Velasquez Ch01 CYWa

Copyright © 2012 Pearson Education, Inc. All rights reserved.

Business Ethics Concepts & Cases

Manuel G. Velasquez


Chapter One

Basic Principles: Ethics and Business


Ethics and Morality• DEF: Ethics is the study of morality/moral philosophy or code

of morals practiced by a person or group of people.– Morality = The standards that an individual or a group has

about what is right and wrong, or good and evil.• Example: B.F. Goodrich A7-D Fraud

– Moral Standards = norms about the kinds of actions that are morally right and wrong, as well as the values placed on what is morally good or bad. Eg-don’t be cruel to animal

– Non-Moral Standards: The standards by which we judge what is good or bad and right or wrong in a non-moral way.


Five Characteristics of Moral Standards

• Involve significant injuries or benefits• Not established by authority figures• Should be preferred to other values including

self-interest• Based on impartial considerations (Eg.

Choosing own family member for job/project)• Associated with special emotions and

vocabulary. (Eg. Guilt, shame, remorse, etc)


Types of Ethics

• Virtue Ethics– Aristotle: Moral behavior as “what the moral or

virtuous person does.” Ask for advise from someone we know who is very good, virtuous.

• Duty Ethics– Fundamental binding principles should govern an

individual or firm’s behavior under any circumstance. Source: religions and Kantian ethics (logic and rational).


Types of Ethics

• Consequentialist Ethics (Utilatarian)• Relativistic Ethics


Etika Deskritif

Etika

Etika Normatif

Etika Deskriptif & Etika Normatif


• disiplin yang membincangkan sejarah sistem moral/ empirical research into the attitudes of individuals or groups of people.

• menyatakan apakah sistem moral yang dianuti oleh seseorang individu @ golongan tertentu/uncover people's beliefs about such things as values, which actions are right and wrong, and which characteristics of moral agents are virtuous.

• cuba menghurai . tidak cuba untuk mencapai apa-apa kesimpulan mengenai perkara apakah yang sebenarnya baik dan buruk @ betul & salah

Etika Deskritif1.5 Etika Deskriptif & Etika Normatif


• suatu penyiasatan untuk cuba mencapai kesimpulan normatif

- kesimpulan mengenai perkara apa yang baik atau buruk

- kesimpulan mengenai tindakan apa yang betul atau salah

• menilai, mengkritik dan membuat keputusan terhadap sistem moral yang ada

Kajian/Etika Normatif1.5 Etika Deskriptif & Etika Normatif


• intrinsic value, right and wrong, and/or virtues.• what actually has overriding importance for

determining how we ought to act.• Eg. It is wrong to kill people just because they

make you angry.

Normative Ethics1.5 Etika Deskriptif & Etika Normatif


Kategori Etika

Etika Teleologikal (Consequentialist)

- Greek – Telos - sesudah, selepas, kemudiannya

Etika Deontologikal (Nonconsequentialist)

- Greek – Deontos - tugas @ tanggungjawab

1.6 Teori Etika—menilai samada sesuatu tindakan adalah betul atau tidak


• pendekatan etika yang menilai tindakan berdasarkan kepada kesan/akibat @ sejauhmana hasil yang baik @ memudaratkan - Thomas White, 1992

• baik atau buruk sesuatu tindakan tertakluk;

- kepada hasil, akibat @ kesan daripada tindakan tersebut

-

1.6 Teori Etika Teleologikal


Consequentialism -“The End Justifies the Means”• In consequentialism, the consequence of an action

justifies the moral acceptability of the means taken to reach that end. • The results of actions outweigh any other

consideration; in other words, ‘the end justifies the means.’• Jeremy Bentham was an early and influential

advocate of utilitarianism, the dominant consequentialist position.• A utilitarian believes in ‘the greatest happiness for

the greatest number.’ The more people who benefit from a particular action, the greater its good.


ScenarioConsider the following scenario: A doctor is working in the Accident and Emergency Department of a hospital. A homeless man is brought in with brain damage sustained in a road traffic accident. The doctor recognises him; the man has no family and is in reasonable physical, if not mental, health. The doctor knows there is still time to save the man’s life. He also knows that if he does not start treatment, the man will suffer brain death and his organs could possibly be used to improve the quality of or even save several other people’s lives. Assuming there is no penalty associated with either choice, what would a strict utilitarian do?Save the man’s life or Contact the transplant team to ready them to harvest any available organs answer --The doctor would allow the man to die and try to use his organs to save as many people as possible. This would bring the greatest happiness to the greatest number of people


Teori Deontologikal

• Pendekatan etika yang menilai tindakan berdasarkan nilai intrinsik tanpa merujuk kepada hasil /kesan & bersifat “act-oriented” - Thomas White, 1992


DeontologyDeontology or Kantianism is an obligation-based theory whose chief author was Immanuel Kant, who lived in the 18th century. This theory emphasises the type of action rather than the consequences of that action. Deontologists believe that moral decisions should be made based on one’s duties and the rights of others. According to Kant, morality is based on pure reason. As people have the innate ability to act rationally, they therefore must act morally, irrespective of personal desires. Another way of stating Kant’s theory is “Act morally regardless of the consequences.” - In the case of the doctor and the homeless man, again assuming there is no penalty for either decision, which would a deontologist do? Answer: The doctor would save the man’s life, as it is his duty to treat a patient. The fact that several people’s lives might be improved by allowing the man to die would not justify making that decision


What is Business Ethics?

• Broadly, ethics is the discipline that examines one’s moral standards or the moral standards of a society to evaluate their reasonableness and their implications for one’s life.

• Business ethics is a specialized study of moral right and wrong that concentrates on moral standards as they apply to business institutions, organizations, and behavior.


Types of Ethical Issues

• Systemic—ethical questions about the social, political, legal, or economic systems within which companies operate.

• Corporate—ethical questions about a particular corporation and its policies, culture, climate, impact, or actions.

• Individual—ethical questions about a particular individual’s decisions, behavior, or character.


Can ethical qualities be attributed to corporations?

• View #1: corporations, like people, act intentionally and have moral rights, and obligations, and are morally responsible.

• View #2: it makes no sense to attribute ethical qualities to corporations since they are not like people but more like machines; only humans can have ethical qualities.

• View #3: humans carry out the corporation’s actions so they are morally responsible for what they do and ethical qualities apply in a primary sense to them; corporations have ethical qualities only in a derivative sense.


Arguments Against Business Ethics

• In a free market economy, the pursuit of profit will ensure maximum social benefit so business ethics is not needed.

• A manager’s most important obligation is loyalty to the company regardless of ethics.

• So long as companies obey the law they will do all that ethics requires.


Arguments Supporting Business Ethics

• Ethics applies to all human activities.• Business cannot survive without ethics.• Ethics is consistent with profit seeking.• Customers, employees, and people in general

care about ethics.• Studies suggest ethics does not detract from

profits and seems to contribute to profits.

Copyright © 2012 Pearson Education, Inc. All rights reserved.22

ETHICAL DILEMMA CATEGORIES

• Taking things that don’t belong to you

• Saying things you know aren’t true• Giving or allowing false

impressions• Buying influence or engaging in

conflict of interest• Hiding or divulging information• Taking unfair advantage

• Committing personal decadence

• Perpetrating interpersonal abuse

• Permitting organizational abuse

• Condoning unethical actions

• Violating rules• Balancing ethical dilemmas


• Kajian menunjukkan bahawa gelagat paling tidak beretika berlaku sektor-sektor berikut (The most unethical behavior, per one survey, happens in the following areas;

- Kerajaan - Jualan - Undang-undang - Media - Kewangan - Perubatan - Perbankan - Pembuatan/perkilangan


• wakil menipu bagi panggilan jualan (49%) • wakil membuat janji tidak realistik bagi panggilan

jualan (34%) • wakil menjual produk yang tidak diperlukan oleh

pelanggan (22%) • pelanggan menuntut sogokan untuk membeli produk

(30%) • desakan untuk memenuhi matlamat jualan telah

merugikan pelanggan (54%)

Kajian oleh Sales & Marketing Management ke atas 200 orang pengurus jualan


On June 18, 1967, the B.F. Goodrich Wheel and Brake Plant in Ohio won a contract to supply wheels and brakes for a new Air Force aircraft. Goodrich won the contract based on their competitive bid and, more importantly, their innovative technical design. Before the Air Force could accept the brake, B.F. Goodrich presented a report showing that the brake passed specified qualifying tests. The brakes ultimately failed a series of flight tests, and shortly after, a former B.F. Goodrich employee, Kermit Vandivier, accused specific Goodrich personnel of test report falsification and ethical misconduct. In 1972, Vandivier wrote a well-crafted article, "Why Should My Conscience Bother Me," which depicted his version of the Goodrich incident. As one of the most famous whistleblowing cases in the literature, The Aircraft Brake Scandal has been hailed as a paradigm case of the courageous individual challenging an unscrupulous corporation. Whistle-blower Vandivier is treated as a hero, a man who lost his job for doing the right thing.


A Case Study Ivermectin- The Story of a drug in

treating,” River Blindness”• What did Merck do to deal with the disease “river

blindness”?• Should the company develop a drug that was

potentially life-saving but little chance of making a profit. Was Merck morally obligated to develop this drug? – Why did Merck invest so much money and effort

into a drug that made no money?


MERCK AND CO Ivermectin, one of its best-selling animal drugs may help treat river blindness an agonizing disease afflicting about 18 million poor people in Africa and Latin America. Merck would never recoup the $100 million cost to develop the human version of the drug. New Drug Regulation Act is intensifying competition in the drug industry.

Questions: Should the company develop a drug that was potentially life-saving but little chance of making a profit. Was Merck morally obligated to develop this drug? Merck managers felt they were. Even gave drug FOC. Most cos do not invest in an R & D project that promises no profit. Companies that spend money on unprofitable ventures will be out of business. In the long run, Merck will benefit from this act of kindness as ethical behavior can give a company significant competitive advantages over companies that are not ethical.

Copyright © 2012 Pearson Education, Inc. All rights reserved.Business Ethics 28

• QUICK TEST OF YOUR ETHICS BELIEFSAnswer each question with your first reaction. Circle the number, from 1 to 4, that best represents your beliefs if 1 represents “Completely Agree” and 4 represents “Completely Disagree.”• I consider myself the type of person who does whatever it takes to get the job done, period.

1 2 3 4• Ethics should be taught at home and in the family, not in professional or higher education.

1 2 3 4• I believe that the “golden rule” is that the person who has the gold rules.

1 2 3 4• Rules are for people who don’t really want to make it to the top of a company.

1 2 3 4• Acting ethically at home and with friends is not the same as acting ethically on the job.

1 2 3 4• I would do what is needed to promote my own career in a company, short of committing a

serious crime.1 2 3 4

• Cutthroat competition is part of getting ahead in the business world.1 2 3 4

• Lying is usually necessary to succeed in business.1 2 3 4

• I would hide truthful information about someone or something at work to save my job.1 2 3 4

• I consider money to be the most important reason for working at a job or in an organization.1 2 3 4

Copyright © 2012 Pearson Education, Inc. All rights reserved.Business Ethics 29

Self Grading of Test

• Add up all the numbers you circled.• What was your grade? 10? 15? 30? 40?• ……………………………………………..• The lower the score, the more questionable

are your ethical principles regarding business activities.

• 10 is the lowest … 40 is the highest.• Consider why you answered as you did.


Corporate Social Responsibility

• Corporate social responsibility refers to a corporation’s responsibilities or obligations toward society.

• Business ethics is both a part of corporate social responsibility and part of the justification for corporate social responsibility.

• Shareholder vs. Stakeholder Theory


New Issues in Business Ethics

• Advances in technology often create new issues for business ethics.– Currently, advances in information technology are

creating new issues in business ethics.• Increasing connections between the economic

and social systems of different nations, known as “globalization”, has also created new issues in business ethics.


Resolving Cross-Cultural Ethical Differences

• Moral Relativism = the theory that there are no ethical standards that are absolutely true and that apply or should be applied to the companies and people of all societies.

• Objections to Moral Relativism:– Some moral standards are found in all societies;– Moral differences do not logically imply relativism;– Relativism has incoherent consequences;– Relativism privileges whatever moral standards are

widely accepted in a society.


• Multinationals can escape environmental regulations and labor laws by shifting to another country. Is ethical to shift dirty industries to 3rd world countries?• Can shift raw materials, goods, and capital to escape taxes?• Have new technologies and products that less developed

countries do not, multinationals must decide when a particular country is ready to assimilate these new things. Chemical cos marketing toxic pesticides to 3rd world nations whose farmers are not knowledgeable or know how to protect themselves

Ethical issues created by multinationals?


- Keupayaan MNC untuk menukarkan tempat operasi membolehkan syarikat multinasional - mengelak kawalan sosial yang mungkin dikenakan ke atasnya oleh negara tuan rumah- “memainkan” sebuah negara dengan sebuah negara lain (Competition for FDI play one country off against another to escape social controls any one country might try to impose on the company)

Contoh:

- Undang-undang persekitaran (environmental laws)

- Peraturan kesatuan buruh (union rules)- Minimum wage law

2.3 Syarikat multinasional dan etika perniagaan


Pengoperasian dalam negara berbeza dan negara-negara tersebut mempunyai standard nasional yang berbeza- syarikat berdepan dengan masalah membuat keputusan berkaitan norma- norma dan standard-standard mana yang patut implementasikan

Contoh

Face different moral codes and laws of different countries. Unilever and Monsanto following local practice of using child labor to process cotton

seeds in India. Child workers paid low wages, expose to pesticides and not going to school

Syarikat multinasional dan etika perniagaan


Wajibkah standard moral yang sama diaplikasikan kepada syarikat multinasional di semua tempat?

MNCs face different moral codes and laws in different cultures and countries. Should we allow Unilever and Monsanto to follow local practice of using child labor to process cotton seeds in India where child workers are paid low wages, expose to pesticides and are not

going to school because they have to work to support their families. Should MNCs go along with norms of their host countries or follow the

norms of their countries?

Teori Ethical Relativism


Teori Etika Relativisme• masyarakat berbeza mempunyai kepercayaan etika yang

berbeza - tidak ada cara bagi menentukan sama ada sesuatu tindakan itu betul atau salah secara moralnya

• Ethical relativism is the theory that, because different societies have different ethical beliefs, there is no rational way of determining whether an action is morally right or wrong.


• melihat bahawa tidak ada standard etika secara mutlaknya benar & diaplikasikan atau sepatutnya diaplikasikan kepada syarikat dan manusia di dalam semua masyarakat .There are no ethical standards that are absolutely true and that apply or should be applied to the companies and people of all societies

• bertanggapan bahawa sesuatu itu betul untuk manusia atau syarikat di dalam sesebuah masyarakat sekiranya ia bersesuaian dengan standard moral mereka & salah apabila ia melanggari standard moral mereka. Relativism holds that something is right for the people or companies in a particular society if it accords with their moral standards and wrong if it violates their moral standards

• Eg In some Arab countries, business bribery is morally acceptable. The ethical relativist will conclude that although it is wrong for a US MNC to bribe in America, it is not wrong for the US MNC to offer business bribes in those Arab countries

Etika relativisme


Etika relativisme • berpandangan syarikat atau ahli perniagaan yang beroperasi di

negara yang berbeza atau mereka yang bertembung dengan standard moral yang berbeza perlu sentiasa mematuhi standard moral yang lazim di dalam mana-mana masyarakat - bila standard moral berbeza, jalan terbaik ialah mematuhi amalan tersedia ada sebab tidak ada kriteria betul atau salah

• One should always follow the moral standards prevalent in whatever society one finds oneself. The multiplicity of moral codes demonstrates that there is no one "right" answer to ethical questions. The best a company can do is follow the old adage, "When in Rome, do as the Romans do."


Teori relativisme • menerangkan bahawa apa sahaja yang

dipercayai oleh majoriti di dalam masyarakat mengenai moraliti, ia secara automatiknya betul


• Jelasnya, memang ada amalan-amalan yang dipertimbangkan sebagai tidak bermoral oleh sesetengah masyarakat tetapi diterima sebagai amalan bermoral oleh masyarakat lain

- poligami, pengguguran kandungan, membunuh bayi, perhambaan, kegiatan homoseksual, perkauman, deskriminasi seks, penghapusan kaum, membunuh bapa sendiri dan menyiksa binatang

Is ethical relativism a reasonable view to hold?

Bolehkah etika relativisme diterima?


when two people or two groups have different beliefs, at least one of them is wrongPhilosopher James Rachels: “The fact that different societies have different moral codes proves nothing. There is also disagreement from society to society about scientific matters: in some cultures it is believed that the earth is flat, and evil spirits cause disease. We do not on that account conclude that there is no truth in geography or in medicine. Instead, we conclude that in some cultures people are better informed than in others. Similarly, disagreement in ethics might signal nothing more than that some people are less enlightened than others. At the very least, the fact of disagreement does not, by itself, entail that truth does not exist. Why should we assume that, if ethical truth exists, everyone must know it?'


• Jika etika relativisme benar

- kita tidak boleh mengkritik amalan-amalan masyarakat- masyarakat lain selagi amalan-amalan mereka tersebut sejajar dengan standard mereka sendiriEg If ethical relativism is true, we cannot say that the following practices are immoral nor unjust

• Child slavery and child labor as practised in many parts of the world

• Aparteid in South Africa

• German treatment of the Jews in the Nazi society of the 1930s


Resolving Cross-Cultural Ethical Differences

• According to the Integrative Social Contracts Theory (ISCT), there are two kinds of moral standards:– Hypernorms: those moral standards that should

be applied to people in all societies.– Microsocial norms: those norms that differ from

one community to another and that should be applied to people only if their community accepts those particular norms.


Kohlberg’s Three Levels of Moral Development

• First Level: Pre-conventional Stages– Stage One: punishment and obedience orientation– Stage Two: instrumental and relative orientation

• Second Level: Conventional Stages– Stage One: interpersonal concordance orientation– Stage Two: law and order orientation

• Third Level: Post-conventional Stages– Stage One: social contract orientation– Stage Two: universal principles orientation


Moral Reasoning

• The reasoning process by which human behaviors, institutions, or policies are judged to be in accordance with or in violation of moral standards.

• Moral reasoning involves:– The moral standards by which we evaluate things– Information about what is being evaluated– A moral judgment about what is being evaluated.


Four Steps Leading to Ethical Behavior

• Step One: Recognizing a situation is an ethical situation.– Requires framing it as one that requires ethical

reasoning– Situation is likely to be seen as ethical when:

• involves serious harm that is concentrated, likely, proximate, imminent, and potentially violates our moral standards

– Obstacles to recognizing a situation:• Euphemistic labeling, justifying our actions, advantageous

comparisons, displacement of responsibility, diffusion of responsibility, distorting the harm, and dehumanization, and attribution of blame.



• Step Two: Judging the ethical course of action.– Requires moral reasoning that applies our moral

standards to the information we have about a situation.

– Requires realizing that information about a situation may be distorted by biased theories about the world, about others, and about oneself.



• Step Three: Deciding to do the ethical course of action.– Deciding to do what is ethical can be influenced

by:• The culture of an organization—people’s decisions to

do what is ethical are greatly influenced by their surroundings.• Moral seduction—organizations can also generate a

form of “moral seduction” that can exert subtle pressures that can gradually lead an ethical person into decisions to do what he or she knows is wrong.



• Step Four: Carrying out the ethical decision.

– Factors that influence whether a person carries out their ethical decision include:

• One’s strength or weakness of will

• One’s belief about the locus of control of one’s actions


Moral Responsibility

• Three Components of Moral Responsibility– Person caused or helped cause the injury, or

failed to prevent it when he or she could and should have (causality).

– Person did so knowing what he or she was doing (knowledge).

– Person did so of his or her own free will (freedom).


Factors that Mitigate Moral Responsibility

• Minimal contribution– In general, the less one’s actual actions contribute to the

outcome of an act, the less one is morally responsible for that outcome.

• Uncertainty– A person may be fairly convinced that doing something is wrong

yet may still be doubtful about some important facts, or may have doubts about the moral standards involved, or doubts about how seriously wrong the action is.

• Difficulty– A person may find it difficult to avoid a certain course of action

because he or she is subjected to threats or duress of some sort or because avoiding that course of action will impose heavy costs on the person.

Velasquez Ch01 CYWa

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