Ethics Exam #1 Study Guide- October 2nd
21 Century Risks
o Reputational Risk
Concern for “Triple Bottom Line”
o Two Important Meanings of Risk
A situation is riskier than another when
There is greater expected loss
o Ex. Young male drivers are riskier than middle-aged drivers
There is greater variance (less predictability) of outcomes
o Ex. A bio-tech stock is riskier than a utility stock
o 6 Levels Definitions
Stage 1: “Bad” behavior is that which is punished.
Stage 2: “Good” behavior is that which is concretely rewarded.
Stage 3: “Good” behavior is that which is approved by others; “bad”
behavior is that which is disapproved by others.
Stage 4: “Good” behavior conforms to standards set by social
institutions; transgressions lead to feelings of guilt or dishonor.
Stage 5: “Good” behavior conforms to community standards set
through democratic participation; concern with maintaining self-respect
and the respect of equals.
Stage 6: “Good” behavior is a matter of individual conscience based on
responsibly chosen commitments to ethical principles.
Constructs representing generalized behaviors or states of affairs that are
considered by the individual to be important.
They play a fairly central role in one’s overall psychological makeup
They can affect behavior is a variety of situations
Individuals in the same work unit can have considerably different values
We can only make inferences about people’s values based on their behavior. o Differences in Values?
Pervasive influences of broad forces at a particular time tend to create common
This may contribute to misunderstandings and tension between older
leaders and younger followers
Each generation is molded by distinctive experiences at their critical
Generation gap in basic values
Gen Xers impact leadership:
o Define leadership as removing obstacles and giving followers
what they need
o Believe leaders have to “earn their stripes” rather than advance
o Moral Reasoning
An important consideration is how one thinks about value-laden issues or
Moral reasoning: process leaders use to make decisions about ethical and
Manner by which leaders solve moral problems.
Value differences often result in different judgments regarding ethical and
Kohlberg offers that although the development of moral reasoning is invariant,
not all individuals actually achieve the highest stages.
o Ends-based thinking
Do what’s best for the greatest number of people.
Also known as utilitarianism
o Authentic Leadership
Founded in Greek philosophical notion of “to thine own self be true”
Strong ethical convictions that guide behavior
Not so much avoiding doing what is “wrong” as much as trying to do what is
Has gained momentum recently because of beliefs that
Enhancing self-awareness can help people in organizations find more
meaning and connection at work
Promoting transparency and openness in relationships builds trust and
Fostering more inclusive structures and practices can help build more
positive ethical climates
o In-group favoritism
Doing acts of kindness and favors for those who are like us o Ethical dilemmas often involve a choice between two “rights” rather than right and
o Process focus- how goals are achieved is as important as achievement
Issue 1: Can Capitalism Lead to Human Happiness?
o How free markets impact prices
“As a natural result of free competition in a free market, quality will improve
and prices will decline without limit, thereby raising the real standard of living of
every buyer. To protect themselves in competition, sellers will be forced to
innovate, discover new products and new markets, thereby raising the real
wealth of the society as a whole. Products improve without limit, wealth
increases without limit, and society prospers.” (pg. 2)
o Impact of capitalism on how long workers live and in what conditions
“For the most efficient factory will be the one that hires its workers at lowest
cost, and if all industry is accomplished by essentially unskilled labor, and every
worker can therefore be replaced by any other, there is no reason to pay any
worker beyond the subsistence wage.” (pg.2)
Issues 2: Is Risk the Best Theory for Capitalism?
Johanson and Kwak
o Impact of too much risk
Consequences can harmful for many, not just the risk taker
“nothing ventured, nothing gained”
Higher returns entail higher risk
“Investors were willing to lend money cheaply, and businesses were one of the
major beneficiaries” (pg. 30)
“More companies will end up in bankruptcy as opposed to being rolled up in
larger companies’ consolidation strategies.” (pg. 30)
o Impact of less risk
4:15 Report- summarizing how much firm would lose if tomorrow turned out to
be a bad day.
Value at Risk: “reducing risk to a single number encouraged the belief that it
could be mastered.” (pg. 33)
“This encouraged the misplaced belief that the same central-bank policies that
had reduced the