Ethics is the study of morality. When we are studying morality we are doing ethics. It is the
discipline that deals with good and bad and moral duty and obligation. Can also be regarded as a set
of moral principles.
Morality refers to the standards that an individual or group has about what is right or wrong, good or
Business Ethics is a specialized study of moral right or wrong. It concentrates on moral standards
as they apply to business policies, institutions, and behaviour.
Corporate Social Responsibility refers specifically to a description and moral evaluation of the
impact that an organization has on society.
Society: a community, a nation, or a broad grouping of people having common traditions values
institutions and collective activities and interests.
Environment: often refers to the macro environment, includes the total environment outside the firm,
the total societal context in which the organization resides.
View of the environment by Fahey and Narayanan: 4 segments: social, political, economic and
Values: individual concepts of the relative worth, utility or importance of certain ideas. Values reflect
what the individual considers important in the larger scheme of things. Ones values shape ones
Sources of a manager values that are external to the organization: religious values, philosophical
values, cultural and legal, professional
Sources that are internal: respect for the authority structure, loyalty, conformity, performance, results.
Elements of moral judgement: Powers and Vogel: 6 major elements necessary for making moral judgements:
1. moral imagination 2. Moral identification and Ordering 3. Moral evaluation 4. Tolerance of moral
disagreement and ambiguity 5. Integration of managerial and moral competence 6. A sense of moral
2. Pluralistic Society: Pluralism is a condition in which there is a diffusion of power among the societies many
groups and organizations. A pluralistic society is one in which there is a wide decentralization and diversity of
Virtues of a pluralistic society:
*prevents power from being concentrated in the hands of a few
*maximizes freedom of expression and action and strikes a balance between monism (social organization
into one institution) on the one hand and anarchy on the other.
*allegiance of individuals to groups is dispersed *creates a widely diversified set of loyalties to many organizations and minimizes the danger that a leader of
any one organization will be left uncontrolled.
*provides a built in set of checks and balances.
Maximizes freedom of expression and action
People prefer it
Weakness: diverse institutions pursue their own self interests, result is that there is no central direction to
unify individual pursuits.
Groups tend to overlap which causes confusion as to which intuitions best serves which functions.
Forces conflict onto center stage because of its emphasis on autonomous groups each pursuing its own
3. Our special interest society: we have carried the idea of pluralism to an extreme with tens of thousands of
special interest groups. They have become increasingly activist, intense, diverse and focused on single
issues. These groups often work at cross purposes to each other and with no unified set of goals. This has
made life more complex for major institutions that have to deal with them.
4. Factors have arisen in the social environment that have created an atmosphere in which business criticism
has taken place and flourished. Influenced also by affluence, awareness, education, rising expectations,
entitlement mentality, rights movements, victimization philosophy, which leads to business criticism, which
increases concern for the societal environment and a changed social contract. These are the factors:
Societal beliefs regarding success in business: that the only successful businesses are dishonest
ones. That business ethics is an oxymoron.
Affluence and education: Affluence: refers to the level of wealth, disposable income and standard of
living of society. This contributes to higher expectations of societies institutions.
Awareness through the media: power of tv.straight news and investigative news programs. Drive by
journalism. Prime time television shows. Commercials
Revolution of rising expectations: maybe that each generation ought to have a standard of living
better than the one before them.
A social problem has been described as a gap between societies expectations of social conditions
and the present social conditions.
Entitlement Mentality: the general belief that someone is owed something just because he is a
member of society.
These factors have contributed to the Rights Movement
5. Criticisms of business: use and abuse of power.
Business power refers to the ability or capacity to produce an effect to bring an influence to bear on a
situation or people.
Levels of power: Epstein identified four such levels:
Macro level refers to the corporate or business system, the totality of business organizations. Power here
emanates from sheer size and dominance of the corporate system. Intermediate Level: refers to several firms or a group of corps acting in concert in an effort to produce a
desired effect like raise prices, control prices, dominate purchasers, pass or defeat legislation. Example
airlines, power companies, banks.
Micro Level: single firm
Individual level; refers to the individual corporate leader exerting power. Annita Rodick the body shop.
Spheres of power: arenas in which this power is manifested: Economic, social/cultural, power over the
individual, technological, environmental, political.
You must stipulate which level of power is being referred to and in which sphere power is being employed.
Balance of power and responsibility: when power gets out of balance there is may be increased regulation,
new laws, more criticism, news media, special interest group power. (cigarettes)
Business response: concern and changing social contract. The social contract is a that set of two way
understandings that characterizes the relationship between major institutions. It is partially articulated through
laws and regulations and shared understandings that evolve. These are the mutual expectations regarding
each others roles, responsibilities and ethics.
The unspoken components of the social contract represent what Donaldson and Dunfee refer to as the
normative perspective of the relationship (what ought to be done by each party)
Management Approach: clarifies the nature of the social or ethical issues that affect the organizations and 2)
suggest alternative management responses to these issues in a rational and ethical fashion. Management
must deal with the various stakeholder groups in an ethical fashion and also reconcile the conflicts of interest
that occur between the organization and the stakeholder groups. They have to treat fairly the groups with
which the business interacts and create an organizational climate in which all employees make decisions
with the interests of the public and those in the org in mind.
Slides for Week One:
1. Perspectives on Ethics in Business:
Ethics as a business constraint ethics costs
Ethics as a business advantage ethics pays
Ethics as underpinning of business: business cant take place without a minimal degree of ethics (e.g.,
2. A Brief History of Business Ethics: Stages of Development:
Prior to 1960: Business is amoral
1960-1970: Social issues in business
1970-1985: Rise of business ethics (academia)
1985-1995: Integration of business ethics in firms (codes, training, hotlines)
1995-2000: Internationalization of business ethics
2000+: Corporate scandals and government reaction
3. Setting It Straight: Debunking the Myths
Myth #1: Business ethics is an oxymoron (i.e., a contraction in terms) or can business and ethics coexist? Myth #2: Business ethics is just a fad or the longest running fad in business history?
Myth #3: Business ethics is just personal ethics or can good apples do bad things due to their
organizations reward systems?
4. Costs of Business Ethics Scandals: Fines, Lawsuits, Imprisonment, Investor and Depositor Losses
Bankruptcies, Unemployment, Increased Regulation
5. Why a Manager Should be Concerned with Ethics... It is the right thing to do. It improves the bottom line.
6. Did Ethics Affect Your Decision? Self-interest? (free-rider)
Trust? (uncertainty, risk) Honesty? (vs. bluffing)
Promise-keeping? (vs. need for legal contract) Integrity? (consistency)
Loyalty? (co-workers, company, friends, family) Caring? (avoiding harm or doing good)
7. How Does Ethics Relate to Markets? Choices
(1) Strict Rationality: Best for Individual (Place $100,000 in Private Account)
(2) Enlightened Self-Interest: Best for Society (Place $100,000 in Public Account)
Lessons (1) Are we strictly rational? (2) It is sometimes in your best self-interest not to act in your own
8. 5) How does McCoys parable embody the characteristics of a typical business ethics dilemma?
Ethics versus the law (e.g., Good Samaritan Laws)
Lack of clarity over moral responsibility and leadership
Moral reasoning skills
Causes of unethical decision making (individual and organizational)
Ethical problems are dumped at our feet (little time to react)
9. Ethical dilemmas are ambiguous (e.g., right vs. right or wrong vs. wrong)
Easier to say whats morally right, harder to do (e.g., classroom)
Danger of pursuing super-ordinate goal (e.g., p