Chapter 5. Business Ethics Essentials

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BUSF-SHU 202

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Jan 13, 2025

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Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.11Business & Society: Ethics, Sustainability, and Stakeholder Management, 11eChapter 5: Business Ethics EssentialsCarroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2Icebreaker: TheranosDivided in small groups, quickly research and then discuss the Theranos case: What ethical violations can you recognize in this case?

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.3Chapter Objectives (1 of 2)By the end of this chapter, you should be able to:1.Describe the public’s opinion of business ethics.2.Define business ethics, explain the conventional approach to business ethics, and identify the sources of ethical norms in individuals.3.Analyze the economic, legal, and ethical aspects of a decision by using a Venn model.4.Identify, explain, and illustrate three models of management ethics.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.4Chapter Objectives (2 of 2)5.In terms of making moral management actionable, describe and discuss Kohlberg’s three levels of moral development and Gilligan’s ethics of care.6.Identify and discuss six major elements of moral judgment. How does Rest’s four component model of ethical decision-making build upon these elements?

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.5Business Ethics Scandals•The public’s interest in business ethics is at an all-time high, spurred by scandals.•Wall Street financial scandals:AIG, Bear Stearns, Lehman Bros, Fannie Mae, Freddie Mac, and Bernie Madoff•Business ethics has both macro and micro effects.•In their 2020 poll, for example, Gallup found that only 17 percent of the public rated the ethics of business executives very high or high.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.6Major Business Ethics ScandalsCompanies ImplicatedLegal/Ethical Charges and AccusationsAirbus of EuropeBribed to secure contracts around worldBoeingFlawed software leading to two major airline crashesPurdue PharmaFelonies selling OxyContin; kickbacks and fraudTheranosFraud and falsification of blood testing machineryFacebookAccused of revenue approaches resulting in privacy lapsesCredit SuisseExecs turned blind eye to banker’s wrongdoing; failing to prevent money launderingHouston AstrosDevised a sign-stealing scheme for decoding opposing catcher’s signsWells FargoSales employees pressured to create fake customer accountsVolkswagenEmissions scandal; illegal pollution control defeat-devices installed on carsWirecardInflated company’s results by booking fake incomeTakataFaulty airbags leading to consumer deaths/recallsPilgrim’s Pride CorporationIndicted for fixing price of chickens sold to restaurants and grocery storesPeanut Corporation of AmericaDeadly salmonella outbreak leading to deaths; fraud

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.8Examples of Ethical Issues Businesses Face TodayStakeholder GroupExamples of Ethical IssuesCustomersProduct safety/healthfulnessAdvertising/marketing honestlyPackaging fairly/accuratelyLabeling accurately/completelyPricing fairly relative to qualityProtecting consumer privacyEmployeesFair compensation practicesFair day’s work and pay; living wageCompliance with employment lawsAvoidance of employment discriminationSafe working conditionsAvoiding employee theft/embezzlementProtecting employees’ privacyDealing with distracted employeesCommunity/EnvironmentEnvironmental protection/sustainabilityAdherence to legal mandatesGood corporate citizenshipPhilanthropy/supporting causesAdapting to foreign culturesAvoidance of briberyShareholdersProtecting shareholders’ interestsFair compensation for executivesQuality boards of directorsProtection of company assetsFair returns on investmentsCommunicating accuratelyTransparency

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.99Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.1Business Ethics: Some Basic Concepts

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.10Business Ethics: Some Basic Concepts(1 of 2)Ethics –are standards of conduct, which originate from some external group or source such as society, in general, or business, in particular.Morals –standards of conduct that originate within the individualBusiness Ethics – •Is concerned with rightness, wrongness, fairness or justice of actions, decisions, policies, and practices that take place within a business context or in the workplace.•Is the study of practices in organizations and is a quest to determine whether these practices are acceptable or not.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.11Business Ethics: Some Basic Concepts(2 of 2)Descriptive Ethics –•Involves describing, characterizing, and studying morality.•Focuses on what is occurring.Normative Ethics –•Focuses on what ought or should be occurring.•Demands a more meaningful moral anchor than just “everyone is doing it.”Normative Ethics is our primary concern in this text.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.15The Danger of Ethical Relativism•A serious danger of using the conventional approach to business ethics is: Ethical Relativism – •One picks and chooses which source of norms one wishes to use based on what will justify current actions or maximize freedom.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.16Ethics 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 of illegal corporate behavior focuses on two questions:1.What leads firms to behave illegally?2.What are the consequences of engaging in illegal behavior?

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.17Discussion Activity 5.1.1Provide a definition of ethical business behavior, explain the components involved in making ethical decisions, and give an example from your personal experience of the sources of ethical norms that affect you while making these determinations.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.1818Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.2Ethics, Economics, and Law – A Venn Model

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.2020Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.3Three Models of Management Ethics

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.23Characteristics of Immoral ManagersThese Managers:•Intentionally do wrong•Are Self-centeredand self-absorbed•Care only about self or organization’s profits or success•Actively oppose what is right, fair, or just•Exhibit no concern for stakeholders•Are the “bad guys”•An ethics course probably would not help them.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.25Characteristics of Moral ManagersThese Managers: •Conform to the highest standards of ethical behavior or professional standards of conduct. •Ethical Leadership is commonplace.•Their goal is to succeed within the confines of sound ethical precepts.•Demonstrate high integrity in thinking, speaking and doing.•Follow both the letter and the spirit of the law.•Possess an acute moral sense and moral maturity.•Moral managers are the“good guys.”

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.26Habits of Moral Leaders•They have a passion to do right.•They are morally proactive.•They consider all stakeholders.•They have a strong ethical character.•They have an obsession with fairness.•They undertake principled decision-making.•They integrate ethics wisdom with management wisdom.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.27Positive Ethical Behaviors of Moral Leaders•Giving proper credit where it is due.•Being straightforward and honest with other employees.•Treating all employees equally.•Being a responsible steward of company assets.•Resisting pressure to act unethically.•Recognizing and rewarding ethical behavior of others.•Talking about the importance of ethics and compliance on a regular basis.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.30Two Hypotheses regarding moral management modelsPopulation 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.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.31Three Models of Management Morality and Emphases on CSRComponents of the CSR DefinitionModels of Management MoralityEconomicResponsibilityLegalResponsibilityEthicalResponsibilityPhilanthropicResponsibilityImmoral managementXXXXAmoral managementXXXXXXXMoral managementXXXXXXXXXXXX

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.32Discussion Activity 5.3.1To demonstrate that you understand the three models of management ethics – moral, immoral, and amoral – give an example from your personal experience of each type. Do you agree that amorality is a serious problem? Why? Explain.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.3333Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.4Developing Moral Judgment

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.37Ethics of Care•Gilligan’s Ethics of Care Alternative to Kohlberg’s Justice & Rights Ethics•Women’s moral priorities:•Relationship maintenance•Hurt avoidance•Moving in an out of three levels:•Self•Establish Connections and Participate•Needs of Others

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.39Sources Internal to the OrganizationNorms 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

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.40Discussion Activity 5.4.1Give examples from your personal experience of Kohlberg’s Levels 1, 2, and 3. If you believe you have ever gotten to Level 3, give an example of what it was.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.41Discussion Activity 5.4.2How does Gilligan’s research about the process of moral development differ from that of Kohlberg’s? Have you seen these differences in your personal experiences? Explain by way of example.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.4242Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.5Elements of Moral Judgment

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.44Elements of Moral Judgment in Amoral and Moral ManagersAmoral ManagersMoral ManagersMoral ImaginationSee a web of competing economic claims as just that and nothing more.Perceive that a web of competing economic claims is simultaneously a web of moral relationships.Are insensitive to and unaware of the hidden dimensions of where people are likely to get hurt.Are sensitive to and hunt out the hidden dimensions of where people are likely to get hurt.Moral Identification and OrderingSee moral claims as squishy and not definite enough to order into hierarchies with other claims.See which moral claims being made are relevant or irrelevant; order moral factors just as economic factors are ordered.Moral EvaluationAre erratic in their application of ethics if it gets applied at all.Are coherent and consistent in their normative reasoning.Tolerance of Moral Disagreement and AmbiguityCite ethical disagreement and ambiguity as reasons for forgetting ethics altogether.Tolerate ethical disagreement and ambiguity while honestly acknowledging that decisions are not precise like mathematics but must finally be made nevertheless.Integration of Managerial and Moral CompetenceSee ethical decisions as isolated and independent of managerial decisions and managerial competence.See every evolving decision as one in which a moral perspective must be integrated with a managerial one.A Sense of Moral ObligationHave no sense of moral obligation and integrity that extends beyond managerial responsibility.Have a sense of moral obligation and integrity that holds together the decision-making process in which human welfare is at stake.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.45Discussion Activity 5.5.1Compare your motivations to behave ethically with those listed in Figure 5-14. Do the reasons given in that figure agree with your personal assessment? Discuss the similarities and differences between Figure 5-14 and your personal assessment.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.4646Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Unit 5.6Rest’s Model for Ethical Decision Making and Behavior

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.47Rest’s Model for Ethical Decision Making and BehaviorA four-component model for ethical decision making and behavior built upon Kohlberg’s ideas.•moral awareness wherein a moral issue must be recognized•making a moral judgment•establishing moral intent, that is, resolving to place moral issues ahead of other concerns•moral action (taking action on the moral concerns)

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.48Discussion Activity 5.6.1From your personal experience, give an example of a situation you have faced that would require one of the six elements of moral judgment. Which of these six elements are most important and why?

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.49Discussion Activity 5.6.2Is everyone capable of recognizing a moral issue in stage one (moral awareness) of Rest’s moral decision-making model? Do you think that people can get “stuck” in a stage, for example, imparting moral judgment but incapable of thinking with moral intent?

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.50Summary (1 of 2)•Describe the public’s opinion of business ethics.•Define business ethics, explain the conventional approach to business ethics, and identify the sources of ethical norms in individuals.•Analyze the economic, legal, and ethical aspects of a decision by using a Venn model.•Identify, explain, and illustrate three models of management ethics.

Carroll/Brown, Business & Society: Ethics, Sustainability & Stakeholder Management; 11th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.51Summary (2 of 2)•Describe and discuss Kohlberg’s three levels of moral development and Gilligan’s ethics of care in terms of making moral management actionable, .•Identify and discuss six major elements of moral judgment and explain how Rest’s four component model of ethical decision-making build upon these elements.