Business Ethics

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Business Ethics

• Doing the Right thing, and Making the Good Life
  Better

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Welcome and Introduction

• I am Andy Gustafson
• I teach Business Ethics at Creighton
• Son of a Farmer from Aurora, NE

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Overview of Ethics

• What is Business Ethics?
• Some Ethical Quotes/Quiz
• Some moral theories
• Moral Development
• Professional Standards/Industry Paradigms
• Moral Decision Making

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• ETHICS QUOTES
• 1. When I do good, I feel good when I do bad, I
  feel bad. Thats my religion. (Abraham Lincoln)
• 2. A man does what he must.. in spite of
  personal consequences, in spite of obstacles and
  dangers, and pressures.. and that is the basis of
  all human morality. (JFK)3. If you don't have
  integrity, you have nothing. You can't buy it.
  You can have all the money in the world, but if
  you are not a moral and ethical person, you
  really have nothing. (Henry Kravis)
• 4. Always do right this will gratify some and
  astonish the rest. (Mark Twain)
• 5. Good people do not need laws to tell them to
  act responsibly, while bad people will find a way
  around the laws. (Plato)
• 6. Associate with men of good quality, if you
  esteem your own reputation for it is better to
  be alone than in bad company. (George
  Washington)
• 7. To educate a person in mind and not in morals
  is to educate a menace to society. (Theodore
  Roosevelt)
• 8. A good name is more desirable than great
  riches to be esteemed is better than silver or
  gold. (Pr 221)
• 9. Two wrongs dont make a right. (old english
  proverb)
• 10. Its not enough to be busy so are the ants!
  The question is what are we busy about?
  (thoreau)
• 11. What does it profit a man to gain the whole
  world, yet forfeit his soul?
• 12. It takes less time to do a thing right than
  to explain why you did it wrong. (longfellow)
• 13. Live so that when your children think of
  fairness and integrity, they think of you. (H.J.
  Brown)
• 14. The most important persuasion tool you have
  in your entire arsenal is integrity (Zig Zigler)

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ETHICS

• QUIZ

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Question 1

• 1. Which of the following has been found to be a
  true statement regarding ethics and the insurance
  industry?
• a.) On average, insurance practitioners are more
  likely to act unethically in business practices
  than in purely personal situations.
• b.) More than 50 percent of people in business
  indicate having observed one or more unethical or
  illegal acts in the past twelve months.
• c.) Insurance practitioners believe that
  managements emphasis on the bottom line is one
  of the main factors leading to unethical
  decision-making.
• d.) All of the above are true statements.

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Answer

• Answer Q1. (d) All of the above are true
  statements. (a) is based on research by Eastman,
  Eastman, and Eastman 1996 (b) is American
  Society of CLU and CFC Ethics Officer
  Association) (c) Cooper and Frank, 1991. People
  with high ethical values in their personal lives
  may act unethically in their business practices
  because of what is expected and rewarded in their
  work. (Reilly, Kjy 1990)

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Question

• 2. A strong organizational culture is one in
  which there is a high expectation of conformity
  with the organizations beliefs, values, and
  purpose. All of the following are true statements
  regarding organizational culture EXCEPT
• a.) In general, members of organizations having
  strong cultures are more likely act ethically.
• b.) In general, members in organizations with
  weak cultures are more likely to base their
  ethical decisions on the norms and values of
  small groups within the organization.
• c.) In general, members of large organizations
  feel less responsibility for their actions than
  those in small organizations.
• d.) In general, higher level employees have less
  ethical beliefs and their ethical decision-making
  is less than lower level employees.

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Answer

• Answer Q2. (a) A strong culture can lead to more
  ethical behavior if the cultures values and
  purposes are ethical but it can also lead to
  conformity of unethical behavior. (Diacon
  Ennew, 1996) (b) is true (Trevino 1986) (c) is
  true because responsibility is more diffused in
  large organizations (Ford Richardson, 1994)
  (d) (Ford Richardson 1994)

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Question

• 3. All of the following are true statements
  EXCEPT
• a.) Individuals see themselves as more ethical
  than their coworkers or supervisors.
• b.) The ethical behavior of supervisors strongly
  influences the ethical behavior of their
  subordinates.
• c.) In general, supervisors and managements
  actions have little influence over individuals
  ethical behavior because individuals form their
  ethical values outside of the work environment.
• d.) Supervisors who are successful performers
  have greater influence over their subordinates
  ethical behavior.

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Answer

• Answer Q3. (c ) is the only one that is not true.
  Countless studies show that although some core
  values may not change, most values and ethical
  standards of conduct are influenced by
  supervisors and management actions (a) is true
  (Tyson 1992), people judge themselves by their
  intentions and they judge others by their
  actions. (Cooper, 1996) (b) Nel Watson, 1989,
  Cooper Frank, 1992)) (d) True, (Javidan,
  Memmels, Devine Dastmalchian).

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Question

• 4. Which one of the following is a true
  statement?
• a.) Most employees report that a companys
  ethical position is stated in their training
  courses.
• b.) The existence of a formal code of ethics is
  a strong deterrent to unethical behavior.
• c.) The awareness of a formal code of ethics is
  a strong deterrent to unethical conduct rather
  than just the mere existence of one.
• d.) The most successful ethical training
  programs are ones that emphasize how to make
  ethical decisions rather than setting clear,
  uncompromising rules.

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Answer

• Answer Q4. (d) As in other training in other
  aspects, training on how to make decisions is
  more effective in changing behaviors than
  training that sets out lists of rules to abide
  by. (Mahoney, 1997) (a) less than half of
  employees state that their companys ethical
  position is stated in training (b) The existence
  of a formal code has no relationship on ethical
  behavior. (Weaver, Trevino, Cochran, 1999) Enron,
  for example, had an award-winning 79 page Code of
  Conduct. (c) Unfortunately, awareness by
  employees does not affect their behavior either.
  (Kohut Corriher, 1994, Vitell, 1997). However,
  clearly communicated and strongly enforced
  guidelines do make a difference. (Laczniak
  Inderrieden, 1987).

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Vocabulary Business Ethics

• What is Business ?
• What is Ethics ?

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Business is inherently social

• Business has its own culture
• Enron, Paypal, your office
• Business Transforms Culture
• Kiewit, FNB, community outreach
• Business is about relationships
• Workers, subcontractors, suppliers

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Business Its purpose/goal

• Lone Ranger/I am an Island View
• The purpose of business is to make me money, and
  increase stockholder value
• (Milton Friedman)

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Alternate Stakeholder View

• Business should make money, but it has many
  stakeholders groups/individuals who have a stake
  in what the business does. Owners are not the
  only ones with a stake (Freeman)

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Your business makes the world Better or Worse for
people by

• The way you treat your customers
• The way you treat your employees or coworkers
• The way you treat your boss/company
• The way you contribute to the local community

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Responsibilities in Business

• To your employer
• To Customers
• To employees
• To boss/es
• To your community
• To your family
• To your God

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The challenge Balancing Responsibilities
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What is ethics?
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Ethics isnt legal Difference between the
Law and Ethics

• Some legal issues are neither ethical or
  unethical.
• Some ethical issues have no laws to support them.
• Law often tries to encourage ethical behavior
• Better to have self-regulation than more govt
  regulations

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Ethics and Regulation

• Government regulation often is designed to
  promote ethical behavior
• SOX
• OSHA Regulations
• EPA Regulations
• Federal Sentencing Guidelines

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Federal Sentencing Guidelines

• 1. Having Standards
• 2. Assigned Responsibility - Adequate Resources
• 3. Due diligence in Hiring
• 4. Communications and Training
• 5. Monitoring, Auditing, Reporting
• 6. Promotion and Enforcement of Ethical Conduct
• 7. Reasonable Steps to Prevent Misconduct

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Company Ethics

• Company Policy often has some basis in the
  compliance regulations and legal statutes and
  fine schedules set up by government.
• But Personal ethics requires personal
  decision-making, rooted in values.

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Many think Ethics is just about what to NOT do
Dont do __!!
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But ethics is more than just what not to do

• Minimal What we shouldnt do
• Dont steal, dont kill, dont lie
• Better What we should do (justice)
• Be fair, Be honest, Fulfill duties, work hard
• Best What we could do to make things excellent
  for all of us
• Zoo, Childrens Hospital, Holland, Real Estate

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Business can help create an excellent life

• Example of this mindset Midland National Life
  insurance mission
• "To make life better for individuals and
  families to afford security, trust, superior
  value, and peace of mind to those we serve to
  offer the best in financial resources and
  services.

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How does Business make life better? Table
discussion (5 min)

• How do you make life better for your community
  through your business?
• What are positive things you do for the benefit
  of the many through your work?
• Do you see these things you do for others as
  being ethical?

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The Point is Realize the good you do in society!

• Businesses do have an effect on society and
  culture. Business is not just about making money.

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Moral Psychology

• WHY DO PEOPLE DO WRONG THINGS?
• Milgram Experiment

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Question Why do Soccer moms sometimes drive
like jerks?
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Question Why do people forge signatures and
documents?
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Why do people stretch or edit the truth, or
exaggerate?
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Moral Development Why do people do unethical
things?

• Why did the soccer mom drive like a jerk?
• Why did my student cheat on the exam?
• Why did people at Enron do unethical things?
• Why do subcontractors cut corners?

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Some reasons people do wrong

• Ignorant
• In a hurry
• Thoughtless
• Didnt plan ahead
• Financial difficulties
• Pressure from organization
• Not clear communication from management
• Lazy
• Want a quick buck
• They are a Bad evil wicked person

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More Moral Psychology

• WHY DO PEOPLE DO THE RIGHT THINGS?

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Kohlbergs theory of moral development

• Stage 1 Obedience and Punishment
• Stage 2 For self-benefit
• Stage 3 For sake of reputation (good boy)
• Stage 4 Maintain Social order
• Stage 5 Contractual-Legalistic orientation
• Stage 6 Conscience/Principle Orientation

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moral dilemma Condo

• Scott Bennett is the engineer assigned to deal
  with vendors who supply needed parts to the
  Upscale Company. Larry Newman, sales
  representative from one of Upscale's regular
  vendors, plays in the same golf league as Scott.
  One evening they go off in the same foursome.
  Sometime during the round Scott mentions that he
  is really looking forward to vacationing in
  Florida next month. Larry says his uncle owns a
  condo in Florida that he rents out during the
  months he and his family are up north. Larry
  offers to see if the condo is available next
  month -- assuring Scott that the rental cost
  would be quite moderate.
• What should Scott say?

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Condo II

• Larry tells Scott he can rent his uncle's condo
  for 100 a week. "My uncle," Larry says, "gets
  nervous when he rents to total strangers. He
  likes to have reliable people stay in his condo
  the condo is paid for, and my uncle isn't
  interested in making money on it -- he just wants
  a little help meeting basic operating expenses
  and the taxes."
• Scott accepts the offer and begins making plans
  for his vacation. Just before leaving, an Upscale
  vice president sends out a new policy statement
  that says, among other things "Accepting
  incentives from vendors is strictly prohibited".
• What should Scott do?

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Kohlbergs theory of moral development

• Stage 1 Obedience and Punishment
• Stage 2 For self-benefit
• Stage 3 For sake of reputation (good boy)
• Stage 4 Maintain Social order
• Stage 5 Contractual-Legalistic orientation
• Stage 6 Conscience/Principle Orientation

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Part 2 Ethical Principles, and how to use them

• Brief explanation of the 5 classic ethical
  theories
• Egoism
• Social Contract Theory
• Utilitarianism
• Duty-Based
• Virtue Ethics

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Egoism

• People should always do what is in their own
  self-interest.
• (ex do what it takes to get repeat business)

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Social Contract Theory

• Compromise-Egoism Make concessions to others,
  but try to get what you can
• Obey the law, respect others because you want to
  be respected, etc
• When driving, slow down near other schools, not
  just your own kids school

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UtilitarianOutcome-Based

• Do what benefits the greatest number the most
• Jump on the grenade if it benefits the most.
• Do what is right if it will make for a better
  society in the long run, even if you could have
  short term maximization right now
• I can save my client on this insurance premium by
  under-reporting risks, but in the long run this
  will cause the insurance company and other
  clients to be at considerable risk.

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We can lose our moral conscience and concern!

• Capacity for the nobler feeling is in most
  natures a very tender plant, easily killed, not
  only by hostile influences, but by mere want of
  sustenance and in the majority of young persons
  it speedily dies away if the occupations to which
  their position in life has devoted them, and the
  society into which it has thrown them, are not
  favourable to keeping that higher capacity in
  exercise.

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John Stuart Mill

• Men lose their high aspirations as they lose
  their intellectual tastes, because they have not
  time or opportunity for indulging them and they
  addict themselves to inferior pleasures, not
  because they deliberately prefer them, but
  because they are either the only ones to which
  they have access, or the only ones which they are
  any longer capable of enjoying.

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Principle/Duty-Based

• Only act in a way that you could make your act a
  universal law
• Should I lie? Would I make lying a universal
  law? No. Then dont lie!
• Should I cheat on my taxes? Would I want
  everyone to do that? No. Then dont!

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Principle 2

• Treat others always as an end, not as a means to
  an end.
• Dont treat checkout person as humanoid ATM
• Dont treat other drivers as obstacles in your
  path
• Dont treat customer as a just a means to money

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Virtue Ethics/Nebraska Ethics

• What is the GOOD life,
• and how do we achieve that?
• Aim for excellence
• Moderation/Balance
• -- Vice Virtue Vice
• (Too little) (just right) (too much)
• Coward Courage Foolhardy

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Being Virtuous

• Does depend on the situation
• When to be witty
• Does depend on the individual
• Child Maestro
• Is something we must constantly strive to upkeep,
  work at
• We can lose our touch!
• It helps to have roll models WWJD?

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Virtues

• Honesty
• Integrity
• Responsibility
• Respect/Caring
• Truthfulness

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Moral Principles for Living and Working

• Banker Friend look in the mirror rule
• Showgirl from Las Vegas Grandma rule
• Golden Rule do unto others
• Silver Rule do no harm
• What rules do you use?....

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Guiding Questions

• Questions to help decide if the situation or
  decision has ethical dimensions
• Is it legal but unethical?
• Is it necessary?
• Does it involve a core ethical principle such as
  honesty, integrity, truthfulness, etc.?

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Guiding Questions Info

• Information gathering questions
• Who are the stakeholders and what are their
  rights?
• Consider the source, reliability, and accuracy of
  all relevant information.
• Who should be involved in this decision?
• Do I have enough information to make a sound
  ethical decision? If not, how do I get it?

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Guiding Questions Options

• Questions to help identify and evaluate
  alternatives
• Am I rationalizing to justify what I want to do?
• Am I using anyone for my own personal gain? (Who
  will be injured and how)
• Are there conflicting loyalties to stakeholders?
• What would result in the long run if everyone did
  this?

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Guiding Questions Conclusion

• Questions that help in reaching a decision
• Could I defend my position before the Board of
  Directors, the CEO, or the media?
• What would ______________________ do? (Fill in
  the name of the best role model you know.)
• Will this seem to be the right decision a year
  from now? Five years from mow?
• Do I have the moral courage to take the more
  ethical course of action? (Am I willing to pay
  the price for my convictions?)

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Final Thoughts

• Usually, doing the right thing is clear, even if
  its not easy
• We tend to cut corners for short-term apparently
  inconsequential issues, but this can come back to
  haunt us
• Having Ethical Habits takes practice, and some
  thoughtfulness.

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Summary What have we covered?

• What is Business Ethics?
• Some moral theories
• Moral Development
• Moral Decision Making

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The End