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Business Ethics

Concepts & Cases


Manuel G. Velasquez

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Chapter One
Basic Principles: Ethics and
Business

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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-dont 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.Inc. All rights reserved.
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2012 Pearson Education,

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)
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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 firms behavior
under any circumstance. Source:
religions and Kantian ethics (logic and
rational).
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Types of Ethics
Consequentialist Ethics (Utilatarian)
Relativistic Ethics

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Etika Deskriptif & Etika Normatif

Etika
Deskritif
Etik
a
Etika
Normatif
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1.5 Etika Deskriptif & Etika Normatif

Etika Deskritif

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
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sebenarnya
baik dan buruk @ betul & salah

1.5 Etika Deskriptif & Etika Normatif


Kajian/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
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1.5 Etika Deskriptif & Etika Normatif


Normative Ethics
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.

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1.6 Teori Etikamenilai samada sesuatu


tindakan adalah betul atau tidak

Kategori
Etika

Etika
Teleologikal
(Consequentia
- Greek Telos
- sesudah, selepas,
list)
kemudiannya

Etika
Deontologikal
- Greek Deontos
(Nonconsequenti
- tugas @ tanggungjawab
alist)
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1.6 Teori Etika Teleologikal


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
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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.
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Scenario
Consider 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 mans
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 peoples lives.
Assuming there is no penalty associated with either
choice, what would a strict utilitarian do?
Save the mans life or Contact the transplant team
to ready them to harvest any available organs
answer --The doctor would allow the man to die and
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try to use his organs to save as many people as

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

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Deontology
Deontology 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 ones 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 Kants 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 mans life, as it is
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reserved.
his duty to treatCopyright
a patient.
The fact
that
several peoples

What is Business Ethics?


Broadly, ethics is the discipline that
examines ones moral standards or
the moral standards of a society to
evaluate their reasonableness and
their implications for ones 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.
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Types of Ethical Issues


Systemicethical questions about
the social, political, legal, or
economic systems within which
companies operate.
Corporateethical questions about a
particular corporation and its
policies, culture, climate, impact, or
actions.
Individualethical questions about a
particular individuals decisions,
behavior, or character.
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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
corporations 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.
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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 managers 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.
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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.
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ETHICAL DILEMMA
CATEGORIES
Taking things that dont
belong to you
Saying things you know
arent 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
22

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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

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Kajian oleh Sales & Marketing Management ke atas 200 orang


pengurus jualan

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%)

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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,
Copyright Scandal
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Inc. All
rights reserved.
The Aircraft Brake
has
been
hailed as a

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?
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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 Copyright
thatare
not ethical.
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QUICK TEST OF YOUR ETHICS BELIEFS
Answer 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 dont 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 28
or something at
Business
Ethics
Copyright
work to save my
job. 2012 Pearson Education, Inc. All rights reserved.

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
as you
Business
Ethics answered 29
did.
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Corporate Social
Responsibility
Corporate social responsibility refers
to a corporations 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
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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.
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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
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Ethical issues created by multinationals?

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
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2.3 Syarikat multinasional dan etika


-perniagaan
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
Contoh:
country off against another to escape social
- controls
Undang-undang
persekitaran
any one country
might try to impose
(environmental
the company)laws)
- on
Peraturan kesatuan buruh (union rules)
-

Minimum wage law


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Syarikat multinasional dan


etika perniagaan
Pengoperasian dalam negara berbeza dan negaranegara tersebut mempunyai standard nasional
yang berbeza
- syarikat berdepan dengan masalah
membuat keputusan berkaitan normanorma 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

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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

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Teori Etika
masyarakat
berbeza mempunyai
Relativisme

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.

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Etika relativisme

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
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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."
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Teori relativisme

menerangkan bahawa apa sahaja


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

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Is ethical relativism a reasonable view to


hold?
Bolehkah etika relativisme diterima?

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

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when
two people or two groups have
Philosopher James Rachels:
different
beliefs,
least have
one different
of them is
The fact that
differentat
societies
wrong
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?'
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Jika etika relativisme benar

- kita tidak boleh mengkritik amalanamalan masyarakat- masyarakat lain selagi


amalan-amalan mereka tersebut sejajar
dengan standard mereka sendiri
Eg 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
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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.
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Kohlbergs 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
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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
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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 Inc.
dehumanization,
and
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Four Steps Leading to Ethical


Behavior
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.
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Four Steps Leading to Ethical


Behavior
Step Three: Deciding to do the
ethical course of action.
Deciding to do what is ethical can be
influenced by:
The culture of an organizationpeoples
decisions to do what is ethical are greatly
influenced by their surroundings.
Moral seductionorganizations 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.
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Four Steps Leading to Ethical


Behavior
Step Four: Carrying out the ethical
decision.
Factors that influence whether a person
carries out their ethical decision include:
Ones strength or weakness of will
Ones belief about the locus of control of
ones actions

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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).
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Factors that Mitigate Moral


Responsibility
Minimal contribution

In general, the less ones 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.
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