Business and Society Ethics Sustainability and

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Business and Society Ethics Sustainability and Stakeholder Management 10th Edition Carroll S

Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

Chapter 7
Business Ethics Essentials

LEARNING OUTCOMES

After studying this chapter, you should be able to:

1. Describe the public’s opinion of business ethics.

2. Define business ethics, explain the conventional approach to business ethics and identify
the sources of ethical norms in individuals.
3. Analyze economic, legal, and ethical aspects of a decision by using a Venn model.
4. Identify, explain, and illustrate three models of management ethics.
5. In terms of making moral management actionable, describe and discuss Kohlberg’s three
levels of moral development and Gilligan’s ethics of care.
6. Identify and discuss six major elements of moral judgment.

TEACHING SUGGESTIONS

INTRODUCTION – Chapter 7 introduces concepts and background that are essential to

understanding business ethics. The authors explore a wide range of topics that combine to form
a network within which business decisions are made, how they are made, and how managers
develop their abilities to make them.

KEY TALKING POINTS – Unless students previously have taken a course in moral philosophy,
most will have given little thought to the whole issue of ethical decision-making. Although they
certainly will have opinions regarding what constitutes moral behavior (often very strong
opinions), the majority will have little insight into how they make those decisions. One effective
way to introduce this element of moral decision-making is to show a video clip or read a short
passage that presents a clear moral dilemma (e.g., Case 10, Phantom Expenses) and then ask the
students how they would make a decision about that scenario—without allowing them to say
what their decisions are. Many will get frustrated with this exercise but will soon recognize the
point being made—that they go through a process to get to their decisions, but rarely do they pay
any attention to that process. Note that when students describe how they would make their
decision, some will describe the use of an ethical principle (i.e., the principles approach);
however, many will discuss the use of societal norms in their decision-making process (i.e., the
conventional approach). Consequently, this exercise also is an opportunity to introduce the three
major approaches to business ethics as well as Kohlberg’s three levels of moral judgment.

This chapter focuses on two primary topics—the environment within which business ethics
decisions are made and how managers go about making those decisions. By maintaining a clear
focus on moral judgment, the authors provide students with a strong explanation of that process.
However, by doing so, they also fall into the trap to which most moral philosophers succumb:
neglect of other elements of moral behavior. James Rest, a contemporary of Lawrence
Kohlberg, developed what he termed a Four Component Model of Moral Behavior, which
outlines the psychological steps that must occur for moral action to occur. As Rest says,

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 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

“…there is more to moral development than moral judgment development…” (Moral

Development in the Professions, 1994, page 22). Rest’s four components include:
1. Moral sensitivity – awareness that a moral situation exists
2. Moral judgment – judging which action is morally right/wrong
3. Moral motivation – prioritizing moral values relative to other values
4. Moral character – courage to carry out the morally right action

There is no question that judgment is a critical element in moral behavior, but it is only one
element. Without recognition of the other components, students will not gain a full
understanding of moral behavior within organizations.

Using the Venn diagram, instructors can demonstrate how economics, ethics and the law affect
managerial decisions. Further, the model of ethics employed by management is reflected by the
emphasis placed on each of these responsibilities: (1) immoral managers focus on the firm’s
economic responsibilities to the exclusion of all else, (2) moral managers balance the firm’s
economic, ethical and legal responsibilities, and (3) amoral managers pursue economic profits
while failing to consider ethical, and, potentially, legal factors (although they may passively
comply with the law).

PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:

Cases:
5-Engineered Billing
6-The Waiter Rule: What Makes for a Good CEO?
7-Using Ex-Cons to Teach Business Ethics
8-To Hire or Not to Hire
9-You Punch Mine, I’ll Punch Yours (2)
10-Phantom Expenses
11-Family Business
13-Location, Location, Location
17-Chiquita – An Excruciating Dilemma
23-McDonald’s Coffee Spill
24-The Betaseron Decision (A)
28-Safety, What Safety
29-Felony Franks (2)- Home of the Misdemeanor Wiener
31-Moral Dilemma - Head vs. Heart
32-Walmart Labor Practices
33-Case of the Fired Waitress
35-Looksism at A&F
38-A Candy Confession
39-To Take or Not to Take

Ethics in Practice Cases:

What Would You Do?
To Hunt or Not to Hunt – That is the Question
Is Resume Inflation and Deception Acceptable?

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 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

Are People More Ethical When Being “Watched?”

Spotlight on Sustainability:
Ray Anderson’s Conversion Experience

Power Point slides:

Visit http://academic.cengage.com/management/carroll for slides related to this and other
chapters.

LECTURE OUTLINE

I. THE PUBLIC’S OPINION OF BUSINESS ETHICS

A. Are the Media Reporting Business Ethics More Vigorously?

B. Is It Society that Is Changing?

II. BUSINESS ETHICS: SOME BASIC CONCEPTS

A. Descriptive versus Normative Ethics
B. The Conventional Approach to Business Ethics
C. Ethics and the Law
D. Making Ethical Judgments

III. ETHICS, ECONOMICS, AND LAW – A VENN MODEL

IV. THREE MODELS OF MANAGEMENT ETHICS

A. Immoral Management
1. Operating Strategy
2. Illustrative Cases
a. Enron
b. Everyday Questionable Practices
B. Moral Management
1. Operating Strategy
a. Integrity Strategy
b. Habits of Moral Leaders
c. Positive Ethical Behaviors
2. Illustrative Cases
a. Navistar
b. Merck
C. Amoral Management
1. Intentional Amoral Management
2. Unintentional Amoral Management
a. Unconscious Biases
3. Operating Strategy
a. Compliance Strategy
4. Illustrative Cases
a. Examples

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 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

b. Nestlé
c. Sears
5. Two Hypotheses Regarding the Models of Management Morality
a. Population Hypothesis
b. Individual Hypothesis
c. Amoral Management Is a Serious Organizational Problem

V. MAKING MORAL MANAGEMENT ACTIONABLE

VI. DEVELOPING MORAL JUDGMENT

A. Levels of Moral Development
1. Level 1: Preconventional Level
2. Level 2: Conventional Level
3. Level 3: Postconventional, Autonomous, or Principled Level
4. Ethics of Care Alternative to Kohlberg
B. Different Sources of a Person’s Values
1. Sources External to the Organization: The Web of Values
a. Religious Values
b. Philosophical Values
c. Cultural Values
d. Legal Values
e. Professional Values
2. Sources Internal to the Organization

VII. ELEMENTS OF MORAL JUDGMENT

A. Moral Imagination
B. Moral Identification and Ordering
C. Moral Evaluation
D. Tolerance of Moral Disagreement and Ambiguity
E. Integration of Managerial and Moral Competence
F. A Sense of Moral Obligation

VIII. SUMMARY

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.

1. Question: Give a definition of ethical business behavior, explain the components involved
in making ethical decisions, and give an example from your personal experience of the
sources of ethical norms that affect you while making these determinations.
Answer: Ethical business behavior does not mean that no harm is done to anyone. Rather,
ethical business behavior entails being aware of the possible consequences of the firm’s

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 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

actions before they take place, making reasoned moral judgments about those
consequences, and choosing the actions that are the most “right” or do the least harm.
Chapter 8 will investigate some of the criteria used to decide “right” from “wrong,” but
this chapter provides a series of important ethics questions, including “what is?” “what
ought to be?” “how do we get from what is to what ought to be?” and “what is our
motivation?” Contemplating theses questions will help managers make decisions that
encourage ethical behavior, especially the normative question of “what ought to be?”
Students should come up with a wide variety of examples that demonstrate the difficulties
of making moral judgments. Instructors may want to provide personal examples of
situations that they have observed where students have struggled with making moral
decisions. Further, sharing relevant personal experiences often increases instructor
credibility in the classroom; consequently, when appropriate, instructors may want to
discuss their own ethical dilemmas with the class.

2. Question: To demonstrate that you understand the three models of management ethics –
moral, immoral, and amoral – give an example from your personal experience of each
type. Do you agree that amorality is a serious problem? Explain.
Answer: Immoral management entails knowingly deciding to engage in “wrong” actions,
often ones that harm others in some way. Moral management, on the other hand, consists
of making moral judgments to do the “right” thing. Immoral management often
concentrates on measures of profitability to the exclusion of other criteria, while moral
management incorporates profit as one of several criteria in making a decision. Finally,
amoral management views managers’ actions as having no moral consequence—that
business operations are somehow outside the boundaries of morality. Examples of
immoral management include Enron’s use of special purpose entities to hide corporate debt
and the waiver of the code of conduct provisions by Enron’s board which permitted Andy
Fastow to serve as the CFO of Enron and the General Partner of certain special purpose
entities that were doing business with Enron. Bernie Madoff’s use of a sophisticated Ponzi
scheme to defraud investors of over $50 billion is another example of immoral
management. Examples of amoral management might include a police department that
puts height and weight restrictions in place for police officers. While the department may
believe that it has a legitimate reason to use height and weight requirements and does not
intend to discriminate in its employment practices, it may fail to recognize the inherent
ethical issues with this practice. The management at Starbucks could be considered moral
management. The company pursues economic goals, while striving to operate within the
confines of the law and focusing on activities that will improve the well-being of its
employees, suppliers and the community in general.

Shepard, Shepard, Wimbush and Stephens (1995) wrote an article entitled “The Place of
Ethics in Business: Shifting Paradigms,” in which they argue that business operates in a
paradigm of amorality. I would agree that amoral management is a serious problem in
business operations. Business has a great deal of power over individuals’ lives, and if that
power is wielded without consideration of its effects, the likelihood that people will be
harmed is greatly enhanced. Furthermore, it is easier for management to say that ethics has
no place in business; hence the saying “It’s not personal, it’s just business.” If

Copyright © 2018 Cengage. All rights reserved.

 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

management is free to make decisions based on purely economic motivations, then they
can avoid the difficult decisions that they may face as a result of legal and ethical issues.

3. Question: Give examples from your personal experience of Kohlberg’s Levels 1, 2, and 3.
If you do not think you have ever gotten to Level 3, give an example of what it might be
like.
Answer: Level 1, the preconventional level, focuses on self gratification, and can be seen
in virtually any infant or young child. Unfortunately, adults often display characteristics of
the preconventional level as well. An example of Level 1 would be when a child takes a
certain course of action to avoid a parental punishment (such as “time out”) or to seek a
parental reward (such as permission to do something the child wants to do). The
conventional level is characterized by awareness of and concern for others. The locus of
analysis of consideration of others widens as a person develops morally, from friends and
family to society. An example of Level 2 would be not cutting line in a public place.
While cutting line is not illegal, individuals recognize that cutting line is socially
unacceptable and their awareness and concern for others usually discourages such actions.
In the postconventional level, concern for humankind as a whole is manifest, and decisions
about right and wrong are based on universal ethical principles rather than societal norms.
An example of this level may be individuals who sacrifice a certain percentage of their
personal income for charitable causes. Reasoning that the money can be used for the
betterment of humankind, individuals may use their resources to support these objectives
rather than for their personal gratification.

4. Question: Compare your motivations to behave ethically with those listed in Figure 7-14.
Do the reasons given in that figure agree with your personal assessment? Discuss the
similarities and differences between Figure 7-14 and your personal assessment.
Answer: Figure 7-14 is basically a recasting of Kohlberg’s three levels of moral
development. I personally agree that most people are morally motivated by the “negative”
aspect of avoiding punishment, while conceding that many people seek the more “positive”
aspect of doing the right thing or acting constructively toward others. Very few people
reach the postconventional level, as evidenced by the honor accorded to people such as
Mother Teresa or Desmond TuTu.

5. Question: From your personal experience, give an example of a situation you have faced
that would require one of the six elements of moral judgment. Which of these six elements
are most important and why?
Answer: The six elements of moral judgment include moral imagination, moral
identification and ordering, moral evaluation, tolerance of moral disagreement and
ambiguity, integration of managerial and moral competence, and a sense of moral
obligation. The instructor may want to relate these six elements to Rest’s Four Component
Model. Moral sensitivity is equivalent to moral imagination; moral judgment is the same
as moral evaluation; moral motivation is similar to moral identification and ordering; and
moral character is analogous to a sense of moral obligation. Students will have a variety of
stories to tell, as well as varying choices for most important element.

GROUP ACTIVITY

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 Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

Have students review the following Venn Diagram Model (this exercise and diagram are an
extension of Figure 7-6 in the book and are based on the following article: Mark S. Schwartz
and Archie B. Carroll, “Corporate Social Responsibility: A Three-Domain Approach,” Business
Ethics Quarterly (Vol. 13, Issue 4, October 2003), 503–530, the Venn Diagram Model).

Economic/Ethical/Legal Purely Ethical Legal/Ethical

MORAL Purely Legal

MANAGEMENT

Economic/Legal

Economic/Ethical

Purely Economic

IMMORAL AND/OR
AMORAL
AMORAL MANAGEMENT MANAGEMENT

Divide students into groups of four to five students and ask them to (1) identify the following
activities as moral, immoral or amoral and (2) categorize the activities as ethical, economic
and/or legal as appropriate:

(1) Enron’s actions of deceiving shareholders by shifting debts from their balance sheet
(2) Arthur Andersen’s ordering the shredding of documents related to their transactions
with Enron
(3) Height and weight requirements for a police force candidate
(4) Tobacco company warnings on labels
(5) Chic-Fil-A’s policy of being closed on Sunday
(6) The creation of a website where users can download music for free by sharing files
with other users
(7) Provision of HIV/AIDS drugs below cost in 3rd world countries
(8) Installation of an anti-pollution device
(9) Smith and Wesson’s addition of safety features to its handguns
(10) Ben & Jerry’s distribution of free ice cream in a community
(11) Prostitution in the state of Nevada
(12) Moving a company overseas because another country has weaker environmental or
employment laws
(13) Pulling a product from a shelf when it is discovered that there is a product defect

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Business and Society Ethics Sustainability and Stakeholder Management 10th Edition Carroll S

Ch 7, Instructor’s Manual, Business & Society, Carroll 10e

Specifically, students should recognize which responsibilities are being pursued by management
in each activity and the management style implicated by the pursuit of certain responsibilities.
After each group has had time to make its determination, the instructor may want to survey all
the groups to determine the assessments made by each group. Differences in categorization
among the groups should be discussed by the entire class.

INDIVIDUAL ASSIGNMENT

Distribute the following instructions to each student:

Describe an ethical dilemma that you faced in the workplace and the course of action that you
took. Analyze whether your decision was economically, legally and ethically responsible and
defend your response. If you determine that your course of action did not meet all three
responsibilities, evaluate whether any alternative course(s) of action would have done so.
Finally, ascertain whether you would choose the same course of action again or if you would act
differently; explain your response.

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