics. 3. Ethics is consistent with profit seeking.  Arguments Supporting Ethics in Business 4. Customers, employees, and people in general care about ethics. 5. Studies suggest ethics does not detract from profits and seems to contribute to profits.  Why study business ethics? 1. Reports of unethical behavior are on the rise 2. Society’s evaluation of right or wrong affects its ability to achieve its business goals 3. Stakeholder demands for ethics initiatives  Why study business ethics? 4. Individual ethics is not enough 5. Helps identify ethical issues Why is ethics important in the business environment? Business ethics is a process of responsible decision-making. The decision-making model can help individuals to understand such failures and avoid future business and personal tragedies. Why is ethics important in the business environment? Why explore ethics in business? Because Ethics Failures = Business Failures Why is ethics important in the business environment? The scandals and ruin experienced since the Enron collapse were brought about by ethical failures.  References Carrol, A. (2018). Business and Society: Ethics, Sustainability, and Stakeholder Management. Boston: Cengage Learning Ghillyer, A. (2018). Business Ethics Now. New York: McGraw-Hill Education.  References Hartman, L., Desjardins, J. and MacDonald, C. (2018). Business Ethics: Decision-making or Personal Integrity and Social Responsibility. New York: McGraw-Hill. Velasquez, M. G. (2016). Business Ethics: Concepts and Cases. 7th Edition. Pearson Prentice Hall THANK YOU VERY MUCH AND GOD BLESS