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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 8
Personal and
Organizational
Ethics
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Learning Outcomes
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1. Understand the different levels at which business ethics
may be addressed.
2. Differentiate between consequence-based and
duty-based principles of ethics.
3. Enumerate and discuss principles of personal ethical
decision making and ethical tests for screening ethical
decisions.
4. Identify the factors affecting an organizations ethical
culture and provide examples.
5. Describe and explain actions, strategies, or best practices
to improve an organizations ethical climate.
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Chapter Outline
Ethics Issues Arise at Different Levels
Personal and Managerial Ethics
Managing Organizational Ethics
From Moral Decisions to Moral Organizations
Summary
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Organizational Ethics


Ethical decision making occurs daily in
organizations.
Many managers have no training in ethics
or ethical decision making.
Ethics is vital to business success.



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Levels at Which Ethical Issues May
be Addressed
Personal level
Situations faced in our personal lives outside the
context of our employment.
Organizational level
Workplace situations faced by managers and
employees.
Industry or profession level
A manager or organization might experience
business ethics issues at the industry or
professional level.
Societal and global levels
Managers acting in concert through their
companies and industries can bring about
constructive changes.
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Personal and Managerial Ethics
There are three major approaches to
ethical decision making
1. Conventional Approach
Discussed in chapter 7.
2. Principles Approach
Managers desire to make decisions based on more
than is provided by the conventional approach to
ethics.
A principle of business ethics is an ethical concept,
guideline, or rule that assists you in taking the
ethical course.
3. Ethical Tests Approach
Discussed later in this chapter.
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Types of Ethical Principles or
Theories

Teleological theories
Focus on consequences or results.
Deontological theories
Focus on duties.
Aretaic theories
Focus on virtue.



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Principles Approach to Ethics
Major principles of ethics
Utilitarianism
Kants Categorical Imperative
Rights
Justice
Principles of care
Virtue ethics
Servant leadership
Golden Rule



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Utilitarianism

A teleological principle that focuses on acts
that produce the greatest good for the
greatest number.



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Strengths Weaknesses
Forces thinking about the
general welfare of stakeholders
Ignores actions that may be
inherently wrong
Allows personal decisions to fit
into situational complexities
May conflict with the notion of
justice
Difficult to formulate
satisfactory rules for decision
making
Kants Categorical Imperative
A duty-based, deontological, principle.

Formulations:
1. Act only on rules that you would be
willing to see everyone follow.
2. Act to treat humanity in every case as an
end and never as a means.
3. Every rational being is able to regard
oneself as a maker of universal law. We do
not need an external authority to determine
the nature of the moral law.

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Principle of Rights
Moral rights
Rights that we ought to have based on
moral reasoning.
Principle of rights
Focuses on examining and possibly
protecting individual moral or legal rights.
A negative right is the right to be left alone.
A positive right is the right to something.
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Principle of Justice
Involves considering what alternative
promotes fair treatment of people.

Types of justice
Distributive
Compensatory
Procedural
Rawlsian



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Ethical Due Process
Process Fairness
1. Have employees been given input into the
decision process?
2. Do employees believe the decisions were made
and implemented in an appropriate manner?
3. Do managers provide explanations when asked?
Do they treat others respectfully? Do they listen
to comments being made?



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Rawlss Principles of Justice
1. Each person has an equal right to the most
basic liberties compatible with similar
liberties for others.
2. Social and economic inequalities are arranged
so that they are both:
Reasonably expected to be to everyones
advantage, and
Attached to positions and offices open to
all.


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Ethic of Care and Virtue Ethics
Ethic of care/Principle of caring
Traditional ethics focus too much on the
individual self.
Views the individual as relational, not
individualistic similar to stakeholder
theory.
Virtue ethics
Focuses on individuals becoming
imbued with virtues.
Based on Aristotle and Plato.


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Servant Leadership


Servant leadership
Based on the moral principle of serving
others first, such as employees, customers,
and community.



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Characteristics of Servant Leaders
Listening
Empathy
Healing
Persuasion
Awareness
Foresight
Conceptualization
Commitment to the growth of people
Stewardship
Building community



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The Golden Rule
Do unto others as you would have them do
unto you.

The Golden Rule is:
1. Accepted by most people.
2. Easy to understand.
3. A win-win philosophy.
4. A compass when you need direction.




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A Sketch of Ethical Principles
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The Categorical
Imperative
The Means-Ends
Ethic
The Conventionalist
Ethic
The Might-Equals-
Right Ethic
The Disclosure Rule The Organization
Ethic
The Golden Rule The Organization
Ethic
The Hedonistic Ethic The Professional
Ethic
The Intuition Ethic The Proportionality
Principle
The Market Ethic The Revelation Ethic
The Utilitarian Ethic
Ethical Tests Approach
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Test of Ones Best Self
Test of Making Something Public
Test of Ventilation
Test of Common Sense
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
Factors Affecting the Morality of Managers
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Societys Moral Climate
Businesss Moral Climate
Industrys Moral Climate
Individual
Ones Personal
Situation
Superiors
Policies
Peers
Organizations Moral Climate
Factors Affecting the Organizations
Moral Climate

1. Behavior of superiors
2. Ethical practices of ones industry or
profession
3. Behavior of ones peers in the organization
4. Formal organizational policy (or lack
thereof)
5. Personal financial need



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Improving Organizational Ethical
Culture
Most organizations are a mix of
compliance and emphasizing values like
ethics.
Concerns about the compliance
orientation
1. Could undermine the ways of thinking or
habits of mind that are needed in ethics
thinking.
2. Can squeeze out ethics.
3. Managers many not consider tougher issues
that a more ethics-focused approach might
require.


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Improving Ethical Culture
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Top
Management
Leadership
Moral
Management
Ethics Programs
and Officers
Realistic
Objectives
Ethical Decision-
Making Processes
Codes of
Conduct
Effective
Communication
Ethics Training
Corporate
Transparency
Whistle-Blowing
Mechanisms
Ethics Audits and
Risk Assessments
Board of Directors
Oversight
Discipline of
Violators
Pillars of Leadership
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Traits
M
o
r
a
l

P
e
r
s
o
n

M
o
r
a
l

M
a
n
a
g
e
r

Ethical Leadership
Behaviors
Decision
Making
Role
Modeling
Ethics
Communication
Effective Rewards
and Discipline
Effective Communication of Ethics

Requires
Written and verbal communication
Candor
Fidelity
Confidentiality


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Features of Ethics Programs
Written standards of conduct
Ethics training
Mechanisms to seek ethics advice or
information
Methods for reporting misconduct
anonymously
Disciplinary measures for employees who
violate ethical standards
Inclusion of ethical conduct in the
evaluation of employee performance



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Ethics Officers

Are in charge of implementing ethics
initiatives in the organization.
The position may be created in response to
the Federal Sentencing Guidelines, which
reduces penalties to those companies with
ethics programs.
Problem with diminishing organizational
status.


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Ethical Decision-Making Process
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Ethics Check

1. Is it legal?
2. Is it balanced?
3. How will it make me feel about
myself?



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Ethics Quick Test
1. Is the action legal?
2. Does it comply with our values?
3. If you do it, will you feel bad?
4. How will it look in the newspaper?
5. If you know its wrong, dont do it.
6. If youre not sure, ask.
7. Keep asking until you get an answer.



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Sears Ethics Guidelines
1. Is it legal?
2. Is it within Sears shared beliefs and
policies?
3. Is it right/fair/appropriate?
4. Would I want everyone to know about
this?
5. How will I feel about myself?



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Codes of Conduct
A way of establishing standards of
behavior and communicating them to
managers and employees.
The single most important element of an
ethics and compliance program.
A fairly recent phenomenon.
Codes of conduct positively affect
corporate culture.

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Content of Codes of Conduct
Employment practices
Employee, client, and vendor information
Public information/communications
Conflicts of interest
Relationships with vendors
Environmental issues
Ethical management practices
Political involvement


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How Codes of Conduct Influence
Behavior
Codes of conduct act as a
Rule book
Signpost
Mirror
Magnifying glass
Shield
Smoke detector
Fire alarm
Club




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Violators of Ethics Standards

Management must forcefully discipline all
violators of ethical norms and standards.
Many business are unwilling to discipline
violators.



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Ethics Hotlines and Whistle
Blowing

Employees must have outlets to
anonymously report questionable
behaviors.
Hotlines are the most common way to
report corporate fraud.
Can be telephone, web, or email-based.





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Purposes of Ethics Training
1. Learn the fundamentals of business
ethics.
2. Learn to solve ethical dilemmas.
3. Learn to identify causes of unethical
behavior.
4. Learn about common managerial ethical
issues.
5. Learn whistle-blowing criteria and
risks.
6. Learn to develop a code of ethics and
execute an internal ethical audit.


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Ethics Audits and Risk Assessments
Ethics Audits
Intended to carefully review such ethics
initiatives as ethics programs, codes of
conduct, hotlines, and ethics training
programs.
Sustainability Audit
Helps to identify sustainability issues within
an organization.
Fraud Risk Assessment
Review processes that identify and monitor
conditions that may pertain to the companys
exposure to compliance/misconduct risk and
to review methods for dealing with concerns.



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Corporate Transparency
Corporate Transparency
A quality, characteristic, or state in which
activities, processes, practices, and
decisions that take place in companies
become open or visible to the outside
world.
The degree to which an organization:
Provides public access to information.
Accepts responsibility for its actions.
Makes decisions more openly.
Establishes incentives for leaders to uphold
standards.




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Board of Director Leadership and
Oversight
Leadership and oversight of ethical
initiatives by boards is not a given.
The Sarbanes-Oxley Act
Companies are required to protect whistle-
blowers without fear of retaliation.
It is a crime to alter, destroy, conceal,
cover up, or falsify documents to prevent
their use in a federal government lawsuit.




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From Moral Decisions to Moral
Organizations
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Moral Decisions
Moral Managers
Moral Organizations
Key Terms
Aretaic
theories/principles
Categorical imperative
Codes of conduct
Codes of ethics
Compensatory justice
Compliance orientation
Corporate transparency
Deontological
theories/principles
Distributive justice
Ethical due process
Ethics orientation
Ethical tests
Ethic of care
Ethics audits
Ethics officer
Ethics programs
Golden Rule
Legal rights

Moral rights
Negative rights
Opacity
Positive rights
Principle of justice
Principle of rights
Principle of utilitarianism
Procedural justice
Process fairness
Rights
Risk assessments
Servant leadership
Sustainability audit
Teleological
theories/principles
Transparency
Utilitarianism
Virtue ethics
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