Business Ethics “Doing the Right thing, and Making the Good Life Better”
Overview of Ethics n n n What is Business Ethics? Some Ethical Quotes/Quiz Some moral theories Moral Development Professional Standards/Industry Paradigms Moral Decision Making
n ETHICS QUOTES – which ethical theory might agree? n 1. When I do good, I feel good; when I do bad, I feel bad. That’s my religion. (Abraham Lincoln) n 2. A man does what he must. . in spite of personal consequences, in spite of obstacles and dangers, and pressures. . and that is the basis of all human morality. (JFK) n n 3. If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing. (Henry Kravis) 4. Always do right – this will gratify some and astonish the rest. (Mark Twain) n 5. Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws. (Plato) n n 6. Associate with men of good quality, if you esteem your own reputation; for it is better to be alone than in bad company. (George Washington) 7. To educate a person in mind and not in morals is to educate a menace to society. (Theodore Roosevelt) n 8. A good name is more desirable than great riches; to be esteemed is better than silver or gold. (Pr 22: 1) n 9. Its not enough to be busy– so are the ants! The question is– what are we busy about? (Thoreau) n 10. What does it profit a man to gain the whole world, yet forfeit his soul? (Jesus) n 11. It takes less time to do a thing right than to explain why you did it wrong. (Longfellow) n 12. “Live so that when your children think of fairness and integrity, they think of you. ” (H. J. Brown) n 13. “The most important persuasion tool you have in your entire arsenal is integrity” (Zig Zigler) n 14. Ethics or simple honesty is the building block upon which our whole society is based, and business is a part of our society, and it's integral to the practice of being able to conduct business, that you have a set of honest standards. And it's much easier to do business with someone when you look them in the eye and say, "This is what we're going to do, " and you understand what you each mean, and you can go away and get it done. (Kerry Stokes)
ETHICS n QUIZ
Question 1 1. Which of the following has been found to be a true statement regarding ethics and the insurance industry? n a. ) On average, insurance practitioners are more likely to act unethically in business practices than in purely personal situations. n b. ) More than 50 percent of people in business indicate having observed one or more unethical or illegal acts in the past twelve months. n c. ) Insurance practitioners believe that management’s emphasis on the bottom line is one of the main factors leading to unethical decision-making. n d. ) All of the above are true statements.
Answer n Answer Q 1. (d) All of the above are true statements. (a) is based on research by Eastman, and Eastman 1996; (b) is American Society of CLU and CFC Ethics Officer Association); (c) Cooper and Frank, 1991. People with high ethical values in their personal lives may act unethically in their business practices because of what is expected and rewarded in their work. (Reilly, Kjy 1990)
Question 2 2. A strong organizational culture is one in which there is a high expectation of conformity with the organization’s beliefs, values, and purpose. All of the following are true statements regarding organizational culture EXCEPT: n a. ) In general, members of organizations having strong cultures are more likely act ethically. n b. ) In general, members in organizations with weak cultures are more likely to base their ethical decisions on the norms and values of small groups within the organization. n c. ) In general, members of large organizations feel less responsibility for their actions than those in small organizations. n d. ) In general, higher level employees have less ethical beliefs and their ethical decision-making is less than lower level employees.
Answer n Answer Q 2. (a) A strong culture can lead to more ethical behavior if the culture’s values and purposes are ethical but it can also lead to conformity of unethical behavior. (Diacon & Ennew, 1996); (b) is true (Trevino 1986); (c) is true because responsibility is more diffused in large organizations (Ford & Richardson, 1994); (d) (Ford & Richardson 1994)
Question 3. All of the following are true statements EXCEPT: n a. ) Individuals see themselves as more ethical than their coworkers or supervisors. n b. ) The ethical behavior of supervisors strongly influences the ethical behavior of their subordinates. n c. ) In general, supervisors’ and management’s actions have little influence over individuals’ ethical behavior because individuals form their ethical values outside of the work environment. n d. ) Supervisors who are successful performers have greater influence over their subordinates’ ethical behavior.
Answer n Answer Q 3. (c ) is the only one that is not true. Countless studies show that although some core values may not change, most values and ethical standards of conduct are influenced by supervisors and management actions; (a) is true (Tyson 1992), people judge themselves by their intentions and they judge others by their actions. (Cooper, 1996); (b) Nel & Watson, 1989, Cooper & Frank, 1992)); (d) True, (Javidan, Memmels, Devine & Dastmalchian).
Question 4. Which one of the following is a true statement? n a. ) Most employees report that a company’s ethical position is stated in their training courses. n b. ) The existence of a formal code of ethics is a strong deterrent to unethical behavior. n c. ) The awareness of a formal code of ethics is a strong deterrent to unethical conduct rather than just the mere existence of one. n d. ) The most successful ethical training programs are ones that emphasize how to make ethical decisions rather than setting clear, uncompromising rules.
Answer n n Answer Q 4. (d) As in other training in other aspects, training on how to make decisions is more effective in changing behaviors than training that sets out lists of rules to abide by. (Mahoney, 1997); (a) less than half of employees state that their company’s ethical position is stated in training; (b) The existence of a formal code has no relationship on ethical behavior. (Weaver, Trevino, Cochran, 1999) Enron, for example, had an award-winning 79 page Code of Conduct. (c) Unfortunately, awareness by employees does not affect their behavior either. (Kohut & Corriher, 1994, Vitell, 1997). However, clearly communicated and strongly enforced guidelines do make a difference. (Laczniak & Inderrieden, 1987).
Vocabulary: “Business Ethics” n What is “Business” ? n What is “Ethics” ?
Business is inherently social n Business has its own culture. n n Business Transforms Culture. n n Enron, Paypal, your office/ school Tesco - green commitment Business is about relationships. n Workers, subcontractors, suppliers
Business: Its purpose/goal n Lone Ranger/I am an Island View: The purpose of business is to make me money, and increase stockholder value (Milton Friedman)
Alternate Stakeholder View: n n Business should make money, but it has many stakeholders– groups/individuals who have a stake in what the business does. Owners are not the only one’s with a stake (Freeman). Who else has a stake?
Responsibilities in Business: n n n n To To your employer Customers employees boss/es your community your family your belief system
Your business makes the world Better or Worse for people by: n n The way they community treat customers treat their employees treat their boss/company contribute to the local
The challenge: Balancing Responsibilities
What is ethics?
“Ethics” isn’t “legal” Difference between the Law and Ethics: n n n Some legal issues are neither ethical or unethical. Some ethical issues have no laws to support them eg showing compassion. Law often tries to encourage ethical behavior: n Better to have self-regulation than more gov’t regulations
Ethics and Regulation n Government regulation often is designed to promote ethical behavior: n n n Financial Services Authority (RBS/UK) Federal Trade Commission (USA) Energy Authority (Enron) Competition Commission (UK) Ofcom, Oftel, etc are regulatory bodies (UK)
Federal Sentencing Guidelines n n n n 1. Having Standards 2. Assigned Responsibility - Adequate Resources 3. Due diligence in Hiring 4. Communications and Training 5. Monitoring, Auditing, Reporting 6. Promotion and Enforcement of Ethical Conduct 7. Reasonable Steps to Prevent Misconduct
Company Ethics n n Company Policy often has some basis in the compliance regulations and legal statutes set up by government. But Personal ethics requires personal decision-making, rooted in values.
Many think Ethics is just about what to NOT do: “Don’t do __!!”
But ethics is more than just what not to do n Minimal: What we shouldn’t do n n Better: What we should do (justice) n n Don’t steal, don’t kill, don’t lie Be fair, Be honest, Fulfill duties, work hard Best: What we could do to make things excellent for all of us… n Reduce emissions, improve safety
Business can help create an excellent life (eudaimonia) n Example of this mindset: Midland National Life insurance mission: "To make life better for individuals and families… to afford security, trust, superior value, and peace of mind to those we serve… to offer the best in financial resources and services. “
How does Business make life better? Discuss n n How else can business make life better for the community? What would a. Kant b. Mill c. Aristotle say?
The point is: business can do in society! n Businesses do have an effect on society and culture. Business is not just about making money.
Moral Psychology WHY DO PEOPLE DO WRONG THINGS? Link with the Milgram experiment.
Question: Why do people sometimes drive like idiots?
Question: Why do people forge signatures and documents?
Why do people stretch or edit the truth, or exaggerate?
Moral Development: Why do people do unethical things? n n Why did that person drive me off the road? Why did my student cheat on the exam? Why did people at Enron do unethical things? Why do subcontractors cut corners?
Some reasons people do wrong: n n n n n Ignorant In a hurry Thoughtless Didn’t plan ahead Financial difficulties Pressure from organization Not clear communication from management Lazy Want a quick buck They are a bad /evil /wicked person
More Moral Psychology: WHY DO PEOPLE DO THE RIGHT THINGS?
Kohlberg’s theory of moral development n n n Stage Stage 1: 2: 3: 4: 5: 6: Obedience and Punishment For self-benefit For sake of reputation (good boy) Maintain Social order Contractual-Legalistic orientation Conscience/Principle Orientation
moral dilemma: Condo n n Scott Bennett is the engineer assigned to deal with companies who supply needed parts to the Upscale Company. Larry Newman, sales representative from one of Upscale's regular suppliers, plays in the same golf league as Scott. One evening they go off in the same foursome. Sometime during the round Scott mentions that he is really looking forward to having a holiday in Florida next month. Larry says his uncle owns a condo in Florida that he rents out during the months he and his family are up north. Larry offers to see if the condo is available next month -- assuring Scott that the rental cost would be quite moderate. What should Scott say?
Condo II n n n Larry tells Scott he can rent his uncle's condo for $100 a week. "My uncle, " Larry says, "gets nervous when he rents to total strangers. He likes to have reliable people stay in his condo; the condo is paid for, and my uncle isn't interested in making money on it -- he just wants a little help meeting basic operating expenses and the taxes. " Scott accepts the offer and begins making plans for his vacation. Just before leaving, an Upscale vice president sends out a new policy statement that says, among other things: "Accepting incentives from suppliers is strictly prohibited". What should Scott do?
Kohlberg’s theory of moral development n n n Stage Stage 1: 2: 3: 4: 5: 6: Obedience and Punishment For self-benefit For sake of reputation (good boy) Maintain Social order Contractual-Legalistic orientation Conscience/Principle Orientation
Part 2: Ethical Principles, and how to use them Brief explanation of the 5 classic ethical theories: n n n Egoism: Natural Law Theory Utilitarianism Duty-Based Kantian Ethics Virtue Ethics
Egoism n People should always do what is in their own self-interest. (e. g. do what it takes to get repeat business)
Natural Law Theory n n How do we apply the primary precepts? Is this course of action rational and in line with “doing good and avoiding evil”? Is the end goal a flourishing community as well as a flourishing business? Are anyone’s natural rights violated?
Utilitarian: Outcome-Based Do what benefits the greatest number the most Jump on the grenade if it benefits the most. Do what is right if it will make for a better society in the long run, even if you could have short term maximization right now I can save my client on this insurance premium by under-reporting risks, but in the long run this will cause the insurance company and other clients to be at considerable risk.
We can lose our moral conscience and concern! n “Capacity for the nobler feeling is in most natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favourable to keeping that higher capacity in exercise. ”
John Stuart Mill: n “Men lose their high aspirations as they lose their intellectual tastes, because they have not time or opportunity for indulging them; and they addict themselves to inferior pleasures, not because they deliberately prefer them, but because they are either the only ones to which they have access, or the only ones which they are any longer capable of enjoying. ”
Principle/Duty-Based: n Only act in a way that you could make your act a universal law n n Should I lie? Would I make lying a universal law? No. Then don’t lie! Should I cheat on my taxes? Would I want everyone to do that? No. Then don’t!
Principle of ends n Treat others always as an end, not as a means to an end. n n n Don’t treat checkout person as humanoid ATM Don’t treat other drivers as obstacles in your path Don’t treat customer as a just a means to money
Virtue Ethics and the flourishing life What is the GOOD life, and how do we achieve that? Aim for excellence Moderation/Balance -- Vice Virtue ++Vice (Too little) (just right) (too much) Coward Courage Foolhardy
Being Virtuous: n Does depend on the situation n Does depend on the individual Is something we must constantly strive to keep up, work at n n When to be witty We can lose our touch! It helps to have role models. Alan Sugar? Richard Branson?
Virtues n n n Honesty Integrity Responsibility Respect/Caring Truthfulness Any more?
Guiding Questions to help decide if the situation or decision has ethical dimensions n n Is it legal but unethical? What if everyone behaved like this? Does it involve a core ethical principle such as honesty, integrity, truthfulness, etc. ?
Guiding Questions: Info n Information gathering questions n n Who are the stakeholders and what are their rights? Consider the source, reliability, and accuracy of all relevant information. Who should be involved in this decision? Do I have enough information to make a sound ethical decision? If not, how do I get it?
Guiding Questions: Options n Questions to help identify and evaluate alternatives n n Am I rationalizing to justify what I want to do? Am I using anyone for my own personal gain? (Who will be injured and how) Are there conflicting loyalties to stakeholders? What would result in the long run if everyone did this?
Guiding Questions: Conclusion n Questions that help in reaching a decision n n Could I defend my position before the Board of Directors, the Managing Director, or the media? What would ___________ do? (Fill in the name of the best role model you know. ) Will this seem to be the right decision a year from now? Five years from mow? Do I have the moral courage to take the more ethical course of action? (Am I willing to pay the price for my convictions? )
Summary: What have we covered? n n What is Business Ethics? Some moral theories Moral Development Moral Decision Making
The End
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