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Business Ethics


Doing the Right thing, and Making the Good Life Better Welcome and Introduction I am Andy Gustafson I teach Business Ethics at Creighton Son of a Farmer from ... – PowerPoint PPT presentation

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Title: Business Ethics

Business Ethics
  • Doing the Right thing, and Making the Good Life

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

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

  • 1. When I do good, I feel good when I do bad, I
    feel bad. Thats my religion. (Abraham Lincoln)
  • 2. Ethics, too, are nothing but reverence for
    life. This is what gives us the fundamental
    principle of morality, namely, that good consists
    in maintaining, promoting, and enhancing life,
    and that destroying, injuring, and limiting life
    are evil. (Albert Schweitzer)
  • 3. Neither fire nor wind, birth nor death can
    erase our good deeds. (Buddha)
  • 4. Gratitude is not only the greatest of virtues,
    but the parent of all the others. (Cicero)
  • 5. Always do right this will gratify some and
    astonish the rest. (Mark Twain)
  • 6. Good people do not need laws to tell them to
    act responsibly, while bad people will find a way
    around the laws. (Plato)
  • 7. Associate with men of good quality, if you
    esteem your own reputation for it is better to
    be alone than in bad company. (George
  • 8. To educate a person in mind and not in morals
    is to educate a menace to society. (Theodore
  • 9. A good name is more desirable than great
    riches to be esteemed is better than silver or
    gold. (Pr 221)
  • 10. Leadership is a potent combination of
    strategy and character. But if you must be
    without one, be without the strategy. (General
    H. Norman Schwarzkopf)
  • 11. A people that values its privileges above its
    principles soon loses both. (Dwight D.
  • 12. What does it profit a man to gain the whole
    world, yet forfeit his soul?
  • 13. Relativity Applies to physics, not ethics.
    (Albert Einstein)

  • QUIZ

Question 1
  • 1. Which of the following has been found to be a
    true statement regarding ethics and the insurance
  • 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
  • d.) All of the above are true statements.

  • 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)

  • 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.

  • 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)

  • 3. Which one of the following statements has been
    found to be true?
  • a.) In general, publicly held (stock) companies
    are more ethical because of the external scrutiny
    they receive.
  • b.) In general, mutual insurance companies have
    made their codes of conduct more prominent and
    ethical attitudes more positive than stock
  • c.) There is no relationship to ethics and
    organizational ownership.
  • d.) Over the long run, the most successful
    companies have focused first and foremost on
    profit maximization.

  • Answer Q3. (b) (Diacon Ennew, 1996). (d) this
    is one of the myths exposed in the book by Jim
    Collins entitled Built To Last. In as study of
    the most successful and enduring companies in
    America, 17 out of 18 companies were more
    ideologically driven, and less purely profit
    driven then their peers. Contrary to business
    school doctrine, what drives a company is its
    belief that it provides a value and makes some
    contribution to society. Maximizing shareholder
    wealth, or profit maximization, has not been the
    dominant force for visionary companies. Instead
    they pursued a cluster of objectives. Making
    money was only one, and not necessarily the
    primary one. They are equally guided by a purpose
    and core values beyond just making money. Profits
    are what sustain the life of an organization, but
    they are not what drive the organization to
    succeed in the long run.

  • 4. All of the following are true statements
  • 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
  • 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.

  • Answer Q4. (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).

  • 5. Which one of the following is a true
  • a.) Most employees report that a companys
    ethical position is stated in their training
  • 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.

  • Answer Q5. (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).

Vocabulary Business Ethics
  • What is Business ?
  • What is Ethics ?

Business is inherently social
  • Business has its own culture
  • Enron, Paypal, your office
  • Business Transforms Culture
  • Mutual of Omaha, FNB, community outreach
  • Business is about relationships
  • Insurance business is about relationships

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)

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)
  • Examples of Stakeholders

Your business makes the world Better or Worse for
people by
  • Your products/Services
  • 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

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

The challenge Balancing Responsibilities
What is ethics?
Ethics isnt legal Difference between the
Law and Ethics
  • Some legal issues are neither ethical or
  • Some ethical issues have no laws to support them.
  • Law often tries to encourage ethical behavior
  • Better to have self-regulation than more govt

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

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

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
    decisionmaking, rooted in values.

Many think Ethics is just about what to NOT do
Dont do __!!
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
  • Mutual of Omaha Project, Real Estate

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

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?

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.

Moral Psychology
  • Milgram Experiment

Question Why do Soccer moms sometimes drive
like jerks?
Question Why do people forge signatures and
Why do people stretch or edit the truth, or
Moral Development Why do people do unethical
  • 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 insurance professionals cut corners?

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

More Moral Psychology

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

moral dilemma
  • In Europe, a woman was near death from a special
    kind of cancer. There was one drug that the
    doctors thought might save her. It was a form of
    radium that a druggist in the same town had
    recently discovered. the drug was expensive to
    make, but the druggist was charging ten times
    what the drug cost him to make. He paid 400 for
    the radium and charged 4,000 for a small dose of
    the drug. The sick woman's husband, Heinz, went
    to everyone he knew to borrow the money and tried
    every legal means, but he could only get together
    about 2,000, which is half of what it cost. He
    told the druggist that his wife was dying, and
    asked him to sell it cheaper or let him pay
    later. But the druggist said, "No, I discovered
    the drug and I'm going to make money from if."
    So, having tried every legal means, Heinz gets
    desperate and considers breaking into the man's
    store to steal the drug for his wife.

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

Part 2 Ethical Principles, and how to use them
  • Brief explanation of the 5 classic ethical
  • Egoism
  • Social Contract Theory
  • Utilitarianism
  • Duty-Based
  • Virtue Ethics

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

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

  • 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.

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

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.

  • 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!

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
  • Dont treat customer as a just a means to money

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

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?

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

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?....

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.?

Guiding Questions Info
  • Information gathering questions
  • Who are the stakeholders and what are their
  • 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?

Guiding Questions Options
  • Questions to help identify and evaluate
  • 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

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?)

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

Summary What have we covered?
  • What is Business Ethics?
  • Some moral theories
  • Moral Development
  • Moral Decision Making

The End
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