Ethical issues in Business

(F-01-E1B00)
INSTRUCTOR: VŨ THỊ ĐAN TRÀ
Overview

 Chapter 1 An introduction to business ethics

 Chapter 2 Theories of ethics and business
 Chapter 3 Stakeholders and corporate social responsibility (CSR)
 Chapter 4 Ethics and human resource management
 Chapter 5 Ethics and marketing
 Chapter 6 Ethics and the environment
Topics

 Topic 1: Introduction, Philosophical Business Ethics & Ethical Theory

 Topic 2: Moral Responsibilities in Business
 Topic 3: The Ethics of Corporate Downsizing
 Topic 4: The Ethics of International Sweatshops
 Topic 5: When is “Everyone’s Doing it” a Moral Justification?
 Topic 6: The Ethics of Whistle-blowing
 Topic 7: Drug Testing in Employment
 Topic 8: The Ethics of Sales
 Topic 9: The Ethics of Manipulative Adverstising
 Topic 10: Business and Environmental Ethics
Chapter 1 An
introduction to
business ethics
INSTRUCTOR: VŨ THỊ ĐAN TRÀ
Chapter objectives

 To explore conceptualizations of business ethics from an

organizational perspective
 To examine the historical foundations and evolution of business
ethics
 To provide evidence that ethical value systems support business
performance
 To gain insight into the extent of ethical misconduct in the
workplace and the pressures for unethical behavior
 1 What is business?
 2 What is ethics?
 3 What is business ethics?
1. What is ethics?

 Ethics
 Business ethics
 Ethical approaches
1. What is ethics?

 Ethics
 Ethics (or moral philosophy) is a broad field of inquiry that addresses
a fundamental query that all of us, at least from time to time,
inevitably think about—namely, How should I live my life?
 Ethics deals with individual character and the moral rules that
govern and limit our conduct.
 It investigates questions of right and wrong, duty and obligation,
and moral responsibility.
1. What is ethics?

 Ethics
 Analyze the basic nature of business ethics
 What is ethics?
 Principles of conduct.
 Personal rules.
 Study of morality.
 Ethics as investigation
 It doesn’t simply tell you what is right or wrong, but investigates what these
concepts mean.
What is ethics?

 Ethics: “inquiry into the nature and grounds of morality where the
term morality is taken to mean moral judgments, standards and rules
of conduct.”
 Ethics has also been called the study and philosophy of human
conduct, with an emphasis on determining right and wrong.
 The American Heritage Dictionary offers these definitions of ethics:
“The study of the general nature of morals and of specific moral
choices; moral philosophy; and the rules or standards governing the
conduct of the members of a profession.”
1. What is ethics?

 Business ethics comprises the principles, values, and standards that

guide behavior in the world of business.
 Principles are specific and pervasive boundaries for behavior that are
universal and absolute.
 Values are used to develop norms that are socially enforced. Integrity,
accountability, and trust are examples of values.
1. What is ethics?

 Business Ethics
 Business ethics is the study of what constitutes right and wrong, or
good and bad, human conduct in a business context
 What is morality?
 The standards that an individual or a group has about what is right and
wrong, or good and evil.
 2. Why study business ethics?
 Ethical misconduct has become a major concern in business today.
 Abusive behavior, harassment, accounting fraud, conflicts of interest, defective products,
bribery, and employee theft are all problems cited as evidence of declining ethical
standards.
 Insider trading remains a serious issue in business and in ethics
 Inflating earnings involves attempting to embellish or enhance a firm’s profitability in a
manner that is inconsistent with past practice, common regulatory guidelines, or industry
practice.
 2. Why study business ethics?
 Business ethics is not merely an extension of an individual’s own personal ethics. An
individual’s personal values and moral philosophies are only one factor in the ethical
decision-making process.
 Moral rules can be applied to a variety of situations in life, and some people do not
distinguish everyday ethical issues from business ones.
 Professionals in any field, including business, must deal with individuals’ personal moral
dilemmas because these issues affect everyone’s ability to function on the job
 Just being a good person and, in your own view, having sound personal ethics may
not be sufficient to enable you to handle the ethical issues that arise in a business
organization. It is important to recognize the relationship between legal and ethical
decisions
2. Why study business ethics?

 Many important ethical issues do not arise very often in the business
context, although they remain complex moral dilemmas in one’s
own personal life
 Just being a good person and, in your own view, having sound
personal ethics may not be sufficient to enable you to handle the
ethical issues that arise in a business organization.
 Many people who have limited business experience suddenly find
themselves making decisions about product quality, advertising,
pricing, sales techniques, hiring practices, and pollution control.
 In addition, managerial responsibility for the conduct of others
requires knowledge of ethics and compliance processes and
systems. Years of experience in a particular industry may be required
to know what is acceptable.
2. Why study business ethics?

 Studying business ethics will help you

 begin to identify ethical issues when they arise and recognize the
approaches available for resolving them.
 learn more about the ethical decision-making process and about ways
to promote ethical behavior within your organization.
 may begin to understand how to cope with conflicts between your own
personal values and those of the organization in which you work.
 How is about DEVELOPING AN ORGANIZATIONAL AND GLOBAL
ETHICAL CULTURE
 The ethical component of a corporate culture relates to the values,
beliefs, and established and enforced patterns of conduct that
employees use to identify and respond to ethical issues.
3. The benefits of business ethics
2. Ethical terms in organizational
contexts
 Moral standards concern behavior that seriously affects human well-
being
 Moral standards take priority over other standards.
 The soundness of moral standards depends on the adequacy of the
reasons that support them
2. Ethical terms in organizational
contexts
 Moral and Nonmoral Standards and Norms
 Defining a moral standard:
 What we believe is morally good or morally bad.
 Norms expressed as rules about our actions.
 The sources of moral standards:
 Family, friends, and various societal influences.
 Reflection upon our moral standards.
 Examples of nonmoral norms:
 Etiquette.
 Rules of behavior.
 Law.
 Language standards.
2. Ethical terms in organizational
contexts
 Etiquette refers to the norms of correct conduct in polite society or,
more generally, to any special code of social behavior or courtesy
 The rules of etiquette are prescriptions for socially acceptable
behavior. If you violate them, you’re likely to be considered ill-
mannered, impolite, or even uncivilized, but not necessarily immoral
2. Ethical terms in organizational
contexts
 Legality should not be confused with morality. Breaking the law isn’t
always or necessarily immoral, and the legality of an action doesn’t
guarantee its morality.
2. Ethical terms in organizational
contexts
 Somewhere between etiquette and law lie professional codes of
ethics
 How do we come to have certain moral principles and not others?
Obviously, many things influence what moral principles we accept:
our early upbringing, the behavior of those around us, the explicit
and implicit standards of our culture, our own experiences, and our
critical reflections on those experiences
3. Concepts in business ethics

 Any religion provides its believers with a worldview, part of which

involves certain moral instructions, values, and commitments.
3. Concepts in business ethics

 Six characteristics of moral standards:

1. Cover serious matters,
2. Preferred over other values,
3. Are independent of authority,
4. Are universal,
5. Are impartial,
6. Enlist special vocabulary and emotions,
3. Concepts in business ethics:
Moral versus Nonmoral Norms
3. Concepts in business ethics:
 Refining the Concept of Ethics
 Ethical standards require good reasons for one to hold them.
 Two ways to approach ethics:
 Descriptively.
 Prescriptively.
 Which of the following two questions enlists a descriptive approach, and
which enlists a prescriptive approach?
 “Do Americans believe that bribery is wrong?” [Descriptive]
 “Is bribery wrong?” [Prescriptive]
 Business ethics studies moral standards as applied to business.
 Business ethics issues can be sorted into systemic, corporate, and
individual issues.
3. Concepts in business ethics:
 Applying Ethical or Moral Concepts to Corporations
 Corporate personhood.
 Corporations do not qualify as moral agents. So, they cannot be morally
responsible for what they do.
 Corporations are like machines in some ways, and so not responsible for what
they do.
 Corporations can be secondarily or derivatively morally responsible for their
actions.

 Objections to Business Ethics

 Arguments against business ethics:
 Free market builds in ethics.
 Employee loyalty.
 Law.
  Objections to arguments against business ethics:
 There is no “perfectly competitive” condition.
 Increasing profits do not necessitate social benefit.
 Not everyone values the same things.
 1.2.6: The Case for Ethics in Business
 The case for business ethics.
 Businesses require ethical employees.
 Businesses require an ethical society.
 Business Ethics and Corporate Social Responsibility
 Corporate Social Responsibility (CRS)
 A corporation’s responsibilities or obligations to society.
 Shareholder view (Friedman).
 Stakeholder view (Freeman and Reed).
 Two types of arguments in support of stakeholder view:
 Instrumental.
 Normative.
4. Ethical Issues in International
Business (1 of 3)
 Examine ethical issues arising from globalization and
international business connections and practices
 Technology and Globalization
 Types of new technologies.
 Significant issues in international business and new technologies.
 Globalization.

 Technology and Business Ethics

 Ethical issues raised through technological advancements
 Industrial and agricultural revolutions: Labor, fair trade, deception and
stock manipulation.
 Information technology: risk, privacy, and property rights.
 Nanotechnology and biotechnology: risk and dangerous products.
4. Ethical Issues in International
Business (2 of 3)
 Globalization and Business Ethics
 Globalization
 Largely driven by multinationals.
 Benefits to developing countries including jobs, skills, income,
technology, a decrease in poverty, specialization.
 Blamed for, e.g., rising inequality, cultural losses, a “race to the bottom,”
introduction of inappropriate technologies into developing countries.
 Differences in laws, governments, practices, levels of development, and
cultural understandings raise ethical problems, which suggests ethical
relativism.
 Criticisms of ethical relativism:
 Some moral standards are found in all societies.
 Moral differences do not logically imply relativism.
 Relativism has incoherent consequences.
 Societal standards are not above criticism.
4. Ethical Issues in International
Business (3 of 3)
 Integrative Social Contracts Theory
 Integrative social contracts theory:
 Hypernorms should apply to people in all societies.
 Microsocial norms apply only in specific societies and differ from one
society to another.
5. Foundations of Moral
Reasoning (1 of 4)
 Explain the deep foundations and structure of moral reasoning
 Key goals:
 Examination of moral standards and the reasoning process by which
such standards are applied to issues.
 Description of the development of one’s critical capacities over one’s
lifetime.
 Description of reasoning processes used to evaluate moral standards.

 Moral Development
 Kohlberg’s stages of moral development:
 Preconventional Orientations
 Punishment and Obedience.
 Instrumental and Relative.

 Conventional Orientation
 Interpersonal Concordance.
 Law and Order.
5. Foundations of Moral
Reasoning (2 of 4)
 Postconventional Orientation
 Social Contract.
 Universal Moral Principles.

 Criticisms of Kohlberg’s view:

 Feminist and care ethics critiques.

 5.2 The Structure of Moral Reasoning

 Moral reasoning involves:
 Moral standards for evaluation. (Be logical.)
 Information about what is being evaluated. (Rely on evidence or
information that is accurate, relevant, and complete.)
 Moral judgment about what is being evaluated. (Be consistent.)
5. Foundations of Moral
Reasoning (3 of 4)
 5. 3: Steps to Ethical Behavior
 Steps to ethical behavior:
 Awareness.
 Judgment.
 Decision.
 Action.
 Recognizing a situation as ethical:
 Requires framing it as one that requires ethical reasoning.
 Involves serious harm that is concentrated, likely, proximate, imminent,
and potentially violates our moral standards.
 Obstacles to recognizing a situation is ethical include:
 Euphemistic labeling, rationalizing our actions, diminishing comparisons,
displacement of responsibility, diffusion of responsibility, disregarding or
distorting the harm, dehumanizing the victim, and redirecting blame.
5. Foundations of Moral Reasoning (4 of 4)
 Judging the ethical course of action.
 Avoid three forms of biased theories
 Organization.
 Judging the ethical course of action often depends on:
 The ethical climate of the organization.
 The ethical culture of the organization.
 Acting on a decision depends on:
 Ego strength.
 Loss of control.
 Response to authority.
Figure 1.2: The Four Steps Leading
to Ethical Behavior
6. Moral Responsibility and Blame (1 of 3)
 Assess the factors that define and refine the concept of moral
responsibility
 Clarity about what’s involved in moral reasoning:
 Responsibility.
 Accuracy.
 Appropriate emotions.
 Accountability.

 6.1 When is a Person Morally Responsible?

 Criteria for moral responsibility for injuries or wrongs:
 Causality.
 Knowledge.
 Freedom.
Moral Responsibility and Blame
(2 of 3)
 6.2: Mitigating Factors
 Moral responsibility is mitigated by:
 Minimal contribution.
 Uncertainty.
 Difficulty.
 Moral responsibility is not mitigated by:
 The cooperation of others.
 Following orders.

 6.3: Moral Responsibility: Essential Points

 Essential points of responsibility
 Causation.
 Knowledge.
 Freedom.
6. Moral Responsibility and
Blame (3 of 3)
 Mitigation of moral responsibility
 Minimal contribution to the act.
 Uncertainty.
 Coercion or threat.
 Seriousness of the wrong.

 6. 4: Responsibility for Corporate Actions

 Corporate moral responsibility
 Individual
 Corporation
Case Study 1.1: Slavery in the
Chocolate Industry
 Child slavery in Ivory Coast to farm cocoa beans.
 U.S. chocolate companies purchase the cocoa beans from Ivory
Coast, knowing that slavery is involved.
 Pressure Leads to Action
 Pressure from U.S. legislators led to chocolate companies
committing to reforms.
 Far from Achieving Goals
 As of 2010, no progress on a certification system reached
conclusion.
 Mixed Responses
 Some cocoa is now certified “slave-free,” but most cocoa from
Ivory Coast is not.
Case Study 1.2: Aaron Beam
and the HealthSouth Fraud (1
of 2)
 Aaron Beam and Richard Scrushy founded HealthSound in 1984.
 The company’s profitability was misrepresented.
 In 1986, the company went public.
 Beam and Scrushy became very wealthy.
 Hiding a Shortfall to Appear Profitable
 From 1986-1996, HealthSound grew to be a $3 billion Fortune 500
company.
 Over the next near, the company’s quarterly earnings repeatedly
fell short of Wall Street analysts’ expectations.
 The company continued to falsify earnings reports.
 Beam retired in 1997.
Case Study 1.2: Aaron Beam
and the HealthSouth Fraud (2
of 2)
 Investigation and Outcome
 The FBI began investigating HealthSound in 2003.
 Scrushy was not convicted of wrongdoing in the HealthSound case,
but was later convicted of bribery in an unrelated case and was
sentenced to seven years in prison.
 Scrushy lost a $2.8 billion civil lawsuit brought by HealthSound
shareholders.
 Beam blamed Scrushy for much of what happened at
HealthSound.
Summary: Ethics and Business
 Definition of ethics.
 Definition of business ethics.
 Objections to studying business ethics.
 Moral reasoning.
 Key requirements of ethical behavior.
 Actions and agents.
5. Why ethical problems occur in
business