Professional Documents
Culture Documents
Business Ethics
Business Ethics
Chapter 7
Business Ethics
This chapter:
Sets forth basic sources of ethical values.
Discusses how corporations manage ethics and
try to elevate behavior.
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WorldCom
Opening Case
Bernard Ebbers built WorldCom into a global
telecommunications giant.
Ebbers used use all of his WorldCom stock as collateral for
bank loans.
In 2000 Ebbers gave the first in a string of instructions to
report false revenues and use accounting tricks to disguise
rising expenses.
Ebbers testified that he had no knowledge of the fraud, but
five of his subordinates testified against him.
Ebbers was sentenced to 25 years in prison for securities
fraud, unprecedented for a white-collar crime.
Some question whether his sentence was fair.
Ebbers is seen now as unethical, a criminal, and deficient as
a leader.
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Two Theories of
Business Ethics
The theory of amorality is that business
should be conducted without reference to
the full range of ethical standards,
restraints, and ideals in society.
The apex of this view came during the latter
half of the nineteenth century.
The theory of amorality has far less public
acceptance today, but it lives on quietly.
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Religion
The great religions converge in the belief that a
divine will reveals the nature of right and wrong
behavior in all areas of life, including business.
Christian managers often seek guidance in the
Bible.
In Islam the Koran is a source of ethical
inspiration.
In the Jewish tradition, managers can turn to
rabbinic moral commentary in the Talmud and the
books of Moses in the Torah.
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Philosophy
Even after two millennia, there remains
considerable dispute among ethical thinkers about
the nature of right action.
Greek ethics
Socrates asserted that virtue and ethical behavior were
associated with wisdom and taught that insight into life
would naturally lead to right conduct.
Plato carried this doctrine of virtue as knowledge further
by elaborating the theory that absolute justice exists
independently of individuals and that its nature can be
discovered by intellectual effort.
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Philosophy (continued)
Aristotle spelled out virtues of character in the
Nicomachean Ethics and advocated a regimen of
continuous learning to improve ethical behavior.
Epictetus taught that virtue was found solely within
and should be valued for its own sake, arguing that
this inner virtue was a higher reward than external
riches or worldly success.
Philosophy (continued)
Secular philosophers such as Baruch Spinoza tried
to demonstrate ethical principles with logical
analysis rather than ordain them by reference to
Gods will.
Immanuel Kant tried to find universal and objective
ethical rules in logic.
Jeremy Bentham developed the idea of utilitarianism
as a guide to ethics, validating two dominant
ideologies: democracy and industrialism.
John Locke developed and refined doctrines of
human rights and left an ethical legacy supporting
belief in the inalienable rights of human beings.
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Cultural Experience
Every culture transmits between
generations a set of traditional values,
rules, and standards that define
acceptable behavior.
Civilization is a cumulative cultural
experience consisting of three stages:
Hunting and gathering stage
Agricultural stage
Industrial stage
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Ethical Variation
in Cultures
Ethical values differ among nations as historical experiences
have interacted with philosophies and religions to create
diverging cultural values and laws.
The school of ethical universalism holds that in terms of
biological and psychological needs, human nature is
everywhere the same.
The school of ethical relativism holds that although human
biology is everywhere similar, cultural experience creates
widely diverging values, including ethical values.
Because of globalization, corporations struggle with the
question of how to apply conduct codes across cultures.
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Law
Laws codify, or formalize, ethical
expectations.
Corporations and their managers face
a range of mechanisms set up to:
Deter illegal acts
Punish offenses
Rehabilitate offenders
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Damages
In civil cases courts may assess damages, or
payments for harm done to others by a corporation.
Compensatory damages are payments awarded
to redress concrete losses suffered by injured
parties.
Punitive damages are payments in excess of a
wronged partys actual losses, awarded to deter
similar actions and punish a corporation.
Since the purpose of punitive damages is to punish
and deter misconduct, they must be large enough to
cause pain, yet they raise many questions about
fairness.
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Criminal Prosecution of
Managers and Corporations
Managers may be prosecuted for criminal
actions undertaken in the course of their
employment.
Corporations are criminally liable for
corrupt actions or omissions of managers if
those actions are intended to benefit the
corporation.
Criminal prosecution of corporations and
their executives is exceptionally difficult.
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Leadership
The example of company leaders is
perhaps the strongest influence on
integrity.
A common failing is for managers to
show by their actions that ethical duties
can be compromised.
If the leader does something, an
opportunistic employee can rationalize
his or her entitlement to do it also.
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Corporate Culture
Corporate culture refers to any set of
values, norms, rituals, formal rules, and
physical artifacts that exists in a company.
Three levels of corporate culture:
Artifacts
Espoused values
Tacit underlying values
Often inconsistencies are observed
between the levels.
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Concluding Observations
The business environment is rich in sources of
ethical values. Yet strong forces in both markets
and corporations act to depress behavior.
Managers can use a range of methods to
discourage transgression and encourage high
ethics.
Individuals also have a range of principles with
which to enrich their ethical thinking and
powerful methods with which to make ethical
decisions.
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