Business Ethics‘‘What are the main types of issue-related factors in ethical decision-making? What is the significance of these factors for managers seeking to prevent ethical violation in their organizations? Critically discuss.’’

Business Law / Mr. Aurélien Portuese

Garance COUVRY Woojin KIM

Class 14 / 2013-14

1. Introduction: Business Ethics 2. Ethical Decision-making Process 3. Issue-related Factors in Ethical Decision-making 4. Conclusion: For The Better Business World 5. Q&A

Table of Contents

‘Introduction: Business Ethics

Who is this man?

Introduction: Business Ethics

Case Study 1: Enron Scandal

Introduction: Business Ethics

‣ You make money in the new economy in the same ways you make money in the old economy- by providing goods and services that have real value.

‣ Financial cleverness is no substitute for a good corporate strategy.

‣ The arrogance of corporate executives who claim they are the best and the brightest, ‘‘the most innovative’’ and who present themselves as superstars should be a ‘‘red flag’’ for investors, directors and the public.

‣ Executives who are paid too much can think they are above the rules and can be tempted to cut ethical corners to retain their wealth and perquisites.

‣ Government regulations and rules need to be updated for the new economy, not relaxed and eliminated.

Lessons from the Enron Scandal

Introduction: Business Ethics

What is Business Ethics?

The will of long-term growth and sustainability

The issue of globalization

The study of business situation, activities, and decision where issue of

right and wrong are addressed.

Introduction: Business Ethics

What is Business Ethics?

The limited resources

and the growing population

The reduction of costs and risks

The study of business situation, activities, and decision where issue of

right and wrong are addressed.

Introduction: Business Ethics

2 Types of Business Ethics Theories

Introduction: Business Ethics

Descriptive Business TheoryThe scientific study of

moral beliefs and practices, to describe how people behave and think when

dealing with moral issues and arguments.

The study of principles, rules, or theories that guide

our actions and judgements, To determine what actually is

morally right or wrong. Normative Business Thoery

Case Study 2: The Price of Your Life

Introduction: Business Ethics

‘‘Should Business Ethics Theory be

normative or descriptive?’’

?

‘Part 1: Ethical Decision-making Process

Models of Ethical Decision-making

Issue-related Factor ‘‘Can I cheat during an exam?’’

Context-related Factor ‘‘So I cheat during an exam.’’

Context-related Factor ‘‘But I have to get a good mark, it’s more important’’

Establish moral intent

Recognize moral issue

Engage in moral behavior

Make moral judgement

Issue-related Factor ‘‘Cheating is wrong.’’

Part 1: Ethical Decision-making Process

Thomas Jones’s Decision-making Process (1991)

Models of Ethical Decision-making

Establish moral intent

Recognize moral issue

Engage in moral behavior

Make moral judgement

Part 1: Ethical Decision-making Process

Ford and Richardson (1994)

Individual Factors

Situational Factors

Individual Factors

Part 1: Ethical Decision-making Process

Factors Acquired by Experience and SocializationBirth Factors

!!

• Education • Personality • Psychological factors • Moral imagination

!!• Age • Gender • Nationality • Culture

Cognitive Moral Development

Part 1: Ethical Decision-making Process

When the individual is mature enough to make his decision based on principles of right and

wrong, instead of external impact.

When the individual’s decision-making

process depends on the self interest and rewards.

When the individuals reasoning is based on conforming himself on

what people expect from him.

Pre-conventional level

Conventional level

Principled level

Cognitive Moral Development by Lawrence Kohlberg (1969)

Models of Ethical Decision-making

Establish moral intent

Recognize moral issue

Engage in moral behavior

Make moral judgement

Part 1: Ethical Decision-making Process

Ford and Richardson (1994)

Individual Factors

Situational Factors

Situational Factors

Part 1: Ethical Decision-making Process

Decision- making Process

Context-related Factors

Issue-related Factors

Moral intensity Moral framing

Rewards Organizational culture Authority Bureaucracy Work roles National context

Models of Ethical Decision-making

Issue-related Factor ‘‘Can I cheat during an exam?’’

Context-related Factor ‘‘So I cheat during an exam.’’

Context-related Factor ‘‘But I have to get a good mark, it’s more important’’

Establish moral intent

Recognize moral issue

Engage in moral behavior

Make moral judgement

Issue-related Factor ‘‘Cheating is wrong.’’

Part 1: Ethical Decision-making Process

Thomas Jones’s Decision-making Process (1991)

‘Part 2: Issue-related Factors in Ethical Decision-making

Situational Factors

Decision- making Process

Context-related Factors

Issue-related Factors

Moral intensity Moral framing

Rewards Organizational culture Authority Bureaucracy Work roles National context

Part 2: Issue-related Factors in Ethical Decision-making

Moral Intensity

Part 2: Issue-related Factors in Ethical Decision-making

Concentration of effect

Social consensus

Magnitude of consequences

Probability of effect

Temporal immediacy

6 Variables Proximity

‣ Moral intensity means how important the issue is to the decision-maker. ‣ There was strong support for the influence of moral intensity on ethical

decision-making, especially with respect to magnitude of consequences and social consensus.

The expected sum of the harms (or benefits) for those impacts

by the problem or action.

The degree to which people are in agreement over the ethics of

the problem or action.

Case Study 3: The Explosion of Ford Pinto

‘‘Which variables of Moral Intensity

Influenced Ford’s decision?’’

?‣ It costs $11 per car to implement the new design ‣ It resulted in 180 deaths

- Magnitude of consequences - Social consensus

Part 2: Issue-related Factors in Ethical Decision-making

Case Study 4: Nike Sweatshops

‘‘Which variables of Moral Intensity

Influenced Nike Sweatshops?’’

?‣ Nike has been accused of using sweatshops

since early 1970s. ‣ When workers demanded additional rights and

benefits, the Nike factories closed and moved to different location to continue operating at a low cost.

- Proximity - Concentration of effect

Part 2: Issue-related Factors in Ethical Decision-making

Situational Factors

Decision- making Process

Context-related Factors

Issue-related Factors

Moral intensity Moral framing

Rewards Organizational culture Authority Bureaucracy Work roles National context

Part 2: Issue-related Factors in Ethical Decision-making

Moral Framing

Part 2: Issue-related Factors in Ethical Decision-making

‣ The same problem or dilemma can be perceived very differently according to the way that the issue is framed. ‣ However, many people in business are reluctant to ascribe moral terms.

Harmony EfficiencyImage of

power and effectiveness

3 Threats

Managers tend to believe that moral talk would disturb organizational

harmony by provoking confrontation, recrimination, and

finger-pointing.

Managers often felt that moral talk could cloud issues, making

decision-making more difficult, time consuming, and inflexible.

Managers also felt that their own image might suffer since being associated with ethics could be seen as idealistic and lacking

sufficient robustness for effective management.

Rationalizing Unethical Behaviour

Part 2: Issue-related Factors in Ethical Decision-making

Strategy Description

Denial of responsibility

The actors engaged in corrupt behaviors perceive that they have no other choice than to participate in such activities.

Denial of injury The actors are convinced that no one is harmed by their actions; hence the actions are not really corrupt.

Denial of victim The actors counter any blame for their actions by arguing that the violated party deserved whatever happend.

Social weighting The actors assume two practices that moderate the salience of corrupt behavior: 1. Condemn the condemner, 2. Selective social comparison.

Appeal to higher loyalties

The actors argue that their violation of norms is due to their attempt to realize a higher-order value.

Metaphors of the ledger

The actors argue that they are entitled to indulge in deviant behaviors because of their accrued credits (time and effort) in their jobs.

<Mental strategies that allow employees to view their croup acts as justified> by Anand, Ashforth, and Joshi (2004)

Rationalizing Unethical Behaviour

Part 2: Issue-related Factors in Ethical Decision-making

‘‘They deserve it.’’ ‘‘I would not report it because of my loyalty to my boss.’’

‘‘What can I do? My arm is being twisted.’’

‘‘No one is really harmed’’‘‘It’s all right for me to use the internet

for personal reasons at work. After all, I do work overtime.’’

‘‘Others are worse than we are.’’

What can I do? My arm is being twisted.

No one was really harmed.

They deserve it.

Others are worse than we are.

I would not report it because of my loyalty to my boss.

It’s all right for me to use the internet for personal reasons at work. After all, I do work overtime.

Case Study 5: Downloading vs. Stealing

‘‘With which strategies, illegal downloaders

rationalize themselves?’’

?- Denial of injury

- Social weighting - Denial of victim

Part 2: Issue-related Factors in Ethical Decision-making

Decision-making Process

Part 2: Issue-related Factors in Ethical Decision-making

Decision-making Process

Heading 2!

Recognize moral issues

Heading 4Heading 3! ! !

Make moral judgement

Establish moral intent

Engage in moral behavior

Individual factors

Situational factors

Situational factors

‘Conclusion: For the Better Business World

Benefits of an Ethical Business

Conclusion: For the Better Business World

Improve organizational

morale, also bring the ability to attract

new customers

Reduce the risk of negative

reputation and public

repercussion

Provide a positive impact on the

community

Responsibility of New Generation

Conclusion: For the Better Business World

1 2

Corporate Social Responsibility (CSR)

Business Ethics

The Better Business Environment

Q&A

Business Law / Mr. Aurélien Portuese

youThank

Business Law / Mr. Aurélien Portuese