- Business ethics
The area of applied ethics that focuses on real-world situations and the context and environment in which transactions occur.
- Corporate culture
The beliefs and behaviors that determine how a company’s employees and management interact inside an organization and also handle outside business transactions. Corporate culture develops organically over time from the cumulative traits of the leaders and the people that the company hires.
- Ethical dilemma
A situation in which a difficult choice has to be made between two courses of action with ethical consequences.
- Ethical relativism
Holds that people set their own moral standards for judging their actions, based on self interest.
The code of moral principles and values that governs the behaviors of a person or group with respect to what is right or wrong.
- Instrumental values
The preferred means of behavior used to obtain desired goals.
Four major tenets: (1) All individuals should be treated equally; (2) Justice is served when all persons have equal opportunities and advantages; (3) Fair decision practices, procedures, and agreements among parties should be practiced; (4) Punishment is served to someone who inflicts harm.
- Moral entrepreneur
Someone who creates a new ethical norm.
- Normative ethics
The field of ethics concerned with our asking how should and ought we live and act.
Legal rights are entitlements that are limited to a particular legal system and jurisdiction, while moral rights are universal and based on norms in every society.
- servant leadership
Involves selflessly working with followers to achieve shared goals that improve collective, rather than individual, welfare.
Any group or individual who can affect or is affected by the achievement of an organization’s objectives. The use of the term stakeholder has become commonplace in organizations.
- Stakeholder management
The systematic identification, analysis, planning, and implementation of actions designed to engage with stakeholders
Concerned with empowering followers to make decisions and gain control over their work.
- Terminal values
Desired goals, objectives, or end states that individuals wish to pursue.
- Virtue ethics
Grounded in one’s character, focusing on what type of person one ought to be.
Summary of Learning Outcomes
5.2 Ethics and Business Ethics Defined
1. What are ethics and business ethics?
A goal of the chapter is to present ethical principles, guidelines, and questions that inform our individual decision-making and influence actions we can take with regard to questionable ethical situations and dilemmas. We also present and illustrate how business leaders, corporations, and organizations internationally have responded and are responding to questionable ethical problems with the environment in their communities through responsible corporate governance and alliance with concerned stakeholders. Ethics is both local and global; it begins with the individual, moves to the organizational, and reaches to international and global levels of societies.
5.3 Dimensions of Ethics: The Individual Level
2. What are the types of values that motivate ethics at the individual level?
Ethics at an individual level may seem to involve only the individual, but it is a holistic process. There may be high pressure from coworkers, managers, or any other constituent of business culture to be unethical. Individuals may hate such pressures, and they tend to work to avoid the dilemmas.
5.4 Ethical Principles and Responsible Decision-Making
3. What are the major ethical principles that can guide individuals and organizations?
There are many approaches for both individuals and organizations to take with regard to ethical principles. They are utilitarianism; universalism, which is a duty-based approach; a rights approach, which takes a moral and legal approach; justice; virtue; common good; and finally the ethical relativism approach.
5.5 Leadership: Ethics at the Organizational Level
4. Why is ethical leadership important in organizations?
After the failures of Enron and other organizations, people have started emphasizing the concept of ethical leadership. An organization can incorporate ethical practices only if its leaders enforce ethical values into the organization. While such basic concepts of ethics such as being honest are crucial to ethical leadership, a modern approach is to take the servant leadership approach, where the leader serves the interests of all stakeholders in an ethical manner.
5.6 Ethics, Corporate Culture, and Compliance
5. What are the differences between values-based ethics and compliance in organizations?
A compliance-based ethical approach is simple and direct. It provides a basic integrity to the participant since it is spelled out in clear terms. If the individual or organization exhibits destructive behaviors, their rights can be restricted. An integrity-based ethics code fills the receiver with demands based on the highest expectations.
5.7 Corporate Social Responsibility (CSR)
6. What value do CSR (corporate social responsibility) programs offer to organizations and society?
Corporate social responsibility is about an organization taking responsibility for the impacts of its decisions and activities on all aspects of society, the community, and the environment. Corporate social responsibility is about contributing to the health and welfare of society and operating transparently and ethically. More importantly, this way of operating should be embedded in the business, rather than an afterthought.
5.8 Ethics around the Globe
7. What are ethical issues we encounter in the global environment?
Some of the most common ethical issues organizations encounter globally include outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery, and corruption.
5.9 Emerging Trends in Ethics, CSR, and Compliance
8. Identify forecasts about contemporary ethical and corporate social responsibility issues.
Among the emerging issues in the area of ethics are in the area of harassment in the era of #MeToo. Organizations and individuals are also more accepting of their roles in assisting with such things as natural disasters and national emergencies. Finally, there is increasing attention to issues of compliance and governance to ensure that organizations meet their stated ethical standards.
Chapter Review Questions
- What is the difference between ethics and business ethics?
- What is normative ethics?
- Why are values an important element of ethics for individuals and organizations?
- What are the differences between instrumental and terminal values?
- Can an individual be ethical without using ethical principles described in the chapter? Explain.
- Identify major classical ethical principles.
- Differentiate between the principle of rights and utilitarianism and between justice and universalism.
- Why is leadership important for ethical conduct in corporations?
- Identify two types of ethical leaders and the important role each plays.
- What is the difference between ethics and compliance in organizations?
- What is CSR, and why is it important?
- What is stakeholder management?
- What is the difference between stakeholders and stockholders?
- What is different about ethics in a global or international context and ethics in a national context or setting?
- What are some global issues that corporations must face today, and why are these important?
- Identify some contemporary ethical and compliance trends affecting corporations, employees, and individuals now.
- What is a moral entrepreneur?
- Does ethics pay? Explain.
- After reading this chapter, what are major insights you have about ethics and CSR?
Management Skills Application Exercises
- What are some advantages and disadvantages of leaders, managers, and employees having and working with a principle-centered approach (using some ethical principles in the chapter) rather than taking a “come what may,” trust in luck, circumstance and chance approach?
- Would you rather work for a company that takes a stakeholder or stockholder approach in its dealings with customers, employees, suppliers, and other constituencies in its network? Explain.
- What are some principles (from the chapter) that leaders and managers can use to guide their actions in ethical ways?
- What can organizational managers and leaders learn with regard to organizational cultures that would inspire and motivate employees to do the right thing in their work?
- What type of leaders and leadership styles and practices often lead to problems with employees, customers, and other stakeholders and stockholders?
- Describe how a leader, manager, and employee might think and act differently if their organization seriously adopted and practiced doing business with a corporate social responsibility mindset.
- What are some concerns that have ethical implications that a leader, manager, or employee might have when doing business internationally or globally?
- After reading the section in the chapter on ethical and compliance trends going forward, what top two or three things do you think organizational leaders and managers would want to take action on preparing for now? Why?
Managerial Decision Exercises
- You are a manager, and your boss—who is also a friend—has reprimanded a fellow employee (also a friend) in ways that are demonstrably unfair and unethical but not illegal. That employee has confided in you with the facts, and you agree. The employee asks you not to mention anything to the boss but to go with her to human resources for support while she reports him for those actions. What would you do, if anything, and why? Explain.
- One of your direct reports thinks that you are not acting responsibly or in the best interests of the company with him or the department in which you work. The direct report has informed you that your communication and work style are lacking and that this is also causing problems with others in the department. You are upset over this news and realize it could cause you problems with your boss and those above. What would you do, when, why, and how?
- You learn that a woman in your department has complained about sexually improper advances toward her by your boss and another more senior person above that boss. You know the woman but not well. She may be right in this instance. You have heard rumors that she often exaggerates and sometimes can’t be trusted. You don’t particularly like her and are concerned about your own reputation if she’s wrong. What would you do and why?
- Your department boss wants you to select a few others in your organization to explore adopting corporate social responsibility practices. Some of your friends think that CSR isn’t effective and in fact wastes resources and time of those who get involved. To take on this assignment would require time out of doing your own work. However, you have noticed that your organization’s leadership isn’t all that responsible and responsive to employees and many customers. Maybe adopting more ethical standards and practices could improve business and some of the questionable leaders’ behaviors. What would you do and why?
Critical Thinking Case
The Wells Fargo recent crisis over mismanaging customer relationships, fraudulently implementing illegal and unethical sales practices with trusted clients, has cost the company in fines, lost business, and the resignation of the CEO. The following online sources offer a narrative and factual source of what happened, when, to whom, and why. Use these sources to answer and provide evidence to the following questions to present to the class:
- What were the sources and causes the problems in the first place? Explain.
- Who were some of the primary decision makers that led to the illegal sales activities?
- What were these individuals’ motives and motivations?
- How were the illegal and fraudulent activities discovered?
- Who was to blame?
- What unethical activities occurred before the illegal actions took place?
- What would you have done, if anything, had you been one of the sales professionals pressured to engage in unethical, illegal practices there?
- How would a stakeholder approach, if taken by the company’s top leaders and board of directors, have possibly prevented the crisis
Sources: Comrie, Harley, “Wells Fargo Fake Accounts Scandal”, Seven Pillars Institute, March 15, 2017, http://sevenpillarsinstitute.org/cas...counts-scandal ; “Wells Fargo Banking Scandal a Financial crisis We Can Finally Understand”, The Guardian, accessed January 2, 2019, https://www.theguardian.com/business...inancialcrisis; Glazer, Emily, “Wells Fargo’s Textbook Case of Botched Crisis Management”, The Wall Street Journal, October 13, 2017, https://www.wsj.com/articles/wells-f...sis-1476380576.