Chapter 3

Ethics and Behavior

in Organizations

Introduction
Inventory of Ethical Issues in Business

Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest

Publics Opinion of Business Ethics

Gallup Poll finds that only 17 percent to 20 percent
of the public thought the business ethics of
executives to be very high or high
To understand public sentiment towards business
ethics, ask three questions
Has business ethics really deteriorated?
Are the media reporting ethical problems more
frequently and vigorously?
Are practices that once were socially acceptable no
longer socially acceptable?

Publics Opinion of Business Ethics

Gallup opinion polls about ethical behavior (see
text book Figure 3.1)
Pharmacists ranked highest
Car salespeople ranked lowest
Business executives ranked near the middle
People in the United States do not have a positive
view of ethics and behavior in organizations

Business Ethics: What Does It

Really Mean?
Definitions
Ethics involves a discipline that examines good
or bad practices within the context of a moral
duty
Moral conduct is behavior that is right or wrong
Business ethics include practices and
behaviors that are good or bad

Business Ethics: What Does It

Really Mean?
Two Key Branches of Ethics
Descriptive ethics involves describing,
characterizing and studying morality
What is

Normative ethics involves supplying and

justifying moral systems
What should be

Conventional Approach to Business

Ethics
Conventional approach to business ethics
involves a comparison of a decision or practice
to prevailing societal norms
Pitfall: ethical relativism

Decision or Practice

Prevailing Norms

Sources of Ethical Norms

Fellow Workers

Fellow Workers

Family

Regions of
Country

Profession
The Individual
Conscience

Friends

The Law

Employer

Religious
Beliefs

Society at Large

Ethics and the Law

Law often represents an ethical minimum
Ethics often represents a standard that exceeds
the legal minimum
Frequent Overlap

Ethics

Law

Making Ethical Judgments

Behavior or act
that has been
committed

compared with

Value judgments
and perceptions of
the observer

Prevailing norms
of acceptability

Ethics, Economics, and Law

Four Important Ethical Questions

What is?
What ought to be?
How to we get from what is to what ought to be?
What is our motivation for acting ethically?

3 Models of Management Ethics

Three Types Of Management Ethic

Moral

Amoral

Immoral

Three Models of Management

Morality and Emphasis on CSR

Making Moral Management

Actionable
Important Factors
Senior management
Ethics training
Self-analysis

Developing Moral Judgment

External Sources of a Managers Values

Religious values
Philosophical values
Cultural values
Legal values
Professional values

Developing Moral Judgment

Internal Sources of a Managers Values

Respect for the authority structure

Loyalty
Conformity
Performance
Results

Can Business Ethics Be Taught

And Trained?

Ethic courses should not:

Advocate a set of rules from a single perspective

Not offer only one best solution to specific ethical
problems
Not promise superior or absolute ways of thinking
and behaving in situations

Can Business Ethics Be Taught

And Trained?

Scholars argue that ethical training can add value

to the moral environment of a firm and to
relationships in the workplace by:

Finding a match between employers and

employees values
Handling an unethical directive
Coping with a performance system that
encourages unethical means

Ethics-Moral Disengagement
Social Learning Theory
Moral reasoning translates to moral action through
self regulatory processes
You do things that bring you self-worth
You avoid things that avoid self censure

You have to disengage from your normal internal

self sanctions to commit unethical or deviant
acts

Moral Disengagement
Scoring the questionnaire

Moral justification-A
Euphemistic language-B
Displacement of responsibility-C
Advantageous comparison-D
Diffusion of responsibility-E
Distorting consequences-F
Attribution of blame-G
Dehumanization-H

Chapter 3
Ethics and Behavior
in Organizations

Ethical and
Unethical Behavior
Ethical behavior is good, right, just, honorable,
and praiseworthy
Unethical behavior is wrong, reprehensible, or
fails to meet an obligation
Judgment of behavior is based on a specific
moral philosophy or ethical theory

Ethical and
Unethical Behavior (Cont.)
Nagging issues
Finding a standard of judgment with which all
reasonable people can agree
Defining the meaning of good, bad, right, and
wrong
Add the nasty issue of cross-cultural ethical behavior

Ethical and
Unethical Behavior (Cont.)
Ethical dilemmas

Find 1 cent

Find wallet with $1,000

and no identification.

Find $1

Find wallet with $1,000

and identification.

Legal Versus Ethical Behavior:

The Issue of Lying
Legal
behavior
Testifying under
oath in court.

Ethical
behavior

How does my
hair look?

Lying to a customer
about the safety of
a product.

Lying: deliberate misrepresentation of the truth.

Theories of Ethics
Four major theories of ethics in the Western
world
Utilitarianism: net benefits
Rights: entitlement
Justice: fairness
Egoism: self-interest

Theories of Ethics (Cont.)

Utilitarianism
examine an actions effects to decide whether it is
morally correct
Action is morally right if the total net benefit of the
action exceeds the total net benefit of any other
action
Assumes a person can assess all costs and benefits
of an action

Theories of Ethics (Cont.)

Utilitarianism (cont.)
Assessment of net benefits includes any important
indirect effects
Example: assessing the effects of pollutant
discharge from a factory on the immediate
surrounding environment and those down stream or
down wind from the factory
Two forms: act and rule

Theories of Ethics (Cont.)

Utilitarianism (cont.)
Act utilitarianism asks a person to assess the
effects of all actions
Rejects the view that actions can be classified as
right or wrong in themselves
Example: lying is ethical if it produces more good
than bad

Theories of Ethics (Cont.)

Utilitarianism (cont.)
Rule utilitarianism asks a person to assess actions
according to a set of rules designed to yield the
greatest net benefit to all affected
Compares act to rules
Does not accept an action as right if it maximizes net
benefits only once
Example: lying is always wrong or thou shalt not
lie

Theories of Ethics (Cont.)

Utilitarianism (cont.)
Two main limitations
Hard to use in difficult to quantify situations
Does not include rights and justice

Other ethical theories meet these objections

Theories of Ethics (Cont.)

Rights
Right: a persons just claim or entitlement
Focuses on the persons actions or the actions of
others toward the person
Legal rights: defined by a system of laws
Moral rights: based on ethical standards

Purpose: let a person freely pursue certain actions

without interference from others

Theories of Ethics (Cont.)

Rights (cont.)
Features
Respect the rights of others
Lets people act as equals
Moral justification of a persons action

Examples
Legal right: right to a fair trial in the United States
Moral right: right to due process within an organization

Theories of Ethics (Cont.)

Rights (cont.)
Rejects view of assessing the results of actions
Expresses moral rights from individual's view, not
society's. Does not look to the number of people
who benefit from limiting another person's rights
Example: right to free speech in the United States
stands even if a person expresses a dissenting view

Theories of Ethics (Cont.)

Rights (cont.)
Types of rights
Negative rights: do not interfere with another persons
rights
Positive rights: A person has a duty to help others
pursue their rights
Negative: do not stop a person from whistleblowing
Positive: coworker helps another person blow
the whistle on unethical actions

Theories of Ethics (Cont.)

Justice
Looks at the balance of benefits and burdens
distributed among members of a group
Can result from the application of rules, policies, or
laws that apply to a society or a group
Just results of actions override utilitarian results
Rejects view that an injustice is acceptable if others
benefit the action

Theories of Ethics (Cont.)

Egoism
Self-centered form of ethics
Two forms of ethical egoism: individual and
universal
Individual ethical egoism
Judges actions only by their effects on ones interests
Usually rejected by moral philosophers as a defensible
basis of ethics

Theories of Ethics (Cont.)

Egoism (cont.)
Universal ethical egoism
Can include the interests of others when assessing ones
actions
Still self-centered: pursuing pleasure and avoiding pain
Enlightened self-interest. Considers the interests of
others because the person wants others to do the same
toward him or her

Theories of Ethics (Cont.)

Egoism (cont.)
Objections raised by moral philosophers
Does not resolve conflicts in peoples interests
One party would always have the pursuit of his or her
interests blocked

Theories of Ethics (Cont.)

Questions from the ethical theories
Utilitarianism: does the action yield the greatest
net benefits?
Rights: does the action negatively affect someones
moral rights?
Justice: does the action give a fair distribution of
costs and benefits among those affected?
Egoism: will the action lead to other people
behaving toward me in a way I would like?

International Aspects
of Ethics
Sharp contrasts exist between U.S. attitudes
toward business ethics and those of other
countries
Of the major capitalist nations, the United States
has the highest frequency of reporting ethical
violations, the toughest laws, and the greatest
prevalence of organization codes of ethics

International Aspects
of Ethics (Cont.)
Two ethical views

Cultural
relativism

Multinational
organization

Ethical
realism

International Aspects
of Ethics (Cont.)
Ethical views (cont.)
Cultural relativism
Cultural relativism refers to differences in ethical
values among different cultures
Premise: right and wrong should be decided by
each society's predominant ethical values
Cultural relativists base their argument on three
points

International Aspects
of Ethics (Cont.)
Ethical views (cont.)
Cultural relativism(cont.)
Three points
Moral judgments are statements of feelings and opinions; neither
wrong nor right
Moral judgments are based on local ethical systems; cannot
judge right or wrong across cultures
Prudent approach: do not claim an action is either right or wrong

International Aspects
of Ethics (Cont.)
Ethical views (cont.)
Cultural relativism(cont.)
Managers should behave according to local ethical
systems, even if their behavior violates the ethical
systems of their home country
Many philosophers have rejected cultural relativism's
argument that codes of ethics cannot cross national
boundaries
Agree, however, that countries vary in what they define as
right and wrong

International Aspects
of Ethics (Cont.)
Ethical views (cont.)
Ethical realism
Morality does not apply to international transactions
Because no power rules over international events, people
will not behave morally
Because others will not behave morally, one is not morally
required to behave ethically

See text for a revision to this view of ethical realism

International Aspects
of Ethics (Cont.)
International ethical dilemmas
Goods made in a country with no child labor laws
Goods made in a country with child labor laws that
are not enforced
Changing the behavior of local people
Making small payments that are allowed under the
FCPA