3/21/2019

BUSINESS ETHICS AND CORPORATE

SOCIAL RESPONSIBILITY

Lecture 3
Vo Thi Mai Ha
Faculty of Business Administration
University of Economics, Hue University
Topic 3: Ethics and management

Topic 3:
Ethics and management
• Ethics and ethical reasoning
• Ethics and the law
• Corporate behavior

Topic 3: Ethics and management

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Ethics and ethical reasoning

• People who work in business frequently encounter and
must deal with on-the-job ethical issues:
– Being ethical is important to the individual, the organization and
the global marketplace in today’s business climate
– Managers and employees alike must learn how to recognize
ethical dilemmas and know why they occur
– In addition, they need to be aware of the role their own ethical
character plays in their decision-making process, as well as the
influence exhibited by the ethical character of others
– Finally, managers and employees must be able to analyze the
ethical problems they encounter at work to determine an
ethical resolution to these dilemmas

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Preview Case: Unknown Corporate

Criminals
• How does a person know what behavior is right or wrong in the
business world?
• What might lead an individual to act unethically?
• Does the root cause lie in a person’s character or direction given by
top management?
• Were these “mid-level executives” simply following orders?
• If so, should they be sent to jail or forced to resign for doing what
their bosses told them to do?
• How can an employee refuse to follow orders – even when their
boss is the CEO or CFO of the firm?
• What would you do?

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The Meaning of Ethics

• Ethics
– A conception of right and wrong conduct
– Tells us whether our behavior is moral or immoral
– Deals with fundamental human relationships—
how we think and behave toward others and want
them to think and behave toward us

• Ethical Principles
– Guides to moral behavior
• Business Ethics
– Application of general ethical ideas to business
behavior

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Sources of Ethics
• Notions of right and wrong come from many sources:
– Religious beliefs
– Family background
– Education
– Community/neighborhood
– Media influences

• These experiences create a concept of ethics, morality,

and socially acceptable behavior in each person
– Acts as a moral compass to guide him/her when ethical puzzles
arise

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Ethical Relativism

• This concept holds that ethical behavior should be

defined by various periods in time in history, a
society’s traditions, the special circumstances of
the moment, or personal opinion
– The meaning given to ethics would be relative to time,
place, circumstances, and the person/s involved
– There would be no universal ethical standards on
which people around the globe could agree
• Is an important and controversial issue

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Observations of Unethical Behavior

at Work

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Five Key Reasons Why

Business Should be Ethical
1. To meet demands of business stakeholders
 10 country poll shows 90% of general public placed
business ethics standards above traditional corporate
goals
 Meeting demands of stakeholders is good business

2. To enhance business performance

 Research shows linkage between ethically responsible
behavior and favorable corporate financial performance
 Imparts trust, promoting positive alliances among
business partners

Topic 3: Ethics and management

Five Key Reasons Why

Business Should be Ethical
3. To comply with legal requirements
U.S. Corporate Sentencing Guidelines provides that if an
employee of a firm is found guilty of wrong-doing, the
sentence may be reduced if preventive measures were in
place in the company
 Measures judges look for in assessing this
culpability (degree of blame) shown on next slide
4. To prevent or minimize harm
 Overriding principle that business should
“do no harm”
 Examples include: not harming society with toxic
waste, protecting business from unethical employees and
unethical competitors
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Five Key Reasons Why

Business Should be Ethical
5. To promote personal morality
 Knowing one works in a supportive ethical climate
contributes to a sense of psychological security
 People want to work for companies that do the right
thing

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Why Ethical Problems Occur in Business

• 4 Primary Reasons:

1. Personal gain and self-interest

2. Competitive pressure on profits
3. Conflicts of interest
4. Cross-cultural contradictions

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Why Ethical Problems Occur

in Business

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Core Elements of Ethical Character:

Managers’ Values
• Managers’ values set the ethical tone for the company
• Corporate scandals have led to a crisis of confidence in business
leadership
• Differences in ethical stances of U.S. versus European managers
and employees
• Survey of new U.S. CEOs shows concern for short-term profits
• One in four managers emphasizes moral values
• Younger generation of managers more concerned about
ethics/social responsibility

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Analyzing Ethical Dilemmas in Business

• Model presented in next set of slides is powerful tool for reasoning through
ethical problems that occur in business
• Based on three standards of ethical reasoning borrowed from philosophy
• Presents guidelines to
– Identify and analyze the nature of an ethical problem, and
– Decide which course of action is likely to produce an ethical result

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Three Approaches to Ethical Reasoning

• Utilitarian
– Compares benefits and costs of a decision, policy or action
– Costs and benefits can be economic, social or human
• Rights
– Person or group is entitled to something or to be treated in a
certain way
– Examples of basic human rights are right to life, safety, and
due process
• Justice
– Means benefits and burdens are distributed equally, according
to some accepted rule

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Three Methods
of Ethical Reasoning

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Applying Ethical Reasoning

to Business Activities
• Can use the Utility, Rights and Justice framework as a tool
to analyze real business ethics dilemmas
• For each possible action or decision, ask the three critical
questions
• If all the answers are “Yes”, the proposed action is ethical
• If all the answers are “No”, the action is not ethical and
needs to be reconsidered
• If “Yes” and “No” answers are mixed, you must decide
which takes priority

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Analytical Approach to Ethical Problems

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Ethics and the law

• Corporate Culture and Ethical Climates

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Corporate Culture and Ethical Climates

• Corporate culture
– A blend of ideas, customs, traditional practices,
company values, and shared meanings that help define
normal behavior for everyone who works in a company

• Ethical climate
– The unspoken understanding among employees of what
is and is not acceptable behavior
– Multiple climates (or subclimates) can exist within one
organization

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Business Ethics
across Organizational Functions

• Business operations can be very specialized, leading to

ethical challenges related to those functional areas
– Professional ethical standards may conflict with the
ethical standards within the organization

• Professional associations may have specific ethical standards

that apply to that function

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Professional Codes of Conduct

• Examples of business professional
associations and their codes:
– American Institute of Certified Public
Accountants (AICPA) Code of Professional
Conduct
– Chartered Financial Analyst (CFA)®, CFA Institute
Code of Ethics and Standards of Professional
Conduct
– American Marketing Association (AMA) Code of
Ethics
– Association for Computing Machinery (ACM)
Code of Ethics and Professional Conduct - for
Information Technology professionals

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Building Ethics Safeguard into the Company

• To improve the quality of a company’s
ethical performance you have to change the
culture so that ethics is part of everyday
decision-making
• To do so means institutionalizing ethics or
building ethics safeguards into everyday
routines
– University has its own ethics branch governing
the practices surrounding research
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Two Ethics Approaches

1. Compliance-based approach
– Seeks to avoid legal sanctions
– Emphasizes threat of detection and punishment to promote
lawful employee behavior

2. Integrity-based approach
– Combines concern for law with emphasis on employee
responsibility for ethical conduct
– Employees instructed to act with integrity and conduct
business dealings honestly
Both approaches have been found to reduce unethical conduct, but in somewhat
different ways.

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Ethics Programs and Policies

• Top Management Commitment and Involvement

– Critical to fostering employee ethical behavior
• Ethics Code or Policies
– Provides guidance to managers and employees on what to
do when faced with an ethical dilemma
– In U.S.: policies tend to be instrumental, providing rules
and procedures vs in Japan: policies tend to be a
combination of legal compliance and company values
– Just having a code or policy is insufficient: norms must be
widely distributed and have associated training

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Ethics Programs and Policies

• Ethics Officers
– May also be called Compliance Officers or
Ombudspersons
– Relatively new position (started in 1980’s) that
has grown significantly
– Membership in professional association, Ethics
and Compliance Officers Association, doubled
between 2000 and 2004
• Ethics Help Lines
– Purposes include: providing interpretations of
proper ethical behavior, avenue for reporting
unethical conduct, and information-sharing tool
– Are present in over 83% of large companies
recently surveyed

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Ethics Programs and Policies

• Ethics Training Programs

– Is very effective method for promoting workplace
ethical behavior

• Ethics Audits
– Formal study of deviations from company ethical
standards
– Management must report on corrective action to
be taken in response to found deviations

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Comprehensive Ethics Programs

• Integration of various program/policy components is
critical to effective ethics design
– Integrated approach is called a “comprehensive” program
• 26% of companies recently surveyed had a “6 element”
program integrating:
– written policies, training, advice resources, hotline, ethics
discipline, and evaluation systems
• Those working at firms with a comprehensive program
are
– more likely to report ethical misconduct
– more likely to be satisfied with any investigation and
response to ethical misconduct

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Relationship between Law and Ethics

• Both define proper and improper behavior
• Laws are society’s attempt to formalize ethical
standards
– Written to capture public’s wishes about what
constitutes right and wrong behavior
• Ethical concepts are more complex than laws
– Often apply to areas not covered by laws
– Some businesses proactively address ethical areas
not covered by law through voluntarily adopted
practices
• Managers who are trying to improve their
company’s ethical performance need to do
more than comply with laws
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Three models of management ethics

• Immoral management
• Moral management
• Amoral management

(See the material)

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Corporate behavior

CSR

Corporate
behavior

Ethics Law

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Sources

• Archie B. Carroll and Ann K. Buchholtz (2008). Business and Society: Ethics
and Stakeholder Management. Cengage Learning
• Anne T. Lawrence and James Weber (2014), Business and Society. Lecture
series by Adelaide University

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