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End of Chapter 5

Ethics of Business: The

Theoretical Basis
Looking out for #1
Personal Virtues Ethic
Appearing to be a good person
Ethic of Caring
Reducing harm
Govnt Requirements Ethic
Obeying the law
Universal Rules Ethic
Set a precedent
Individual Rights Ethic
Universal Declaration of Human
Economic Ethic
Profit by following the rules
Ethic of Justice
4 kinds (procedural, corrective,
retributive, distributive)
Moral Reasoning Process
Define moral issue or decision
Gather all relevant information
Identify the stakeholders involved
Moral Reasoning Process
Develop possible alternative solutions
Consider applicable value judgments, moral
standards, ethical principles
Moral Reasoning Process
Identify harms/benefits to stakeholders
Determine practical constraints
Decide on action
Moral Reasoning
Range of perspectives
Ethics verses morals and values
Testing Ethical Congruence
The Butterfly Test

Your own personal conscience, typified by a
feeling of anxiety (butterflies in your stomach)
when you know something is inherently

Written by:
Ken Chapman, I.S.P.
Ken Chapman Professional Services
IT Management Consulting
Testing Ethical Congruence
Authority Test

Ask yourself the question, would a
person in authority approve of this
(boss, president, civic leader, religious
leader, etc).

Testing Ethical Congruence
Public Scrutiny Test

Would it be acceptable to write your
actions/decisions in a public forum
(newspaper, web site, TV report) where
your family and friends would find out
about it.
Kohlbergs Stages of
Moral Development
Pre-Conventional Level (Self)
Stage 1 Punishment and obedience orientation
Stage 2 Individual instrumental purpose/exchange
Whats in it for me?
Kohlbergs Stages of
Moral Development
Conventional Level (Others)
Stage 3 Mutual interpersonal expectations
Stage 4 Law and order orientation
Kohlbergs Stages of
Moral Development
Post-Conventional Level (Humankind)
Stage 5 Social contract orientation
Stage 6 Universal ethical principle orientation
Chapter 6
Managing the Ethics of Business
Statement of Values
Codes of Conduct and Ethics
Ethics Training
Ethics Audits and Consultants
Ethics Officers and Ethics Committees
Ethics Reporting Systems and
Statement of Values
A description of the beliefs, principles, and
basic assumptions about what is desirable or
worth striving for in an organization.
Key components:
Key stakeholder interests to be satisfied and
Emphasis on quality and/or excellence
Work climate
Observance of codes
Codes of Conduct
Code of conduct: explicitly states what
appropriate behaviour is by identifying
what is acceptable and unacceptable
Code of Ethics
Code of ethics: a statement of principles
or values that guide behaviour by
describing the general value system
within which a corporation attempts to
operate in a given environment.
Distinction between the
Codes of Conduct

Imposed by others
What must be done
or what must not be
Codes of Ethics

Who we are
What we stand for
Guidelines or
guiding principles
Types of Codes
Corporate or business enterprise
Professional organizations
Industry and sector
Single issue
Codes from national and international
Criticisms of Codes
If enforced, penalties are insignificant
Unnecessary, as most corporations already
operate ethically
Often idealistic
Written in meaningless generalities
Merely to prevent government legislation
Mere response to public criticism
Ethics Training
Managers or outside consultants
Online exercises
Practical checklists and tests
Is it legal
Benefit/cost test
Categorical imperative
Light of day test
Do unto others
Ventilation test
Source: Pagano, 1987
Conflicts of Interest
Three types of conflict: (1) real; (2)
apparent; (3) potential
self-dealing; accepting gifts or benefits;
influence peddling; using employers
property; using confidential information;
outside employment or moonlighting; post-
employment; personal conduct
Ethics Audits and Consultants
Systematic effort to discover actual or
potential unethical behaviour in an
Preventive and remedial purpose
Useful in conjunction with a code of
Conducted by consultants
Ethics Officers and Ethics
Ethics officers:
Independent manager
Reports to the board of directors or CEO
Reviews complaints or information from anyone in
the organization or any stakeholder
Studies situation and recommends action
Responsible for the ethics program
Ethics committees:
Comprising management, employees, and outside
Ethics Reporting Systems and
Whistleblowing: an act of voluntary
disclosure of inappropriate behaviour or
decisions to persons in positions of
authority in an organization.
Reporting systems (e.g., hotlines)
Whistleblowing: Issues
Remain silent, quit, or disclose wrongdoing?
Does obligation to employer supersede
obligation to self, profession, or industry?
Will whistleblower be believed?
Is whistleblower hero or snitch?
Who should the whistleblower contact?
What will the consequences be?
Whistleblowing and Movies
Boiler Room (2000)
A Civil Action (1998)
Erin Brockovich (2000)
The Insider (1999)
The Rainmaker (1997)
Ethics: Who is Responsible?
Boards of directors?
Three models of moral management:
Immoral (devoid of ethical principles)
Amoral (without ethics, but not actively
Moral (conform to high standards of ethical
Source: Carroll, 2002
Ethics Programs: Approaches
Formal approach
based on organizational norms that are written as
a code of conduct
Monological approach
allows organizational members (e.g., managers,
employees) to determine for themselves what is
right or wrong
Dialogical approach
Emphasizes communication before decisions are
made and implemented
Source: Nijhof et al., 2000
Ethics Programs:
Evaluation and Benefits
Rules, laws
Prevent criminal
Employee discretion
Code of conduct
Enable responsible
Employee discretion
Code of ethics