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Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
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Chapter 7
Business Ethics
Fundamentals
© 2012 South-Western, a part of Cengage Learning
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Learning Outcomes
1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities of
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making ethical judgments.
Explain the conventional approach to business ethics.
Analyze economic, legal, and ethical aspects by using a
Venn Model.
Enumerate and discuss the four important ethics questions.
Identify and explain three models of management ethics.
Describe Kohlberg’s three levels of developing moral
judgment.
Identify and discuss the elements of moral judgment.
© 2012 South-Western, a part of Cengage Learning
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Chapter Outline
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The Public’s Opinion of Business Ethics
Business Ethics: Meaning, Types, Approaches
Ethics, Economics and Law: A Venn Model
Four Important Ethics Questions
Three Models of Management Ethics
Making Moral Management Actionable
Developing Moral Judgment
Elements of Moral Judgment
Summary
Key Terms
Discussion Questions
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Business Ethics
• The public’s interest in business ethics is at
an all-time high, spurred by headlinegrabbing scandals.
• The Enron scandal impacted business to
greatly it is called “The Enron Effect.”
• Business will never be the same.
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Inventory of Ethical Issues in
Business
Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest
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Business Ethics: Meaning, Types,
Approaches
Ethics
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The discipline that deals with moral duty and
obligation.
Moral Conduct
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Relates to principles of right, wrong, and fairness
in behavior.
Business Ethics
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Concerned with morality and fairness in behavior,
actions, and practices that take place within a
business context.
Is the study of practices in organizations and is a
quest to determine whether these practices are
acceptable or not.
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Business Ethics: Meaning, Types,
Approaches (continued)
Descriptive Ethics
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Involves describing, characterizing, and
studying morality.
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Focuses on what is occurring.
Normative Ethics
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Concerned with supplying and justifying a
coherent moral system of thinking and
judging.
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Focuses on what ought or should be occurring.
© 2012 South-Western, a part of Cengage Learning
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Three Approaches to Business
Ethics
Conventional Approach
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Based on how common society today views
business ethics and on common sense.
Principles Approach
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Based upon the use of ethics principles to
justify and direct behavior, actions, and
policies.
Ethical Tests Approach
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Based on short, practical questions to guide
ethical decision making and behavior and
practices.
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Ethics and the Law
• The law and ethics can overlap in many
respects.
• The law is a reflection of what society
thinks are minimal standards of conduct
and behavior.
• Research focuses on two questions:
1. Why do firms do illegal things?
2. What are the consequences of engaging
in illegal behavior?
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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?
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Ethical Relativism
Ethical Relativism
• Picking and choosing which source of
norms one wishes to use based on what
will justify current actions or maximize
freedom.
 A serious danger of the conventional
approach to making ethical judgments.
© 2012 South-Western, a part of Cengage Learning
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Four Important Ethical Questions
1.
What is?
2.
What ought to be?
3.
How do we get from what is to what
ought to be?
4.
What is our motivation in all this?
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Five Levels for Questions
1.
Level of the individual
2.
Level of the organization
3.
Level of the industry or profession
4.
Societal level
5.
Global or international level
© 2012 South-Western, a part of Cengage Learning
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What Is?
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What are your personal ethics?
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What are your organization's ethics?
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What are the ethics practice in your
industry?
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What are society’s ethics?
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What global ethics are in practice today?
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What Ought to Be?
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How ought we treat our aging
employees?
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How safe ought we make this product?
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How clean an environment should we
aim for?
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Should we outsource aspects of
production to China or India?
© 2012 South-Western, a part of Cengage Learning
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Three Models of Management
Ethics
Immoral Management
• An approach devoid of ethical principles and an
active opposition to what is ethical.
• The operating strategy of immoral management is
focused on exploiting opportunities for corporate
or personal gain.
Moral Management
• Conforms to high standards of ethical behavior or
professional standards of conduct.
Amoral Management
• Intentional: Does not consider ethical factors.
• Unintentional: Casual or careless about ethical
factors.
© 2012 South-Western, a part of Cengage Learning
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Characteristics of Immoral
Managers
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Intentionally do wrong
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Self-centered and self-absorbed
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Care only about self or organization’s
profits/success
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Actively oppose what is right, fair, or just
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Exhibit no concern for stakeholders
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An ethics course probably would not help
them
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The “bad guys”
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Characteristics of Moral Managers
• Conform to high level of:
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Ethical or right behavior
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
• The “good guys”
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Habits of Moral Leaders
1. They have a passion to do right.
2. They are morally proactive.
3. They consider all stakeholders.
4. They have a strong ethical character.
5. They have an obsession with fairness.
6. They undertake principled decision
making.
7. They integrate ethics wisdom with
management wisdom.
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Integrity Strategy
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Related to moral management; is characterized
by a conception of ethics as the driving force
of an organization.
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Guiding values and commitments make sense and
are clearly communicated.
Company leaders are personally committed,
credible, and willing to take action on values.
Espoused values are integrated into normal
channels of management decision making.
The organization’s systems support and reinforce
its values.
All managers have the skills, knowledge, and
competencies to make ethically sound decisions
daily.
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Characteristics of Amoral Managers
Intentionally Amoral Managers
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Don’t think ethics and business should “mix.”
Business and ethics exist in separate spheres.
A vanishing breed.
Unintentionally Amoral Managers
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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.
© 2012 South-Western, a part of Cengage Learning
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Hypotheses Regarding Moral
Management Models
Population hypothesis
• The distribution of the three models
approximate a normal curve, with the
amoral group occupying the large middle
part of the curve and the moral and
immoral categories occupying the tails.
Individual hypothesis
• Within the individual manager, these three
models may operate at various times and
under various circumstances.
© 2012 South-Western, a part of Cengage Learning
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Why Managers and Employees
Behave Ethically
1. To avoid some punishment
Most of Us
2. To receive some reward
Many of Us
3. To be responsive to family, friends,
or superiors
4. To be a good citizen
Very Few Of Us
5. To do what is right, pursue some ideal
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External Sources of a Person’s Values
Religious values
Philosophical values
The Web
of Values
Cultural values
Legal values
Professional values
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Internal Sources of a Person’s
Values
Norms prevalent in business include
 Respect for the authority structure
 Loyalty to bosses and the organization
 Conformity to principles and practices
 Performance counts above all else
 Results count above all else
© 2012 South-Western, a part of Cengage Learning
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Key Terms
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Amoral management
Business ethics
Compliance strategy
Conventional
approach to business
ethics
Descriptive ethics
Ethical egoism
Ethical relativism
Ethics
Immoral
management
• Integrity strategy
• Intentional amoral
management
• Kohlberg’s levels of
moral development
• Moral development
• Moral management
• Normative ethics
• Unintentional amoral
management
© 2012 South-Western, a part of Cengage Learning
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