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Revision Dr. T


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Social issues became important during this period in history, with little discussion of business ethics. What little business ethics that was discussed, was done so in primarily social circles. (Church) This laid the ground work for future studies of bus
Before 1960's
The progressive movement was established, which tried to make sure everyone had a Living Wage: enough money for education, recreation, and retirement.
Franklin D Roosevelt introduced the New Deal, which blamed business for the country’s economic woes.
Harry S Truman had developed the new deal into the Fair Deal; identifying civil rights and environmental responsibility as ethical issues business had to address.
Social issues began to rise in business. Companies started to develop a social conscience. This was a period of anti-business sentiment. John F Kennedy said that we have four rights as consumers, which became known as the Consumer’s Bill of Rights. The
The 1960’s:
Business Ethics emerged as a separated field of study at universities. Centers were established to deal with ethical issues in business. Jimmy Carter’s administration passed the Foreign Corrupt Practices Act, making it illegal for business to bribe gov
The 1970’s:
Companies began to establish ethics and policy comities. Defense Industry Initiative on Business Ethics and Conduct was established to guide corporate support for ethical conduct. Became the basis for the Federal Sentencing Guidelines.
The 1980’s:
Institutionalization of business ethics. In 1991, Federal Sentencing Guidelines passed which did the following:

⬢ Set the standard for ethical compliance programs.
⬢ Provided guidelines for taking action to Prevent and Detect ethical
The 1990’s:
This era began a new focus on business ethics, shifting away from legally based initiatives, more towards cultural and integrity based initiatives. In 2002, the Sarbanes-Oxley Act was passed:

⬢ Made securities fraud a criminal offense.
2000 & Beyond:
There are considered to be 2 broad based studies of Moral Philosophy:
Teleology and Deontology
Refers to the act in question morally right if it produces the desired result. Emphasis on consequences of the behavior. The end justifies the means.
2 important teleological decisions that guide decision making in individual business decisions:
Egoism and Enlightened Egoist
Behavior is acceptable if it produces positive consequences for the individual. Maximize own self interest.
Two types of Egoist
Hedonism and Utilitarianism
Right behavior is that which maximizes personal pleasure.
Allow for the well being of others as long as their own self interests remain the most important.
Enlightened Egoist
Seek the greatest good for the greatest number of individuals. Greatest total utility. Use cost benefit type of analysis.
Can’t get too much of a good thing
Quanatative hedonist
Can get too much of a good thing
Qualitative hedonist
General rules you should follow in determining which act produces the greatest utility, rather then examining the individual case. Bribery, lying always wrong.
Rule Utilitarians
Look at the specific act itself rather then the rules to determine which action creates the greatest utility. Bribery is wrong using general guidelines
Act Utilitarians
Focuses on the rights of people and the intentions associated with a particular act or behavior, not its consequences. Should not be done even if it maximizes total utility
Conformity in determining if an act is right or wrong. The Golden Rule Theory
Rule Deontologist
People just know that there are certain acts that are wrong.
Act Deontologist
Two types of Deontologist
Act and Rule Deontologist
Kohlberg’s 6 stages of cognitive moral development
1.Punishment and Obedience
2.Instrumental Purpose and Exchange
3.Mutual Interpersonal Expectations, Relationships, and Conformity
4.Social System and Conscience Maintenance
5.Prior Rights, Social Contract, or Utility
6.Universal Ethical Principles
Defines right as literal obedience to rules and authority. Right is person who has the power.
Punishment and Obedience
Defines right as which serves ones own needs. “Egoist”
Instrumental Purpose and Exchange
Well being of others is considered rather then him- or herself.
Mutual Interpersonal Expectations, Relationships, and Conformity
: Defines right as duty to society. Respect for society and maintaining social order. “Rule Deontologist”
Social System and Conscience Maintenance
Adhering to basic rights or values and the legal contracts of society.
Prior Rights, Social Contract, or Utility
Believes right is defined by universal ethical principles that everyone should follow. Virtue Ethics- Acquired disposition that identifies a person. Justice, Equality, Fairness.
Universal Ethical Principles
Conclusions Kohlberg Model Suggest
• Person’s level of moral development influences their perception of and response to ethical issues.
• People continue to change their decision priorities after their formative years.
• An individual’s moral development can be influenced by corporate culture, especially ethics training.
• Experience in resolving moral conflicts accelerates an individual’s progress in moral development.
Decision making authority is concentrated in the hands of top level managers, with little authority delegated to lower level employees.
Centralized Organization
List 5 things about a Centralized Organization
⬢ Employees might behave according to the letter of the laws as opposed to the spirit of the law. (Taller organizations make this easier to occur)

⬢ Scapegoating: Blame shifting. Not my responsibility, only following orders from my superiors.

⬢ Issues resulting from specialization and division of labor
a) Operations: Cheap product, little variety. Cost Cutting.
b) Marketing: Quality product, more variety. Consumer Issues.

⬢ Issues arising due to limited upward communication. Reluctance to communicate negative information up hill. Employees not empowered.

⬢ Employees may not fully understand how their individual actions affect the overall organization.
Decision making authority is delegated as far down the command chain as possible.
Decentralized Organization
List 3 things about decentralized organizations
• Difficulty in quickly responding to changes in policies and procedures established by top management. Geographical Dispersing.

• Independent profit centers may deviate from organizational objectives according to ethics.

• Independent operations might look no further then the local community for their ethical standards.

CO’s tend to be more ethical in their practices due to the strict formalization and implementation of ethics policies and procedures.
Discuss 6 ethical issues that may arise in formal groups.
• Majority opinion may not appropriately consider minority view points.

• Decisions are based on compromise rather then attempting to find the optimum alternative.

• Lack of training personal responsibility for the group’s decision.

• Misuse of ethical comities. Misuse only to provide legitimacy for standards on a specific case.

• Members applying personal ethics to complex business issues.

• Conflicts between work team members from different functional areas with different ethical view points.
Assembly of individuals that has an organized structure accepted explicitly by the group.
Formal Groups
Describe the minimum requirements (7) for ethical compliance programs
1. Standards and procedures should be REASONABLY capable of detecting and preventing misconduct.
⬢ How? Common sense approach.

2. High level personnel who are responsible for ethics compliance programs.
⬢ Ethics officer who reports directly to the board of directors.

3. No substantial authority to a person who has had a track record for a propensity of misconduct.

4. Standards and procedures communicated effectively via ethics training programs.
⬢ Help employees IDENTIFY ethical dimensions of a business decision.
⬢ Give employees a MEANS to address ethical issues.
⬢ Help employees UNDERSTAND ethical issues that are typically ambiguous.

5. Establish SYSTEM to monitor, audit, and report misconduct.
⬢ Observation
⬢ Surveys
⬢ Internal Audit

6. Consistent enforcement of standards, codes, and punishment.

7. Continuous improvement of ethical compliance program.
⬢ Structure your resources in such a manor, as to help you achieve your ethical objectives.
Common mistakes in designing and implementing an ethics program
1. Failure to understand and appreciate goals of ethics program.
• Deter and detect unethical behavior
• Gain competitive advantage through improved relationships w/ customers and employees
• Link employees through a unifying and shared corporate culture

2. Not setting realistic and measurable program objectives
• Once objectives determined, companies should solicit input through
o Interviews
o Focus groups
o Survey instruments

3. Senior MGT’s failure to take ownership of the ethics program.
• CEO’s must support and uphold ethics himself
o EX: Enron – recording sales that never took place

4. Developing program materials that do not address the needs of average employee.
• Complex, confusing material that is hard for average employee to understand.
o Should try to get feedback from firm
o EX: Q and A , checklists, illustrations

5. Transferring and “American” program to a firm’s international operations
• Should involve overseas personnel as soon as possible in process
• Develop inventory of common global MGT practices and examine standards of conduct.

6. Designing a program that is little more than a series of lectures
• Participants typically recall less than 15% the day after lecture.
• More practical solution: Allow employees to practice the skills they learn through case studies or small group exercises (hands-on).
Discuss five of the ethical issues around the globe.
1. Price Discrimination
2. Human Rights
3. Bribery
4. Harmful Products
5. Sexual and Racial Discrimination

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