Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Ethics Textbook
CHAPTER1 Introducing Business Ethics
Business Ethics- the study of business situations, activities, and decisions where issues of
right and wrong are addressed
...

Morality is concerned with the norms, values, and beliefs embedded in social processes
which define right and wrong for an individual or a community
...
Ethical
theories are the codifications of these rules and principles
...
Business has huge power within society
...

2
...
In
terms of producing the products and services, providing employment, paying taxes,
acting as an engine for economic development or solving complex social problems,
business can be tremendous source for good
...
Business malpractice has the potential to inflict enormous harm on individuals,
communities, and the environment
...

4
...
It is critical to understand these challenges
and to develop responses to them that address the demands of stakeholders but
also enable firms to perform their economic role effectively
...
Employees face significant pressure to compromise ethical standards
...

6
...
Only 18% of the general population trusts business
leaders and just 19% trust them to make ethical decisions
...


1
...
In philosophy, ethics has mostly been concerned with
decisions made by individuals in their relationships with other individuals and in
managing societal norms
...

2
...
Organisations make decisions and it is often difficult to
figure out if there is a “who” responsible
...


1

Race to the bottom- a process whereby multinationals pitch developing countries against
each other by allocating foreign direct investment to countries that can offer them the most
favourable conditions in terms of low tax rates, low levels of environmental regulation, and
restricted workers’ rights
...

–‘deterritorialization
1) Countries of EU have been in various stages of crisis
...

2) Global climate change has gradually been acknowledged as a critical problem to
address across the world
...

3) We all are affected by terrorism (e
...
going through security checks in airports)
Globalization has led to a situation where events, people or ideas from faraway
places can have a very palpable effect on people in otherwise unconnected locations
and situations
...
Modern communication technologies (telephone, internet) contact
people throughout the globe
...

2 Political
...
(Within 25 years the iron curtain fell and EU was created) National
borders have been eroded
...
For example, attitudes to racial and
gender diversity in North America may differ significantly to those in Middle Eastern
countries
...
Also, in eroding the divisions of geographical distances, globalization reveals
economic, political, and cultural differences and confronts people with them
...
As soon as
2

a company leaves its home territory and moves part of its production chain to, for
example, an emerging economy, the legal framework becomes very different
...
E
...

3)Accountability issues:
The more economic activities become global, the less governments can control
them, and the less they are open to democratic control by the people affected by
them
...
Hence, if there are demands for solving ethical questions, it
would be the individual who is usually expected to be responsible for making right
choices
...
However, the identification of the corporation as the key actor
in North America also means that corporate misconduct tends to face greater
enforcement and hardest penalties
...

Key issues: Privacy, workers’ rights, salary issues
...

Stakeholder approach: Corporations are big
...

Actors: Government and corporations
...

Ethical guidelines: Managerial discretion, giving rise to a more organic and flexible
approach to ethical decision-making that places considerable emphasis on personal
virtues and collective responsibility and relationships
...

Stakeholder approach: Interests of shareholders and employees are often promoted
through cultural norms of trust and implicit duties, rather than formal governance
mechanisms

Europe: It is not the individual business person, nor even the single company, that
is primarily expected to be responsible for solving ethical dilemmas in business
...

Actors: Trade unions, governments and corporate associations
...

Ethical guidelines: Codified in the negotiated legal framework of business
...

Stakeholder approach: Multiple stakeholders as the focus of corporate activity
...

Comparative analysis of business ethics- Understanding the differences in cultural
norms and moral values between different countries and regions is an important skill
in business ethics
...

Sources of difference between different regions globally
...
The influence of the Catholic and Lutheran Protestant religions in
Europe led to a collective approach to organizing economic life, whereas the
individual focus of the Calvinist-Protestant religion in the US led to the rise of a
distinctly different capitalist economic system
...
The Muslim world is
characterized by a number of ethical principles, of which justice/fairness,
trusteeship and integrity can be considered core
...
In Europe there was a need to rebuild institutions after the Second
World War and in the aftermath of economic and political restricting in Eastern
Europe
...

Sustainability
...

Waste disposal and management as a result of excessive product packaging and the
dominance of our “throwaway culture”
...

Erosion of local cultures and environments due to the influx of mass tourism in
places as diverse as Thai fishing villages, Swiss alpine communities, or ancient Roman
monuments
...

The triple bottom line

The triple bottom line is a term coined by the sustainability thought leader John
Elkington
...


5

1) Environmental perspectives
...
All bio systems are regarded
as having finite resources and finite capacity, and hence sustainable human
activity must operate at a level that doesn’t threaten the health of those
systems
...
More fundamentally it rises the problem of economic growth itself
...
Emerged from economic growth models that assessed
the limits imposed by the carrying capacity of the earth
...
This includes a focus on
strategies that lead to a long-term rise in share price, revenues, and market
share rather than short-term “explosions” of profits at the expense of long-term
viability
...

3) Social perspectives
...
Currently around 80% of the
world’s GDP is enjoyed by 1 million people living in the developed world while
the remaining 20% is shared by 6 billion people living in the developing
countries
...

•

•

Corporate Social Responsibility (CSR)- “… the economic, legal, ethical and
discretionary expectations that society has of organizations”
...
It
recognizes social ‘cost’ of business activity and ethical behavior
...
Consumption of local produce in season will reduce
environmental cost of transport
...
Independent from those who
work in them, manage them, or receive products or services from them
...
Since corporations
are set up by individual human beings, it is those human beings who have moral
responsibility for the actions of the corporation
...
As long
as a corporation abides by the legal framework society has set up for business, the
only responsibility of the managers of the corporation is to make profit
...
Managers shouldn’t and can’t decide what is in society’s best
interests
...
The strongest case for assigning responsibility to a corporation comes from
legal perspective because corporations have a distinct legal identity
...

Agency
...
The crucial point is that corporations have an
organized framework of decision-making that establishes an explicit or implicit purpose for
these decisions
...
These values and beliefs are widely believed to be a
strong influence on the individual’s ethical decision-making and behavior
...
Corporations present themselves and interact with customers and other
stakeholders as if they were distinct persons
...

Corporations do indeed have some level of moral responsibility that is more than the
responsibility of the individuals constituting the corporation
...

Enhance (long-term) revenues
...
Similarly, employees might

7

be more attracted to, and committed to, corporations perceived as being socially
responsible, giving such companies more effective workforces
...
CSR can reduce costs as it helps in saving energy, reducing waste and cutting
out inefficiencies
...
Voluntarily committing to social actions and programmes
may forestall legislation and ensure greater corporate independence from government
...
A considerable driver for CSR in resource-based
industries is the necessity for gaining and maintaining the consent of local communities,
employees, and governments
...
Making a positive contribution to society might be regarded as a
long-term investment in a safer, better-educated and more equitable community, which
subsequently benefits the corporation by creating an improved and stable competitive
context in which to do business
...

The externalities argument
...

Corporations create a variety of externalities of one sort or the other
...

The power argument
...
Some refer to this
as a Spiderman maxim: “with great power comes great responsibility”
...
Corporations rely on the contribution of a much wider set of
constituencies, or stakeholders in society (consumers, suppliers, local communities), rather
than just shareholders, and hence have a duty to take into account the interests and goals
of these stakeholders as well as those of shareholders
...

CSR- the attempt by companies to meet the economic, legal, ethical, and philanthropic
demands of a given society at a particular point in time
...
Corporations have shareholders who demand a reasonable return
on their investments, they have employees who want good jobs, and they have customers
who want their products to satisfy their needs
...

Legal responsibility
...
The satisfaction of legal responsibilities is
required of all corporations seeking to be socially responsible
...
These responsibilities oblige corporations to do what is right, just, and
fair even when they are not compelled to do so by the legal framework
...

Philanthropic responsibility
...
Philanthropic responsibilities are merely desired of
corporations without expected or required, making them “less important than the other 3
categories”
...

The US ends to leave more discretion to companies over their social responsibilities
...
Other countries have operated more of an implicit CSR model that sees social
responsibilities of business tightly embedded in the legal and institutional framework of
society
...
The dominant model
of capitalism in much of Europe and Asia has traditionally been somewhat different
...
g
...

The element of legal responsibility is often regarded as the basis of every other social
responsibility in Europe, particularly given the prominent role of the state in regulating
corporate practice
...
In
many developing countries with weak or corrupt governments, compliance at the legal level
is often not a very reliable standard of responsible behavior
...

Europeans tend to exhibit greater mistrust in modern corporations than North Americans
do, while people in developing countries have far greater levels of trust in business
...
In
the developing world in general ethical expectations are less prevalent compared to the
expectation that corporations assume their economic and philanthropic responsibilities
...
In Europe income and corporate taxes are higher than in the US and funding
of these activities is more an expectation directed towards governments
...

Company generates profits without too much consideration for wider society expectations
...
CSR for these companies is mostly
about philanthropy and has very little to do with the other, lower levels of the pyramid
...

Contemporary CSR- companies see responsible behavior as an opportunity to generate
profits while at the same time living up to expectations of society
...

Basic CSR Rules for Everyone: The Global Compact
Human Rights
Principle 1: Businesses should support and respect the protection of internationally
proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses
...

Environment
Principle 7: Businesses should support a precautionary approach to environmental
challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly
technologies
...

Outcomes of CSR: corporate social performance
Corporate Social Performance can be observed as the principles of CSR, the process of social
responsiveness and the outcomes of corporate behavior
...
For
example, most major firms now explicitly include social objectives in their mission
statements and other corporate policies
...
For example, many firms have
implemented programmes to manage their environmental impacts, based around
environmental management systems
...
Policies aimed at
benefiting local schools can examine literacy rates and exam grades; environmental
policies can be evaluated with pollution data, etc
...

The principle of corporate rights demands that the corporation has the obligation not to
violate the rights of others
...

Why stakeholders matter
...
An increasingly dense network of laws and regulations enforced by society,
which make it simply a matter of fact that a large spectrum of different stakeholders have
certain rights and claims on the corporation
...
An important aspect is the agency problem: shareholders are
seen as the owners of the corporation, and consequently managers have their dominant
obligation to them
...

They buy shares for speculative reasons
...

The vision of stakeholder democracy reads as something of a blueprint for the German
model of industrial relations: at least one-third of the members on the supervisory board of

11

large public shareholder-owned corporations have to be representatives of the employees –
and in some industries they even have up to 50% of the votes
...
These are networks of banks, manufacturing companies, suppliers, and service
providers, which reflects a view of the firm where suppliers, creditors, and customers
represent the most important stakeholders
...
This is
reflected in the stronger attention to co-operation in Scandinavian business, such as
through participative management, employee involvement, and consensus building
...

Forms of stakeholder theory
...

Descriptive stakeholder theory- this is theory that attempts to ascertain whether (and how)
corporations actually do take into account stakeholder interests
...

Corporate citizenship- the firm as a political actor
...
Three main areas where this has happened:
Governments retreating from catering to social needs
...
was privatized
and now are in hands of private companies
...
have a somewhat more complex social responsibility
...
In less-developed countries,
business often faces governments that lack the resources to cater effectively for basic social
needs
...

Governments can only address social problems within their reach
...
On the contrary, these spaces are often influenced and governed by
businesses
...


12

The concept of corporate citizenship(CC)
...
2) Good neighborly behavior to a responsible role of business in
society
...

Liberal citizenship comprises three different rights:
Social rights- these provide the individual with the freedom to participate in society, such as
the right to education, health care, or various aspects of welfare
...

Civil rights- these provide freedom from abuses and interference by 3d parties; among the
most important are the rights to own property, to engage in “free” markets, or exercise
freedom of speech
...

Political rights- these include the right to vote or the right to hold office and, generally
speaking, enable the individual to participate in the process of governance beyond the
sphere of his or her own privacy
...
Corporations enter the
arena of citizenship at the point where traditional governmental actors fail to be the only
counterpart of citizenship
...
Similarly, in developing countries
where governments simply cannot afford a welfare state, the task of improving working
conditions etc
...

Civil rights
...
Corporations can sometime play a crucial
role in either discouraging or encouraging governments to live up to their responsibility in
this arena of citizenship or directly protecting of infringing people’s civil rights
...

Political rights
...
Hence, given the
emerging role for corporations in the administrative of civil, social, and political rights, the
extended view suggests that corporate citizenship is essentially about how corporations
govern the rights of individual citizens
...


13

These rights are governed by the corporation in different ways
...

Implications of CC: corporate accountability and transparency
Corporate accountability- a concept that refers to whether a corporation is answerable in
some way for the consequences of its actions
...
Some see it as a given that corporate managers are only accountable to their
shareholders, provided they comply with the laws of the countries in which they do
business
...

However, there are also good arguments for the view that since corporations now shape
and influence so much of public and private life in modern societies, in effect they are
already de facto political actors, so they have to become more accountable to society
...
Consumption choices
are to some extent purchase votes in the social control of corporations
...
Consumers are just one of the
multiple stakeholders that corporations might be expected to be accountable to
...
The term usually applied to this is
corporate transparency
...

According to Schnakenberg and Tomlinson the quality of corporate transparency depends
on 3 elements:
Disclosure – whether relevant information is made available in a timely and accessible
manner
...

Accuracy- whether the disclosed information is correct and reliable
...


14

Assessing CC(Corporate Citizenship) as a framework for business ethics
...

By providing us with a way of understanding business in relation to common rights of
citizenship across cultures, CC in this sense also helps us to better understand some
of the challenges presented by the context of globalization
...

Although the notion of CSR has been widely adopted all over the world, the
extended view of CC provides us with a more critical perspective on the social role of
business
...

The role of ethical theory
...
On one side of the spectrum would be a position of ethical absolutism,
which claims that there are eternal, universally applicable moral principles
...

Ethical relativism
...
There are no universal
rights and wrongs that can be rationally determined – it simply depends on the person
making the decision and the culture in which they are located
...

Ethical pluralism: accepts different moral convictions and backgrounds, while at the same
time suggesting that a consensus on basic principles and rules in a certain social context can,
and should, be reached
Morality- 1) foremost social phenomenon 2) is about harm and benefit
Normative ethical theories: International origins and differences
Individual VS Institutional Morality
...


15

Questioning VS accepting capitalism
...
In Europe, relevant parts of
business ethics focus on questioning the ethical justification of capitalism
...
Europe is characterized by a strong pluralism of
moral convictions and values
...
In the US judging these issues do not seem
to take such a dominant position: apart from a section on normative theories in
business, there is the question of which moral values are appropriate as a given and
chiefly focus on the application of morality to business situations
...
European and North American approaches are mainly based
on philosophical arguments
...

Source of rules and principles – Religions typically invoke a deity or an organized system of
belief as the source of determining right and wrong
...
Philosophical theories, on the other hand, are based on the belief that
human reason should drive ethics
...

Consequences of morality and immorality – Acting ethically according to normative
philosophical theory is primarily considered a matter of creating of creating tangible social
benefits and harms for others
...

Followers of Judaism tend to exhibit some distinctive business practices that can be directly
traced back to basic tenets of their faith
...
In Northern Europe and North America it has been found to give rise to
self-discipline, hard work and honesty
...

As these theories have a well-defined rule of decision, the main advantage of these theories
is the fact that they normally provide us with a fairly unequivocal solution to ethical
problems
...
The first one is about theories based on
the moral judgment on outcomes of a certain action
...
The moral judgment in these consequentialist
theories is thus based on the intended outcomes, the aims, or the goals of a certain action
...

Non-consequentialist theories base moral judgments on the underlying principles of a
decision-maker’s motivation
...
These
approaches are quite closely linked to Judeo- Christian thinking and start from reasoning
about the individual’s rights and duties
...


CONSEQUETIALIST THEORIES
There are 2 main theories: Egoism, Utilitarianism
...
However,
egoism focuses on the outcome for the decision- maker, utilitarianism focuses on
the wider social outcomes within a community
...

The justification for egoism lies in the underlying concept of humans: as we have
only limited insight into the consequences of our actions, the only suitable strategy
to achieve a good life is to pursue our own desires or interests
...
This argument may thus be
17

summarized as saying that one is likely to find a moral outcome as the end-product
of a system based on free competition and good information
...

Utilitarianism
Utilitarianism- a theory which states that an action is morally right if it results in the
greatest amount of good for the greatest amount of people affected by the action
...
This is the
ultimate consequentialist principle as it focuses solely on the consequentialist
principle as it focuses solely on the consequences of an action, weighs good
outcomes against bad outcomes, and encourages the action that results in the
greatest amount of good for everyone involved
...

Utilitarianism has been very powerful since it puts at the center of the moral
decision a variable that is very commonly used in economics as a parameter that
measures the economic value of actions: “utility”
...

Core problems with utilitarianism:
Subjectivity
...

Problems of quantification
...

Distribution of utility
...

Act utilitarianism looks to single actions and bases the moral judgment on the
amount of pleasure and the amount of pain the single action causes
...

Non-consequentialist theories
The two main types are: Ethics of duties and Ethics of rights and justice
...

Ethics of duties
...

Kant argued that morality and decisions about right and wrong were not dependent
on a particular situation, let alone on the consequences of one’s action
...
Hence,
humans could therefore also be regarded as independent moral actors who made
their own rational decisions regarding right and wrong
...
By this he meant that this theoretical
framework should be applied to every moral issue regardless of who is involved, who
profits, and who is harmed by the principles once they have been applied in specific
situations
...
An action can only be regarded as right if the rule guiding that behavior
should be followed consistently be everyone in all cases, without contradiction
...

Human dignity
...
Humans deserve respect as
autonomous, rational actors, and this essential human dignity should never be
ignored
...

Universality
...

They have to be acceptable to every rational human being, not because they have
been told to accept them but because they are rationally acceptable
...

Evan and Freeman suggest that employees, local communities, or suppliers should
be treated not only as means, but also as constituencies with goals and priorities of
their own
...

The problems with ethics of duty:

19

Undervaluing outcomes
...
Although Kant would argue that you can consider
consequences providing you would agree that everyone should do so when faced
with similar situations, it gives you no real way of assessing these outcomes, and
they do not form a fundamental part of the theory itself
...
Specific formulations such as Kant’s categorical imperative can be quite
complicated to apply
...

Optimism
...
In contrast, the strength of egoism is that it is a concept of humans that is
generally quite well confirmed by the conventional pattern of business behavior
...
Most of people now talk of
human rights, rather than natural rights
...

This link to corresponding duties makes the theory of rights similar to Kant’s
approach
...
Rather, the notion of
rights is based on a certain axiomatic claim about human nature that rests mostly on
various philosophical approaches of the Enlightenment, often backed up by certain
religious views, such as the approach of Catholic social thought
...

Ethical theories based on rights are very powerful because of their widely
acknowledged basis in fundamental human entitlements
...
Fairness is determined according to whether everyone has
been free to acquire rewards for their efforts
...

Fair outcomes
...
This is
commonly referred to as distributive justice
...

The non-egalitarian approach claims that justice in economic systems is ultimately a
product of the fair process of free markets
...

2) Social and economic inequalities are arranged so that they are both:
To the greatest benefit of the least advantaged; and
Attached to offices and positions open to all under conditions of fair equality
of opportunity
...
Traditional ethical theories are too theoretical and impractical for the
pragmatic day-to-day concerns of managers
...

Too reductionist
...

Too objective and elitist
...

Too impersonal
...

Too rational and codified
...

Too imperialist
...

Alternative perspectives on ethical theories
...
Four main contemporary ethical theories:
Ethical approaches on character integrity
Ethical approaches based on relationships and responsibility

21

Ethical approaches based on procedures of norm generation
Ethical approaches based on empathy and moral impulse

Ethical approaches based on character and integrity
Rather than checking every single action according to its outcomes or its underlying
principles, these approaches look to the character or integrity of the decision-maker
...

Virtues can be differentiated into intellectual virtues-“wisdom” being the most prominent
one – and moral virtues, which comprise a long list of possible characteristics such as
honesty, courage, friendship, mercy, loyalty etc
...

Ethical approaches based on relationships and responsibility
...

Feminist ethics- an approach that prioritizes empathy, harmonious and healthy social
relationships, care for one another, and avoidance of harm above abstract moral principles
...
The main goal is to avoid harm and maintain
healthy relationships
...
Feminist perspectives put an emphasis on the fact that ethical decisions are
taken in a specific context of personal human interrelations
...

Responsibility
...
Feminist perspectives suggest an active involvement in and
assumption of responsibilities for the ethical implications of business activities
...
Highlight the fact that in decision-making, including ethical decisions, human
beings are intricately determined by past experiences
...

Ethical approaches based on procedures of norm generation

22

The best-known approach to norm generation in business ethics is that of discourse ethics
...

The philosophical underpinning of discourse ethics is the argument that norms ultimately
cannot be justified by rational arguments, but that they have to be generated and applied to
solve ethical conflicts on a day-to-day basis
...
Disclosure ethics assumes that ethical business should be
rooted in stakeholder dialogue based on equal participation and conducted without
domination or coercion by any party
...

Ethical approaches based on empathy and moral impulse
...
It encourages one to question everyday practices
and rules, and to listen to one’s emotions, inner convictions, and gut feelings about what is
right and wrong
...
As morality is an inner conviction of individual actors, there is no
separation between the private and professional realm
...

Practices rather than principles
...

Think local, act local
...

Rather than finding one principle for multiple situations, business ethics focuses on deciding
one issue after another
Preliminary character
...
Thy know that ethical decisions are
subject to non-rational processes, and thus less controllable and predictable
...

The decision is likely to have significant effects on others
...
A moral decision requires that we have a choice
The decision is perceived as ethically relevant by one or more parties
...

The different stages in decision-making that people go through in responding
to an ethics problem in a business context
...

Stages in ethical decision-making
1
2
3
4

Recognize a moral issue
Make some kind of moral judgment about that issue
Establish an intention to act upon that judgment
Act according to their intentions

Modelling the ethical decision-making process- being able to understand and apply the
ethical decision-making model helps you to identify the relevant stages and influences
involved in ethical and unethical decisions
...
The role of normative theory in these stages of ethical
decision-making is primarily in relation to moral judgment
...

Commercial managers tend to rely primarily on consequentialist thinking
...

Individual factors
...
These include factors that are given by birth (age, gender) and
those acquired by experience and socialization (education, personality, etc)
...
Features of the context that influence whether the individual will
make an ethical or an unethical decision
...

International perspectives on ethical decision-making
...

24

Zigmunt Bauman (1991)- the Polish sociologist
...
Rational organizations require loyalty, discipline, and
obedience, all of which, stifle the personal and emotional aspects that are crucial for a sense
of morality to exist
...
Business ethics researchers tend to focus on individual-level differences
...

The literature includes several models of ethical decision making by individuals (Jones, 1991;
Rest, 1986; Trevino, 1986)
...
Rest (1986) and Jones (1991) both say that this relationship is mediated by moral
intention
...
Trevino (1986) argues that the reasoning– behavior relationship is moderated
by individual and situational factors
...

In Treviño’s model, “ethical dilemmas are evaluated by individuals using criteria provided by
both the person (personality attributes) and the situation (organization culture, job
characteristics, and work context)
...
, 1997), is an additional criterion that informs the decisionmaking process because an individual’s values are shaped by the values of his or her cultural
group
...

INDIVIDUAL INFLUENCES ON ETHICAL DECISION-MAKING
AGE AND GENEDER
Some studies concluded that women are more ethical than man, while other studies
demonstrated that men were more consistent in their ethical decision-making or were
stricter when making ethical judgments
...

Empirical tests have tended to report mixed results, with no clear picture emerging on the
influence of age on ethical beliefs and action
...

NATIONAL AND CULTURAL CHARACTERISTICS
“Culture is
...
”

25

Main features of culture:
- Culture is shared
- Culture is intangible
- Culture is confirmed by others
People from different cultural backgrounds are likely to have different beliefs about right
and wrong, different values, etc
...
Research has suggested that nationality can have a significant effect on
ethical beliefs as well as views of what is deemed an acceptable approach to certain
business issues
...
It is based upon
a study of 116,000 IBM employees across 40 countries (1980) in IBM divisions throughout
the world
...
Individualism/ collectivism
...

b
...
The extent to which the unequal distribution of hierarchical power
and status is accepted and respected
...
Uncertainty avoidance
...

d
...
An emphasis is placed on valuing money and
things(masculinity) versus valuing people and relationships (femininity)
...
Long-term/ short-term orientation
...

f
...
Measures the degree to which societies permit or suppress gratification
of basic and natural human drives related to enjoying life and having fun
...
While the relationships between ethical decision-making and employment
experience and education still remain somewhat unclear, some definite differences
between those with different educational and professional experience seem to be present
...
The two most prominent
psychological factors: cognitive moral development and locus of control
...

Cognitive moral development- a theory explaining the different levels of moral reasoning
that an individual can apply to ethical issues and problems, depending on their cognitive
capacity
...
He suggested that three broad levels of moral development could be
discerned, namely:
Level 1
...

Level 2
...

Level 3
...

Level

Stage
1

I

3
Conventional
4

Illustration
Whilst this type of moral reasoning is usually
associated with small children, we can also see that
businesspeople frequently make unethical decisions
because they think their company would either
reward it or let it go unpunished (see Gellerman
1986)
...


An employee might cover for the absence of a coworker so that their own absences might
subsequently be covered for in return – a “you
scratch my back, I’ll scratch yours” reciprocity
(Treviño and Nelson 1999)
...


Individuals’ consideration of the
expectations of others broadens to
social accord more generally, rather
than just the specific people around
them
...


Obedience and
punishment

Preconventional
2

II

Explanation
Individuals define right and wrong
according to expected rewards and
punishments from authority figures

Social accord
and system
maintenance

Level

Stage

Explanation

Illustration

5

Individuals go beyond identifying
with others’ expectations, and
assesses right and wrong
according to the upholding of
basic rights, values and contracts
of society
...


6

III

Social
contract
and
individual
rights

Universal
ethical
principles

Individuals will make decisions
autonomously based on selfchosen universal ethical
principles, such as justice,
equality, and rights, which they
believe everyone should follow
...


Postconventional

Kohlberg identified two specific stages within each of the three levels, giving six stages of
moral development altogether
...
Kohlberg argued that the higher the stage of moral reasoning, the more
“ethical” the decision
...
The theory was gender biased due to its emphasis on the abstract principles
esteemed by Kohlberg and his male subjects
...
Kohlberg has interjected his own value judgments regarding the
“most ethical” way of reasoning into what is essentially supposed to be a descriptive theory
of how people actually think
...
We do not always use the same reasoning when we are at work as we
do at home or on the sports field
...

2
...

4
...

Partial geographic coverage – only a portion of the world’s cultures and countries
...

Attitudinal rather than behavioral measures, with no connection between employee
attitudes and employee behaviors
...
Ecological fallacy, national level data generalized into individual behavior
...
I-C not a neatly defined continuum
...

Someone with a high internal locus of control believes that the events in their life can be
shaped by their own efforts, whereas someone with a high external locus of control believes
that events tend to be the result of the actions of others, or luck, or fate
...

Values are an important aspect of ethical decision-making, and corporations are
increasingly recognizing that they cannot simply ignore their employees’ personal values an
tackling ethical problems in their business
...

The most common meaning refers to integrity as consistency
...


28

Whistleblowing- intentional acts by employees to expose, either internally or externally,
perceived ethical or legal violations by their organization
...

MORAL IMAGINATION
Moral imagination is the creativity with which an individual is able to reflect about an ethical
dilemma
...

Cultivating moral imagination- This is a key skill as it enables you to think “outside the box”
in relation to ethical problems and provides a richer choice of moral perspectives, options,
and outcomes
...

SITUATIONAL INFLUENCES ON DECISION-MAKING
Issue-related factors- differences in the importance we attach to ethical issues
...

ISSUE-RELATED FACTORS
Issue-related factors have been shown to influence both whether an individual actually
recognizes the moral nature of a problem in the first place (e
...
moral recognition stage)
and also the way that people actually think about and act upon the problem ( the
subsequent stages in the ethical decision-making process)
...
The expected sum of harms (or benefits) for those
impacted by the problem or action
...

2) Social consensus
...

Moral intensity is likely to increase when it is certain that an act will be deemed
unethical by others
...
Refers to the possibility that the harms (or benefits) are
actually going to happen
...
Concerned with the speed with which the consequences are
likely to occur
...

5) Proximity
...

6) Concentration of effect
...

MORAL FRAMING
Moral framing- the use of language to expose or mask the ethical nature of certain
behaviours or decisions
...

The most important aspect of moral framing is the language – whether negative terms
such as stealing or cheating, or positive terms fairness or honesty- is likely to prompt us
to think about morality because the words are already associated with cognitive
categories that consist of moral content
...

Efficiency- managers feel that moral talk clouds issues, making decision-making more
difficult, time consuming, and inflexible
...

Moral framing can occur after a decision has been made or an act carried out
...
Anand et al
...


One of the most important factors abetting this type of rationalizing is euphemistic
language, “which enables individuals engaging in corruption to describe their acts in
ways that make them appear inoffensive”
...

Robert Jackall’s extensive research explicit into managers’ rules for success in the workplace
further reveals that what is regarded as “right” in the workplace is often that which gets
rewarded
...
It is a key factor in shaping ethical decisions because employees tend to follow the
explicit and implicit preferences, orders, and rules of their superiors
...

BUREAUCRACY
BUREAUCRACY- a type of formal organization based on rational principles and characterized
by detailed rules and procedures, impersonal hierarchical relations, and a fixed division of
tasks
...

The bureaucratic dimension has been argued to have a number of negative effects on
ethical decision-making:
Suppression of moral autonomy
...
This
can cause employees to act as “moral robots”, simply following the rules rather than
thinking about why they are there or questioning their purpose
...
Morality will be made meaningful only in terms of conformity
to established rules for achieving those goals rather than focusing attention on the
moral substance of the goals themselves
...

Distancing
...
g
...

Denial of moral status
...
By dividing tasks and focusing on efficiency, the totality of
individuals as moral beings is lost and they are ultimately denied true moral status
...
) or hierarchical (director, manager,
etc)
...
g
...

ORGANIZATIONAL NORMS AND CULTURE
ORGANIZATIONAL CULTURE- the meanings, beliefs, and common-sense knowledge that are
shared among members of an organization, and which are represented in taken-for-granted
assumptions, norms, and values
...

NATIONAL AND CULTURAL CONTEXT
The local national context does indeed have an effect on managers’ ethical evaluations
...

Analyzing situational influences on ethical decision-making- a key skill because it helps to
assess the key characteristics of a business situation that hamper or encourage ethical
behavior in business
...

COMPONENTS OF BUSINESS ETHICS MANAGEMENT
Mission or values statements
These are general statements of corporate aims, beliefs, and values
...
However, in terms of business ethics, they often fail to set out a very specific social
purpose, and there is little evidence to suggest that they have much impact on employee
behavior
...

Codes of ethics
Sometimes called codes of conduct or simply ethics policies, these are explicit outlines of
what type of conduct is desired and expected of employees from an ethical point of view
within a certain organization, profession, or industry
...
Providing employees with appropriate channels for reporting or receiving
advice regarding ethical dilemmas can also be a vital means of identifying potential
problems and resolving them before they escalate and/or become public
...

Managing business ethics by identifying areas of risk, assessing the likelihood and scale of
risks, and putting in place measures to mitigate or prevent such risks from harming the
business has led to more sophisticated ways of managing business ethics, although as yet,
most companies have not developed an integrated approach to risk and ethics
...
A growing number of large
corporations also now have an ethics committee, or a CSR committee, which oversees many
aspects of the management of business ethics
...

Diane Kirrane summarizes the goals for ethics training as: identifying situations where
ethical decision-making is involved, understanding the culture and values of the
organization, and evaluating the impact of the ethical decision on the organization
...

It is evident that if “good” business ethics is about doing the right thing, then it is essential
that organizations consult with relevant stakeholders in order to determine what other
constituencies regard as “right” in the first place
...
93% of the largest 250
companies worldwide now issue corporate responsibility reports
...
), there has been increasing attention to developing and implementing
tools and techniques associated with the management of broader social responsibilities
...

Three main areas where the management of business ethics might be relevant:
-Setting standards of ethical behavior
...

-Managing stakeholder relations
...

- Assessing ethical performance
...

SETTING STANDARDS OF ETHICAL BEHAVIOUR: DESIGNING AND IMPLEMENTING
CODES OF ETHICS
Codes of ethics- a voluntary statement that commits an organization, industry, or profession
to specific beliefs, values, and actions and/or that set out appropriate ethical behavior for
employees
...
Specific to a single organization
...

Professional codes of ethics
...
While most traditional
professions such as medicine, law, etc
...

Industry codes of ethics
...
At the international level, the electronics industry has developed a
code of conduct “to ensure that working conditions in the electronics industry supply
chain are safe, that workers are treated with respect and dignity, and that business
operations are environmentally responsible and conducted ethically”
...
Certain programs, coalitions, or other subgrouping of organizations also establish codes of ethics for those participating in
specific programs
...

Content of codes of ethics
...

Possibilities for global codes of ethics
...

Codes of ethics are increasingly common, with a substantial rise in their usage identified
during the past decades, particularly in large and medium-sized companies
...

Content of codes of ethics
...
“Environmental
management and labor standards dominate other issues in code texts, but consumer
protection and bribery and corruption also receive extensive attention
...

Setting out of practical guidelines or rules for employee behavior, either generally or in
specific situations (accepting gifts, how customers are treated, etc
...

Effectiveness of codes of ethics
...
Readability, the use of appropriate examples, the tone used, the
relevance and the realism of the code with respect to the workplace
...
Does it have top management support, is it backed up with
training, is it regularly reinforced?

36

-How the code is enforced
...

Donaldson’s suggest that organization should be guided by 3 principles:
Respect for core human values, which determine an absolute moral threshold
Respect for local traditions
The belief that context matters when deciding what is right and wrong
Implementing codes of ethics- a key skill for managing business ethics as it enables
managers to develop and adopt appropriate rules around ethical conduct and ensure that
the code is effectively applied to business conduct
...


MANAGING STAKEHOLDER RELATIONS
...

Jones and Hill suggest that:
“A company cannot always satisfy the claims of all stakeholders
...
To do so, it must identify the most
important stakeholders and give highest priority to pursuing strategies that satisfy their
needs
...
suggest three key relationship attributes likely to determine the perceived
importance or salience of stakeholders:
Power
...

Legitimacy
...

Urgency
...

Proximity (added by Jamal and Stronza2009)

37

Prioritization of stakeholders
...

Problems with stakeholder collaboration
1
...
Stakeholder collaboration can be extremely time-consuming and
expensive compared with traditional forms of corporate decision-making
...

2
...
Companies and their stakeholders often exhibit very different values
and goals, and this can lead to significant clashes in beliefs and ways of working,
both between and within collaborating groups
...
Schizophrenia
...
This development of “multiple identities” can result in apparently
schizophrenic behavior on either or both sides, which their partners may find hard to
deal with
...
Co-ordination
...
By collaborating with many different
partners, organizations can face major co-ordination problems, increasing the risk of
losing control of their strategic direction
...
Co-optation
...

6
...
Stakeholder collaboration may partially redress problems with
corporate accountability, there are also important concerns about the accountability
of stakeholder organizations themselves
...

7
...
As a result of these and other concerns, organization members or
external parties may try and resist the development of collaborative relationships,
thus preventing the partners from fully achieving their goals
...

The key factors that distinguish social accounting from financial accounting are:
Its focus on issues other than (but not necessarily excluding) financial data
Its intended audience extending beyond (but not excluding) shareholders
Its status as a voluntary rather than a legally mandated practice (at least in most
jurisdictions)
...

The practice of social accounting to date has tended to be evolutionary in nature, with
organizations not only developing and refining their techniques over time, but also building
in adaptation within the development cycle of a given report or audit
...

Why do organizations engage in social accounting?
Internal and external pressure
...
Social auditing, in particular, provides organizations with a clearer picture
of what is happening in terms of their social, ethical, and environmental impacts throughout
their sphere of operations
...

Improved stakeholder management
...

Enhanced accountability and transparency
...
However, at present, companies

39

are far more likely to consult stakeholders in a two-way conversation that involves them in
meaningful decision-making
...

What makes for “good” social accounting?
Inclusivity
...

Comparability
...

Completeness
...

Evolution
...

Management policies and systems
...

Disclosure
...

External verification
...
The perceived
independence of verifiers from the organization will also be critical in this respect
...
The method should be able to actively encourage the
organization to continually improve its performance across the areas covered by the
process, and to extend the process to areas currently unassessed, or assessed
unsatisfactorily
...
Ethical
–Often a focus on internal management systems
2
...
Social
–Broader remit, often including impact on stakeholders
4
...
The social accountability standard, SA 8000, is a global workplace
standard launched in 1997 that covers labor rights such as working hours, forced labor, and
discrimination, and crucially it certifies compliance through independent accredited
auditors
...

Reporting
...

Reporting assurance
...
The standard is specifically
designed to be consistent with the GRI sustainability reporting guidelines
...

GOOD SOCIAL ACCOUNTING CHARACTERISTICS
•Inclusivity
•Comparability
•Completeness
•Evolution
•Management policies and systems
•Disclosure
•External verification
•Continuous improvement
ORGANIZING FOR BUSINESS ETHICS MANAGEMENT
...

According to Trevino there are 4 main ways of approaching the formal organization of
business ethics management:
Compliance orientation
...
Employees are informed of the law and are motivated to do the right
thing through fear of being caught
...

Values orientation
...
The values approach is “rooted in personal selfgovernance” and provides the means for ethical decision-making where no particular rules
are in place
...
Focuses less on company values and more on satisfying external
stakeholders such as customers, the community, and shareholders
...

Protection orientation
...
Employees and other
stakeholders may see the introduction of ethics management as little more than an attempt
to create legal cover for managers in case of accidents or legal infractions of some sort
...

Designing ethics programs- In order to enhance ethical behavior in organizations managers
need skills in designing programs that comprehensively address the management of ethical
issues across the organization
...

The ethical learning approach focuses on ethical cultural learning
...

The ethical culture change approach may have only limited potential to effect real change,
but it is considerably more attractive to many firms who not only may desire considerable
control over the culture, but may also be worried about the potentially damaging effects of
bringing out moral differences through the process of ethical cultural learning
...

Managing ethical culture- Understanding, influencing or leveraging ethical culture is a key
skill for leaders in promoting and empowering ethical decision-making in organizations
...

Leadership: a process whereby an individual influences a group of individuals to achieve a
common goal
...


42

Leadership, culture, etc
...

Under the culture change approach, the leader’s role is to articulate and personify the
values and standards that the organization aspires to, and then to inspire and motivate
employees to follow their lead
...
suggest that there are two pillars to
developing a reputation for ethical leadership: to be perceived as a moral person and as a
moral manager
...
There are dangers
too- such as shifting from encouraging individual choice to accepting moral relativism, or
surrendering control over employees and their decisions
...
However, there is always a slight danger of focusing
too strongly on the few people at the top of the organization when many of the
fundamentals of business ethics are about the day-to-day decisions that each in an
organization lives

---