What factors determine an individuals ethics for you which factor has been most significant?

Learning Objective Summary

1. Understand what is meant by business ethics.

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Learning Outcomes
Principles of Ethical Decision Making
Understanding Differences in Ethical Reasoning
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Ethics is the study of right and wrong and of the morality of choices. Business ethics is the application of moral standards to business situations.

2. Identify the types of ethical concerns that arise in the business world.

Ethical issues arise often in business situations out of relationships with investors, customers, employees, creditors, or competitors. Business people should make every effort to be fair, to consider the welfare of customers and others within the firm, to avoid conflicts of interest, and to communicate honestly.

3. Discuss the factors that affect the level of ethical behavior in organizations.

Individual, social, and opportunity factors all affect the level of ethical behavior in an organization. Individual factors include knowledge level, moral values and attitudes, and personal goals. Social factors include cultural norms and the actions and values of coworkers and significant others. Opportunity factors refer to the amount of leeway that exists in an organization for employees to behave unethically if they so choose.

4. Explain how ethical decision making can be encouraged.

Governments, trade associations, and individual firms can all establish guidelines for defining ethical behavior. Governments can pass stricter regulations. Trade associations provide ethical guidelines for their members. Companies provide codes of ethics - written guides to acceptable and ethical behavior as defined by an organization - and create an atmosphere in which ethical behavior is encouraged. An ethical employee working in an unethical environment may resort to whistle-blowing to bring a questionable practice to light.

5. Describe how our current views on the social responsibility of business have evolved.

In a socially responsible business, management realizes that its activities have an impact on society and considers that impact in the decision-making process. Before the 1930s, workers, consumers, and government had very little influence on business activities; as a result, business leaders gave little thought to social responsibility. All this changed with the Great Depression. Government regulations, employee demands, and consumer awareness combined to create a demand that businesses act in socially responsible ways.

6. Explain the two views on the social responsibility of business and understand the arguments for and against increased social responsibility.

The basic premise of the economic model of social responsibility is that society benefits most when business is left alone to produce profitable goods and services. According to the socioeconomic model, business has as much responsibility to society as it has to its owners. Most managers adopt a viewpoint somewhere between these two extremes.

7. Discuss the factors that led to the consumer movement and list some of its results.

Consumerism consists of all activities undertaken to protect the rights of consumers. The consumer movement generally has demanded - and received - attention from business in the areas of product safety, product information, product choices through competition, and the resolution of complaints about products and business practices. Although concerns over consumer rights have been around to some extent since the early nineteenth century, the movement became more powerful in the 1960s when President John F. Kennedy initiated the consumer "bill of rights." The six basic rights of consumers include the right to safety, the right to be informed, the right to choose, the right to be heard, and the rights to consumer education and courteous service.

8. Analyze how present employment practices are being used to counteract past abuses.

Legislation and public demand have prompted some businesses to correct past abuses in employment practices - mainly with regard to minority groups. Affirmative action and training of the hard-core unemployed are two types of programs that have been used successfully.

9. Describe the major types of pollution, their causes, and their cures.

Industry has contributed to the noise pollution and the pollution of our land and water through the dumping of wastes and to air pollution through vehicle and smokestack emissions. This contamination can be cleaned up and controlled, but the big question is, Who will pay? Present cleanup efforts are funded partly by government tax revenues, partly by business, and in the long run, by consumers.

10. Identify the steps a business must take to implement a program of social responsibility.

A program to implement social responsibility in a business begins with total commitment by top management. The program should be planned carefully, and a capable director should be appointed to implement it. Social audits should be prepared periodically as a means of evaluating and revising the program. Programs may be funded through price increases, reduction of profit, or federal incentives.

Learning Outcomes

Explain the concept of “ethical intensity.”
Identify seven common principles of ethical decision-making (long-term self-interest, personal virtue, utilitarianism, individual rights, government requirements, distributive justice, and religious injunction).
Explain why managers can disagree about what is ethical.

How might ethics affect the decisions you make as an employee?

The 2016 presidential election showed how much people can disagree on the relative importance of ethical issues. Opinions that were anathema in prior elections became common, because people saw that other issues, economic issues, were neglected in the push for political correctness. Similarly in business, a manager must prioritize issues. Each issue will be unique in some ways, but there are some general factors to guide a decision. Ethical intensity is the degree of importance of an issue for an individual or group. The factors that determine ethical intensity include the following:

Magnitude, or significance of the consequences
Concentration of effect, or the number of people affected
Proximity of the decision maker to the victim or beneficiary of the decision
Probability that the decision implemented will lead to the predicted consequence
Social consensus that a proposed decision is negative or positive
Temporal immediacy, or the elapsed length of time between when a decision is made and when the resulting consequences occur

The significance of the consequences refers to the total harm or benefit that follows from the decision. If a few customers were overcharged a small amount by mistake, it may not be worth correcting the mistake. If thousands were overcharged, then the ethical intensity is much higher. If the overcharged customers are friends or neighbors (proximity), it becomes more important to address the issue.

Drug companies often deal in probabilities of harm. A drug may help many people, but there is a chance that it will harm a small number. The measles, mumps, and rubella (MMR) vaccine can cause serious side effects. The company and the Food and Drug Administration (FDA) trade off the benefit to millions and risk of harm to a few in an ethical decision. After much debate, society has developed a consensus that this is the best course. Other behaviors blessed by social consensus in the United States are considered unfair or illegal in other countries. For example, some food dyes banned in the United Kingdom are widely used in the United States.

Some consequences are distant in time. People deal well with issues where they can see the consequences quickly. The fire retardant benefit of asbestos was easy to see. The lung cancers from exposure often did not appear for 30 to 40 years. It took 50 years for lawmakers to make the ethical choice after the dangers were recognized. The perspective taken based on the intensity factors can vary between individuals and groups. Reaching a decision in a group setting like a company can take a long time.

Principles of Ethical Decision Making

After ethical intensity, a thoughtful manager will consider the principles that might apply to an issue. There is no one set of principles to check off, but the seven listed here are common to most people.

Legal and regulatory requirements set the minimum standard for behavior. Any company or individual can disagree with the law, but given the consequences, it must be done carefully. The Hobby Lobby stores refused, on religious grounds, to follow the Affordable Care Act requirements for certain health benefits. The US Supreme Court found in their favor in 2014.
Long-term self-interest means the pursuit of outcomes that will benefit the self in the long run. For example, a company must make choices to ensure its continued existence. The costs and harm from failure are substantial.
Personal virtue refers to conformity to a standard of righteousness. You should make choices that are honest and truthful individually. The good of the company does not justify lying.
Utilitarianism seeks the greatest benefit for the maximum number of people. This is often difficult to judge over large groups of people.
Individual rights are related to the freedom to act and think without punishment through regulatory, legal, or societal means. For example, we make individual health decisions to smoke or drink beverages loaded with sugar even though the health costs are borne by many through private and government insurance programs.
Distributive justice is the fairness of the outcomes. That is, how are the benefits shared or distributed among the individuals in a group? The US market system can have winner-take-all outcomes. Our welfare system redistributes a little to the losers in the market game who are also part of our society.
Religious injunction is the main moral and ethical guide for many people.

Watch the following video for an overview of the ethical decision making process:

You can view the transcript for “Integrating Ethics: Ethical Decision-Making” here (opens in new window).

Understanding Differences in Ethical Reasoning

Achieving an ethical outcome while being guided by these principles is not always simple. Each individual has a different combination of perceptions, moral codes, interests, religious beliefs, convictions, and motives. Furthermore, what may be morally sound to one individual may be unethical to another. What may harm one individual or group may benefit another. Therefore, managers often disagree about what is considered ethical.

For example, UTP, which is devoted to treating employees well, often runs into ethical issues. The company experienced a growth spurt about 10 years ago, and senior executives decided to have a larger building constructed to provide a more comfortable and spacious working environment for its employees. It also planned to continue growing, so a larger building was designed than was projected to be needed at the time.

Unfortunately, the company grew in a way that was unexpected. Customer demand and an evolving business model required that the company hire more mid-level managers that specialize in a certain skill. In the old building, these managers had midsize offices. They moved into midsize offices in the new building, and more midsize offices were left over. The company grew to the point that all of these offices were filled.

New hires were placed in smaller offices until these offices were also filled. After a couple of years, a midsize office became available when one midlevel manager, who had been with the company for more than 20 years, retired. However, the office sat vacant for about a year because senior executives did not want to offend any of the recently hired midlevel managers by offering one of them that office. The company needed to replace the retired employee, which meant the office had to be filled.

The ethical issue was whether to give the midsize office to an employee who started with the company 17 years prior as a nonmanagerial employee and then was promoted to midlevel manager or to the recently hired and ambitious midlevel manager with an advanced degree. Each decision could be considered fair to one individual and unfair to the other, depending on the views of those involved. For each individual involved, the principle of utilitarianism would influence the decision and be used to determine fairness. It would be in the best interest of the individual who does not get the office to focus on other benefits of being employed by the company rather than the perceived injustice of losing the office battle because the situation is not very ethically intense.