Business Ethics Review

Chapter 1
Understanding Business Ethics
Professor: Mohamed Abdelhakim

Mohamed.abdelhakim@cud.ac.ae
Mobile and WhatsApp 0506280766

© 2019 Cengage. All rights reserved.
Business Ethics
It is difficult to precisely define what is business

ethics.
Ethics is a code of moral principles and values that
govern the behaviour concerning what is right and
wrong
Set of moral values that control peoples’ behaves at
workplace
Good ethics such as
Responsibility, respect, probity, honesty, and trust
why understanding and applying Business ethics is
challenging?
Problem :Given the decline in business ethics and
recent corporate scandals it is proposed that
ethics be brought back to the forefront of
strategic management and integrated into the
strategic management process.
• Management involves coordinating and overseeing

the work activities of others so that their activities are
completed efficiently and effectively.
Or
• It is a continuous social process that utilize the
available sources to achieve goals
Business strategic goals
Profit maximization
Continuity
Customer satisfaction
Internal customer/Employees satisfaction
Corporate social responsibility/ society
satisfaction

Ethics are required to achieve which goal?
Decision making
In short, decision making is the heart of all
managerial functions.
So you are deciding while practicing
planning, organizing,……..
Decision means a process of selecting one alternative

among many to solve a problem or to achieve goal.
To decide/manage you will need information and

computerized systems
Ethics are a key factor in responsible decision making

Types of Decisions
• Unstructured
• Decision maker must provide judgment to solve problem
• Novel, important, nonroutine
• No well-understood or agreed-on procedure for
making them
• Structured
• Repetitive and routine
• Involve definite procedure for handling them so do not
have to be treated as new
• Semistructured
• Only part of problem has clear-cut answer provided
by accepted procedure
Decision Making and Information Systems
Information Requirements of Key Decision-Making

Groups in a Firm
Senior managers, middle managers,

operational managers, and employees have
different types of decisions and information
requirements.
The Decision-Making Process
1. Intelligence
• Discovering, identifying, and understanding the
problems occurring in the organization—why is there a
problem, where, what effects it is having on the firm
2. Design
• Identifying and exploring various solutions
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and monitoring how
well solution is working
3
Ethical Issues
• It is important to learn how to make decisions
in the internal environment of an
organization to achieve personal and
organizational goals.
• But business does not exist in a vacuum.
• Decisions in business have implications for
investors, employees, customers,
suppliers and society.

The Basic Concepts in Business 7
Ethics (1 of 11)
Ethics are moral rules of particular individuals that

are implanted in their decision making
processess, which enable to reconcile their
ultimate effect with social norms (Morf,
Schumacher, Vitell, 1999)
• Ethics (in political and legal context) it relates to

legal rules of officers’ conduct, that are focused on
the necessity of avoiding conflict of interest,

Ethics (2 of 11)
• Ethics (in economic world) means compliance with

existing law and requirements
• Ethics (in science) a separate department of
philosophy or applied ethics, namely the field of
science where ethics answers ethical questions in a
specific domain and industry (e.g. as clinic ethics,
ethics in public administration or business ethics)
(Preston, 1997)

Ethics (3 of 11)
• Business ethics : the implemntation of ethical values into behaviour
in business (Business Ethics Institute, 2007).
• Business ethics: organizational principles, values, and norms that
may originate from individuals, organizational statements, or from the
legal system that primarily guide individual and group behavior in
business. CSR, bribery, discrimination
• Ethical culture: organizational principles, values, and norms that are
adhered to by the company and its personnel.
• Corporate social responsibility: actions associated by firms
with various stakeholder (other than investors) interests as a
priority.
• Sustainability: relates specifically to the environment (air, land,
and
water).
Ethics (5 of 11)
• Values: Enduring beliefs and ideals that are socially

enforced (teamwork, trust and integrity).
• Such values are often based on organizational or
industry best practices.
• Core values: the most profound standards shared and
accepted by the organization members
(Ferrell, Fraedrich, Ferrell,
2017)

13
Business ethics and the law
The law might be said to be a definition of the minimum
acceptable standards of behaviour. However, the law does not
explicitly cover every possible ethical issue in business—or for
that matter outside of business. law is essentially an
institutionalization or codification of ethics into specific social
rules, regulations, and proscriptions. Nevertheless, the two are
not equivalent.
Ethics (6 of 11)
Webster defines the notion of “core” as “the central,

deepest part of everything”, whereas the notion of
“value” as “rules, objectives, or social standards
shared or accepted by a human being, a social class,
or a society” (Webster Dictionary 2008).
According to J. Porras and J. Collins (1994), core

values, beside the company’s mission, are a
component of the leading ideology.

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13
Examples of companies and their core values
Company Core values

Boeing Innovation, risk-taking, choosing challenges, product safety,
product reliability, quality, integration, ethics.
General Innovation, responsibility towards customers, employees,
Electric communities and shareholders, honesty, integrity, responsibility
of an individual.
Marriott Friendly service, customer orientation, people as number 1,
respect for an individual, joy and hard work, constant self-
development, overcoming difficulties for the purpose of
character building.
Motorola Product quality, customer orientation, constant
improvement, respect for an individual, honesty, integrity, ethics.
Procter & Product quality, constant self-development, honesty, respect for
Gamble an individual, integration, co-ownership, trust.

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Ethics (7 of 11)
Organizations often have a set of core values or principles

which reflect the way they do business:
• business values such as innovation, customer service
and
reliability,
• ethical values like integrity, honest, trust, responsibility.
Core values guide the way business is done - what is

acceptable, desirable and responsible behavior, above and
beyond compliance with laws and regulations.

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Bad ethics and illegal issues examples
Corruption is unethical and illegal behaviour or practice in business
Examples:
Bribery/ under table payment is a crime of giving or taking money, benefits
to get a favour
Embezzlement: is a crime of stealing money which is in somebody
responsibility
Counterfeiting: manufacture of false money for gain, a kind of forgery in
that something is copied so as to defraud by passing it for the original or
genuine article.
Fraud: In law, fraud is intentional deception to secure unfair or
unlawful gain, or to deprive a victim of a legal right.
Cybercrimes, Child labour, Smuggling, and Money laundry,

How to fight corruption, bad ethics, and illegal issues
Awareness in education, and all sources of ethics,
organizational culture, leadership, maintain a good value
system, social auditing, enforcing law, and Using IT for
prevention, detecting, and auditing.

Hire good employees, develop security systems,
encourage people to report corruption and secure witness
Ethics (8 of 11)
Economic crises of recent years and

numerous corruption scandals across the
world severely damaged social trust in
corporations and their leaders.

32
Ethics
• The formal ethical infrastructure as well as its external
mechanism, cannot protect a company from wrongdoing.
• Each regulation, formal system, and knowledge base
has its
limitations.
• Within the process of ethical and moral decision making,
there is only a human being with his or her knowledge
experience, character, value system, moral, and social
intelligence.
• That is why, the business ethics education - the
education for integrity - is so important.

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37
Why Study Business Ethics?
• Identify ethical issues

• Workplace integrity: pressure to compromise
organizational standards, observed misconduct,
reporting of misconduct when observed and retaliation
against reports.
• Misuse of company resources
• Abusive behavior, harassment, accounting fraud,
conflicts of interest, defective products, bribery, product
knockoffs (fake), employee thefts.

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41
Studying business ethics is

valuable for several reasons
• Business strategy decisions involve complex
and detailed discussions. A high level of
personal moral development may not prevent
an individual from violating the law in an
organizational context.
• The morals people learn from family, religion,
and school may not provide specific guidelines
for complex business decisions.

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Studying business ethics is

valuable for several reasons
• Studying business ethics helps businesspeople
begin to identify ethical issues, recognize the
approaches available to resolve them, learn
about the ethical decision-making process and
ways to promote ethical behavior, and begin to
understand how to cope with conflicts between
personal values and organizational values.

59
The Benefits of Business Ethics

60
The Benefits of Business

Ethics (1 of 5)
• Ethics Contributes to Employee Commitment
• Willingness to sacrifice for the organization.
• Increases group creativity and job satisfaction;
decreases turnover.
• Less pressure to compromise ethical standards,
• Greater absence of misconduct.
• Strong community involvement increases loyalty and
positive
self identity.

61

Ethics (2 of 5)
• Issues fostering the development of an ethical

culture
• Absence of abusive behavior
• Safe work environment
• Competitive salaries
• Fulfillment of all contractual obligations toward employees.

62

Ethics (3 of 5)
• Ethics Contributes to Investor Loyalty

• Provides a foundation for efficiency, productivity, and profits.
• Negative publicity, lawsuits, and fines can lower stock prices,
diminish customer loyalty, and threaten a company’s long-term
viability.
• Demand for socially responsible investing is increasing.

63

Ethics (4 of 5)
• Ethics Contributes to Customer Satisfaction

• High levels of perceived corporate misconduct
decreases customer trust.
• Companies viewed as socially responsible increase
customer trust and satisfaction.
• Consumer respondents stated they would pay more for
products from companies that give back to society in a
socially responsible and sustainable manner.

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Ethics (5 of 5)
• Ethics Contributes to Profits
• Better business performance.
• Part of strategic planning toward obtaining the outcome of
higher profitability.
• Business ethics is becoming more than just a function of
compliance; It’s becoming an integral part of management’s
efforts to achieve competitive advantage.

Marketing Ethics (1 of 2)
Corporate marketing ethics policies should be

developed by firms as guidelines for handling various
issues and dilemmas.
Distributor relations
Advertising standards
Customer service
Pricing
Product development
General ethical standards
Marketing Ethics (2 of 2)
Principles are needed to guide companies and
marketing managers on issues of ethics and social
responsibility.
The free market and the legal system should decide such
issues.
Responsibility is in the hands of individual companies and
managers.
Addressing ethics helps build strong customer
relationships based on honesty and trust.
Ethical Norms Suggested by the American Marketing Association
Do no harm
Foster trust in the marketing system
Embrace ethical values
Ethical Decision-Making Models
for Accountants
▪ All approaches identify
❑ Facts and alternatives
❑ Stakeholders
❑ Dominant ethical issues
❑ Affect on stakeholders
▪ Different ethical decision-making models adapt or
combine major philosophical frameworks
❑ Accounting models used for evaluation of ethical issues in
the business world
▪ American Accounting Association Decision-Making Model
▪ Laura Nash Model
© Pearson Education Limited 2015 2-33

Internal Auditor Code of Ethics — Principles
Internal auditors are expected to apply and uphold the following principles:
1.Integrity
The integrity of internal auditors establishes trust and thus provides the basis
for reliance on their judgment.
2.Objectivity
Internal auditors exhibit the highest level of professional objectivity in
gathering, evaluating, and communicating information about the activity or
process being examined. Internal auditors make a balanced assessment of all
the relevant circumstances and are not unduly influenced by their own
interests or by others in forming judgments.
3.Confidentiality
Internal auditors respect the value and ownership of information they receive
and do not disclose information without appropriate authority unless there is a
legal or professional obligation to do so.
4.Competency
Internal auditors apply the knowledge, skills, and experience needed in the
performance of internal audit services
IEEE or ACM are professional bodies who set standards for IT
The Computer Ethics Institute’s Ten Commandments of Computer Ethics are:
- shalt not use a computer to harm other people.
-shalt not interfere with other people’s computer work.
-shalt not snoop around in other people’s computer files.
-shalt not use a computer to steal.
-shalt not use a computer to bear false witness.
-shalt not copy or use proprietary software for which you have not paid.
-shalt not use other people’s computer resources without authorization or
proper compensation.
-shalt not appropriate other people’s intellectual output.
-shalt think about the social consequences of the program you are writing
or the system you are designing.
-shalt always use a computer in ways that ensure consideration and
respect for your fellow humans.

IT GENERAL ETHICAL PRINCIPLES.
A computing professional should...
1.1 Contribute to society and to human well-being,
acknowledging that all people are stakeholders in computing.
1.2 Avoid harm.
1.3 Be honest and trustworthy.
1.4 Be fair and take action not to discriminate.
1.5 Respect the work required to produce new ideas,
inventions, creative works, and computing artifacts.
1.6 Respect privacy.
1.7 Honor confidentiality.
What is the similarity with other codes of ethics?
Business Ethics
It is difficult to precisely define what is business ethics. It is
challenging to apply Business Ethics.
It is strategic issue.
It is code of moral principles and values that govern the
behaviour concerning what is right and wrong
Set of moral values that control peoples’ behaves at workplace

Values, ethics, code of ethics, law are evolving and intersecting.
More effort is required from all stakeholders to develop, and
apply the culture of Good Ethics.
4
Relationships and Business

• Relationships are associated with both organizational
success and misconduct.
• Businesses exist because of organizational
relationships between employees, customers,
shareholders, and the community.
• Stakeholder framework identifies the internal
(employees, BOD, managers) and external
stakeholders (customers, special interest groups,
regulators, and other groups) who agree, collaborate,
and engage in confrontations on ethical issues.

5
Stakeholders Define Ethical
Issues in Business (1 of 3)
• Stakeholders: customers, shareholders, employees, suppliers,
government agencies, communities and many others who have
a stake or claim in some aspect of a company’s products,
operations, markets, industry and outcomes.
• Primary stakeholders
• Those whose continued association and resources are absolutely
necessary for a firm’s survival (customers, shareholders, employees,
suppliers, governments and communities). They provide necessary
infrastructure.
• Secondary stakeholders
• Those who are not typically engaged directly in transactions with a
company and are therefore not essential to its survival (media. Trade
associations, special interest groups).

6
Stakeholder Interaction Model

• Reciprocal relationships between the firm and
a host of stakeholders.
• Recognizes other stakeholders; explicitly
acknowledges dialogue exists between a firm’s
internal and external environments.

9
Stakeholders Define Ethical
Issues in Business (2 of 3)
• Approaches to stakeholder theory:
1. Normative: Identifies ethical guidelines that dictate how
firms should treat stakeholders.(what should be)
• It affirms that stakeholders have legitimacy and a right to
engage
organizations.
• Principles and values provide direction
2. Descriptive: Focuses on the firm’s behavior; addresses
how decisions are made for stakeholder relationships.
Reality
The gap between 1 and 2 is the problem or challenge

11
Stakeholder Orientation
• The degree to which a firm understands and addresses
stakeholder demands can be expressed as a
stakeholder orientation.
• A stakeholder orientation involves activities and
processes within a system of social institutions that
facilitate and maintain value through exchange
relationships with multiple stakeholders.
1. Organization-wide generation of data about
stakeholder groups and assessment of the firm’s
effects on these groups;
2. Distribution of this information throughout the firm; using
ERP
3. Responsiveness of the organization as a whole to
this information.

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Social Responsibility
and Business Ethics
Companies on the list have met rigorous criteria
across five categories covering the quality of their
ethics and compliance program, organizational
culture, corporate citizenship and responsibility,
governance, and leadership and reputation.
“Today employees, consumers and stakeholders
value companies that show both a commitment to
business integrity, and also have the organizational
humility to never stop seeking improvement.” said
Ethisphere CEO, Timothy Erblich.

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Social Responsibility, CSR and
Business Ethics (4 of 10)
CSR definition:
• The voluntary integration of companies’ social and

ecological concerns into their business activities and
their relationships with their stakeholders. Being
socially responsible means not only fully satisfying the
applicable legal obligations but also going beyond and
investing ‘more’ in human capital, the environment, and
stakeholder relations.”.
Source: https://e-csr.net/definitions/csr-definition/

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For Milton Friedman the discussions of the ´social responsibilities of
business´ are notable for their analytical looseness and lack of rigor.
• What does it mean to say that ´business´ has responsibilities? Only
people can have responsibilities. A corporation is an artificial
person and in this sense may have artificial responsibilities, but
´business´ as a whole cannot be said to have responsibilities (p.
33).
• It is managers’ responsibility to act solely in the interests of the
shareholders. The company has been set up and the managers hired
to make profit for the company.
• Social issues and problems are the proper province of the state
(government) rather then corporate managers. Managers should
not and cannot decide what is in socjety’s best interest. This is the job of
government.

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In 1991 Carroll decided to highlight in specific terms the

philanthropic/good aspect of CSR, suggesting that it embraced
“corporate citizenship:”
For CSR to be accepted by the conscientious business person, it
should be framed in such a way that the entire range of business
responsibilities is embraced. It is suggested here that four kinds of
social responsibilities constitute total CSR: economic, legal, ethical
and philanthropic. Furthermore, these four categories or
components of CSR might be depicted as a pyramid. To be sure, all
of these kinds of responsibilities have always existed to some
extent, but it has only been in recent years that ethical and
philanthropic functions have taken a significant place. (p. 40)
He also stated unambiguously that “the CSR firm should strive
to make a profit, obey the law, be ethical, and be a good
corporate citizen” (p. 43).

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Social Responsibility
Four levels of social responsibility:

• Economic
• Legal
• Ethical
• Philanthropic/Good/ Charitable

33
Models of Corporate
Governance
• Shareholder model
• Goal - Maximize wealth for investors and owners
• Focuses on developing and improving the formal
system for maintaining performance accountability
between top management and shareholders
• Stakeholder model
• Company is answerable to its stakeholders
• Promotes stakeholder welfare along with corporate
needs and interests

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Implementing a Stakeholder
Perspective (1 of 4)
Step 1: Assessing the Corporate Culture
• Identify the organizational mission, values, norms,
and behavior likely to have implications for social
responsibility.
Step 2: Identifying Stakeholder Groups
• Recognize stakeholder needs, wants, and
desires.
Step 3: Identifying Stakeholder Issues
• Identifying the power of each stakeholder

36
Step 4: Assessing Organizational Commitment
to Stakeholders and Social Responsibility
• Used to evaluate current practices and to select
concrete social responsibility initiatives.
• Social responsibility disclosures in company annual
reports are directly related to the quality of
corporate governance.

37
Step 5: Identifying Resources and Determining
Urgency
• Two main criteria: Level of financial and
organizational investments required by different
actions and urgency when prioritizing social
responsibility challenges.
• When the challenge under consideration is viewed
as significant and stakeholder pressures on the
issue can be expected, the challenge is considered
urgent.

38
Step 6: Gaining Stakeholder Feedback
• General assessment of a firm and its practices can
be obtained through satisfaction or reputation
surveys.
• To gauge stakeholders’ perceptions of a firm’s
contributions to specific issues, stakeholder-
generated media such as blogs, websites,
podcasts, and newsletters can be assessed.
• Formal research may be conducted using focus
groups, observation, and surveys.

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Ethical Issues and Dilemmas
in Business
An ethical issue is a problem, situation, or

opportunity that requires an individual, group, or
organization to choose among several actions that
must be evaluated as right or wrong, ethical or
unethical.
An ethical dilemma is a problem, situation, or
opportunity that requires an individual, group, or
organization to choose among several actions that
have negative outcomes.

42
Types of Ethical Issues and
Dilemmas in Business
• Misuse of Company Time and Resources
• Lying
• Conflicts of Interest
• Bribery
• Corporate Intelligence
• Discrimination
• Sexual Harassment
• Fraud
• Financial misconduct
• Intellectual Property Rights
• Privacy issues

45
Ways to Avoid Sexual
Misconduct (1 of 2)
1. Establish a statement of policy naming someone
in the company as ultimately responsible for
preventing harassment at the company.
2. Establish a definition of sexual harassment
that includes unwelcome advances, requests
for sexual favors, and any other verbal, visual,
or physical conduct of a sexual nature; that
provides examples of each; and reminds
employees the list of examples is not all-
inclusive.
3. Establish a non-retaliation/revenge policy
that protects complainants and witnesses.

46
Ways to Avoid Sexual
Misconduct
4. Establish specific procedures for prevention
of such practices at early stages. If in writing,
they are expected by law to train employees
in accordance with them, measure their
effects, and ensure the policies are enforced.
5. Establish, enforce, and encourage victims of
sexual harassment to report the behavior to
authorized individuals.
6. Establish a reporting procedure.
7. Make sure the firm has timely reporting
requirements to the proper authorities.
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Ethical Issues and Dilemmas
in Business
•The Enron Scandal Explained in One Minute
https://www.youtube.com/watch?v=jrEf8uabe7
E Questions:
• What was the first Enron executives risky
decision mentioned in the movie?
• What were the consequences of Enron
bankruptcy?
• Do you know any similar cases of corporate
scandals?
Chapter 3
Ethical Decision making
Professor: Mohamed Abdelhakim

Mohamed.abdelhakim@cud.ac.ae

Decision making
In short, decision making is the heart of all
managerial functions.
So you are deciding while practicing
planning, organizing,……..
Decision means a process of selecting one alternative

among many to solve a problem or to achieve goal.
To decide/manage you will need information and

computerized systems
Ethics are a key factor in responsible decision making

How to make Ethical Decision ?
9
• Approaches to stakeholder theory:

1. Normative: Identifies ethical guidelines that dictate how
firms should treat stakeholders.(what should be)
• It affirms that stakeholders have legitimacy and a right to
engage
organizations.
• Principles and values provide direction
2. Descriptive: Focuses on the firm’s behavior; addresses
how decisions are made for stakeholder relationships.
(Reality)
The gap between 1 and 2 is the problem or challenge

4
A Framework for Ethical
Decision Making in
Business (1 of 5)
This model of the ethical decision making
process in business includes ethical issue
intensity, individual factors, and organizational
factors such as corporate culture and
opportunity.
All of these interrelated factors influence the
evaluations of and intentions behind the
decisions that produce ethical or unethical
behavior.

5
Framework for Understanding Ethical

Decision Making in Business

6
Decision Making in
Business (2 of 5)
1. The first step in ethical decision making is to
recognize that an ethical issue requires an
individual or work group to choose among several
actions that various stakeholders inside or outside
the firm will ultimately evaluate as right or wrong.
2. Ethical awareness is the ability to perceive whether
a situation or decision has an ethical dimension.
3. Ethical issue intensity/density can be defined
as the relevance or importance of an event or
decision in the eyes of the individual, work group,
and/or organization.

7
Decision Making in
Business (3 of 5)
Individuals are subject to six “spheres of
influence” when confronted with ethical
choices—the workplace, family, religion, legal
system, community, and profession—and the level
of importance of each of these influences will vary
depending on how important the decision maker
perceives the issue to be.
The perception of ethical issue intensity can be
influenced by management’s use of rewards and
punishments, corporate policies, and corporate
values to sensitize employees/awareness.

9
Individual Factors in Ethical
Decision Making (1 of 4)
People often base their decisions regarding

ethical issues on their own values and morals
of right or wrong. These values are subjective
and can vary across cultures.
They generally learn these through the
socialization process, interacting with family
members, social groups, religion, and in their
formal education

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Individual Factors in Ethical Decision Making (3 of 4)
• Gender: In many aspects there are no differences
between men and women with regard to ethical
decision making.
• Education and work experience are both positively
correlated with making ethical decisions.
Those more familiarized with the ethical decision
making process due to education or experience are
likely to spend more time examining and selecting
different alternatives to an ethics issue.
• Nationality is the legal relationship between a
person and the country in which he/she is born.
Culture differences may contribute to differing
value systems.
women's gross hourly earnings were on
average 14.1 % below those of men in
the European Union(2019)
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Individual Factors in Ethical
Decision Making (4 of 4)
• Age: Older employees with more experience have
greater knowledge to deal with complex industry-
specific ethical issues. Younger managers are far more
influenced by organizational culture.
• Locus of control relates to individual differences in
relation to a generalized belief about how one is
affected by internal versus external events or
reinforcements.
• Those who believe in external control (externals) see
themselves as going with the flow because that is all
they can do.
• Those who believe in internal control (internals)
believe that they control the events in their lives by
their own effort and skill and trust in their capacity to
influence their environment.
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Organizational Factors in
Ethical Decision Making (1 of 6)
In the workplace, the organization’s values

have the greatest influence on decisions.
The alignment between a person’s own
values and the values of the organization
help to create positive work attitudes and
organizational outcomes.

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A corporate culture can be defined as a set of

values, norms, and artifacts, including ways of
solving problems that members (employees) of an
organization share.
The ethical culture is a function of many factors,
including corporate policies on ethics, top
management’s leadership on ethical issues, the
influence of coworkers, and the opportunity for
unethical behavior.
The more ethical a culture is perceived to be, the
less likely employees are to make unethical
decisions.

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Those who have influence in a work group,
including peers, managers, coworkers,
and subordinates, are referred to as
significant others.
Obedience to authority helps to explain why
many employees resolve business ethics issues
by simply following the directives of a superior.
In organizations that emphasize respect for
superiors, employees may feel that they are
expected to carry out all orders from a
supervisor.

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Opportunity
Opportunity describes the conditions in an
organization that limit or permit ethical or
unethical behavior.
It results from conditions that either provide
rewards or fail to erect barriers against unethical
behavior.
It also relates to individuals’ immediate job
context—where they work, with whom they work,
and the nature of the work.
The opportunity that employees have for unethical
behavior in an organization can be greatly reduced
through formal codes, policies, and rules that are
adequately enforced by management./Bylaws
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Using the Ethical Decision Making

Model to Improve Ethical Decisions
Ethical decision making model does not

help in determining if a business decision
is right or wrong.
Provides insights about ethical decision making
in
businesses.
Business ethics involves value judgments and
collective agreement about acceptable
patterns of behavior.
Gaining an understanding of the factors that
make up ethical decisions helps in
differentiating between an ethical issue and
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Normative Considerations in
Ethical Decision Making (1 of
6)
Normative approaches concern how
organizational decision makers should
approach an issue. Desired
It differs from a descriptive approach,
which examines how organizational
decision makers approach ethical decision
making. Reality
Concepts like fairness and justice are
highly important in a normative
structure.
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6)
Institutions are important in

establishing a foundation for
normative values.
Organizations face certain normative
pressures from different institutions to act a
certain way.
These pressures can take place internally (inside
the organization itself) and/or externally (from the
government or other institutions).
These institutions can be sorted into
three categories: political, economic,
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6)
• Political institutions influence the development of
values as organizations must comply with these
types of institutional norms and belief systems to
succeed.
Political influences can also take place within the
organization.
• An ethical organization has policies and rules
in place to determine appropriate behavior.
This is often the compliance component of the firm’s
organizational culture.
Failure to abide by these rules results in disciplinary
action.

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6)
• Normative business ethics takes into account

the political realities that exert pressure outside the
legal realm in the form of industry standards.
Legal issues such as price fixing, antitrust issues,
and consumer protection are important in maintaining
a fair and equitable marketplace.
Because of their impact on the economy, these
issues must be major considerations for businesses
when making ethical decisions.

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6)
• Competition affects how a company operates as
well as the risks employees take for the good of
the firm. The amount of competition in an industry
can be determined and described according to
the following:
• Barriers to entry into the industry. Sole agent ?
• Available substitutes for the products produced by the
industry rivals.
• The power of the industry rivals over their customers.
• The power of the industry rivals’ suppliers over other
rivals.

27
Institutions as the
Foundation for Normative
Values (1 of 2)
• Social institutions include religion, education,
and individuals such as the family unit.
There are laws meant to ensure an organization acts
fairly, but there is no law saying people should do to
others as they would prefer to have done to them.
• Many cultures adopted this rule that has been
institutionalized into businesses with standards on
competing fairly, being transparent with consumers, and
treating employees with respect.

29
Implementing Principles and Core Values

in Ethical Decision Making (1 of 5)
Companies take basic principles and translate them into

core values.
Core values provide the abstract ideals that are distinct
from individual values and daily operational procedures.
Value practices evolve and are translated into normative
definitions of ethical or unethical.
Individual and organizational values can differ
significantly because of ethical diversity among
individuals.

31
Implementing Principles and Core Values

in Ethical Decision Making (3 of 5)
A firm’s core values provide a blueprint into the

firm’s purpose as well as how it views ethical
decision making and prioritizes stakeholders.
Organizations that have ethics programs based on a
values orientation are found to make a greater
contribution than those based simply on
compliance, or obeying laws and regulations.

32
Understanding Ethical
Decision Making
Ethical issue intensity, individual factors,
organizational factors, and opportunity are all
factors that result in business ethics evaluations
and decisions.
An ethical organizational culture is shaped by
effective leadership.
Without top level support for ethical behavior, the
opportunity for employees to engage in their own
personal approach to ethical decision making will
evolve.
The more you know about ethical decision making in
business, the more likely you will be to make good
decisions.

Ethical Decision making steps
1. Gather the facts
2. Define the ethical issues
3. Identify the affected parties (stakeholders)
4. Identify the consequences
5. Identify the obligations (principles, rights, justice)
6. Consider your character and integrity
7. Think creatively about potential actions
8. Check your gut
9. Decide on the proper ethical action and be prepared to
deal with opposing arguments.
3
Moral philosophy (1 of 3)
Moral philosophy refers to the specific principles or values that
people use to decide what is right or wrong.
Moral philosophies are person-specific, whereas business ethics
is based on decisions made by groups or when carrying out tasks
to meet business objectives.
A moral philosophy is a person’s principles and values. They are
guidelines for “determining how conflicts in human interests are to
be settled and for optimizing mutual benefit of people living
together in groups.”
Adam Smith—the father of free-market capitalism—believed
business was and should be guided by the morals of good
people.
Milton Friedman believed that the market would reward or
punish companies for unethical conduct without the need for
government intervention, but free markets will not solve all
© problems.
2019 Cengage. All rights reserved.
4
Moral philosophy (3 of 3)
• Discussions regarding moral value revolve
around the nature of goodness
• Goodness theories: Focus on the end result of
actions and the goodness or happiness created by
them
• Obligation theories: Emphasize the means and
motives of actions
• These obligation theories are teleology and
deontology, respectively.

5
Obligation Theories:
Teleology (1 of 2)
• Teleology/purpose (consequentialism): Acts are

morally right or acceptable if they produce some
desired result, such as realization of self- interest
or utility.
• Philosophies
1.Egoism: Defines right or acceptable actions as
those that maximize a particular person’s self-
interest as defined by the individual.
• Enlightened egoism: Take a long-range perspective and
allow for the well-being of others although their own self-
interest remains paramount.

6
Teleology (2 of 2)
2.Utilitarianism: seeks the greatest good for
the greatest number of people. Utilitarians look
for the greatest total utility, or benefit, that can
come of a decision using cost/benefit
comparisons of all affected parties.
Utilitarians use various criteria to judge the morality
of an action:
• Rule utilitarianism determines behavior on the basis
of principles, or rules, designed to promote the
greatest utility.
• Act utilitarianism examines a specific action itself,
rather than the general rules governing it.

7
Deontology (1 of 2)
• Deontology/ethics: Refers to moral
philosophies that focus on the rights of
individuals and on the intentions associated
with a particular behavior rather than on its
consequences.
• They regard certain behaviors as inherently
right, and the determination of this rightness
focuses on the individual actor, not society.
Thus, these perspectives are sometimes
referred to as nonconsequentialism, a
system of ethics based on respect for persons.
8
Deontology (2 of 2)
• Deontology is greatly influenced by the
philosopher Immanuel Kant’s categorical
imperative: “Act as if the maxim of thy action
were to become by thy will a universal law of
nature.”
Deontologists may be divided into those who focus
on moral rules and those who focus on the nature of
the acts themselves.
• Rule deontologists believe that conformity to
general moral principles based on logic determines
ethicalness.
• Act deontologists hold that actions are the proper
basis on which to judge morality or ethicalness.
9
Virtue Ethics (1 of 2)
• Virtue ethics: What is moral in a given

situation is not only what conventional morality
requires but what a person with a “good”
moral character deems appropriate.

10
Virtue Ethics (2 of
2)
Virtue ethics approach to business:

1. Good corporate ethics programs encourage
individual virtue and integrity.
2. By the employee’s role in the community
(organization), these virtues form a good person.
3. An individual’s ultimate purpose is to serve
society’s demands and the public good and be
rewarded in his or her career.
4. The well-being of the community goes hand in hand
with individual excellence.

12
Justice Theories (1 of 2)
• Justice: Fair treatment and due reward in

accordance with ethical or legal standards,
including the disposition to deal with perceived
injustices of others.
Based on the perceived rights of individuals and on
the intentions of the people involved in a business
interaction.
Evaluates ethicalness on the basis of fairness.

13
Justice Theories (2 of 2)
Three types of justice provide a framework for

evaluating fairness of different situations:
• Distributive justice is based on the evaluation
of
outcomes or results of the business relationship.
• Procedural justice is based on the processes and
activities that produce the outcome or results.
• Interactional justice is based on the relationships
between organizational members, including the way
that employees and management treat one another

15
Moral Philosophy and Ethical

Decision-Making
Differences exist in
professional and private
goals and pressures
Moral philosophies used
to make personal and
work-related decisions
vary An individual’s moral
philosophy may change to
become compatible with
the work environment

16
Cognitive Moral Development
and Limitations (1 of 6)
Many people believe that individuals advance
through stages of moral development as their
knowledge and socialization continue over
time. Some models attempt to explain, predict,
and control individual’s ethical behavior.
According to Kohlberg’s model of cognitive
moral development (CMD), people pass
through three cognitive moral development
phases, divided into three different stages of
ethical concern.

17
• Stage 1: Punishment and obedience: Right
and wrong are not connected with any
higher order or philosophy but rather with a
person who has power./ fear not aware
• Stage 2: Individual instrumental purpose
and exchange: Right is what serves his or her
own needs. Individuals evaluate behavior on
the basis of its fairness to them. Benefits

18
Cognitive Moral Development and Limitations (3 of 6)
• Stage 3: Mutual interpersonal expectations,

relationships, and conformity: Emphasize the
interests of others rather than simply those of
themselves, although ethical motivation is still
derived from obedience to rules. Me and others but
still not aware or know value of values/morals
• Stage 4: Social system and conscience
maintenance: Determine what is right by considering
their duty to society, not just to certain other people.
Duty, respect for authority, and the maintenance of the
social order become the focal points at this stage.
Aware and apply

19
• Stage 5: Prior rights, social contract, or

utility: Individuals are concerned with
upholding the basic rights, values, and legal
contracts of society. Individuals feel a sense of
obligation or commitment to other groups and
recognize that in some cases legal and moral
points of view may conflict.

20
• Stage 6: Universal ethical principles: Right
is determined by universal ethical principles
everyone should follow. People have certain
inalienable rights that are universal in nature
and consequence. These rights, laws, or social
agreements are valid not because of a
particular society’s laws or customs, but
because they rest on the premise of
universality. Social contract/ we are equal

21
• The model suggests that people continue to
change their decision-making priorities after
their formative years, and as a result of time,
education, and experience, they may
change their values and ethical behavior.
• An individual’s moral development can be
influenced by corporate culture, especially
ethics training. Some experts believe that
experience in resolving moral conflicts
accelerates an individual’s progress in moral
development.

22
White-Collar Crime (WCC) (1 of 3)
Does more damage in monetary and emotional

loss in one year than violent crimes do over
several years combined?
White-collar criminals tend to be highly educated,
in positions of power, trust, respectability, and
responsibility.
Online WCC is a growing problem globally
because technology allows people to hack into
systems and access sensitive information.

23
White-Collar Crime (WCC) (2 of

3)
Cybercrime, such as identity theft and online

fraud, is a major concern of the Federal Trade
Commission.
Advocates of the organizational deviance
perspective argue that a corporation is a living,
breathing organism that can collectively become
deviant
With time, patterns become institutionalized
sometimes encouraging unethical behaviors.

Managing Business Ethics

2
Corporate Culture (1 of 3)
Organizational culture includes values, norms, and
artifacts that influence employees and determine
behavior.
Culture gives the members of the
organization
meaning as well as the internal rules of
behavior.
Values, beliefs, customs, rules, and

ceremonies that
are accepted, shared, and circulated
throughout an
organization represent its culture. A
company’s
history and unwritten rules are also a part of its
culture.
3
Corporate Culture (2 of 3)
Shared beliefs top managers in a company have

about how they should manage themselves and
other employees, and how they should conduct
their business(es).

7
Steps in Measuring an
Ethical Corporate
Culture (1 of 2)
• Management and the board demonstrate their
commitment to integrity, core values, and
ethics codes through their communications and
actions.
• Employees are encouraged/required to have
hands-on involvement in compliance,
especially internal control systems and
reporting systems.
• Ethical leadership.

8
Steps in Measuring an
Ethical Corporate
Culture (2 of 2)
• Employees must receive communication
through resolutions and corrective actions
related to ethical issues.
• Employees must have the ability to report
policy exceptions anonymously to any member
of the organization, including the CEO, other
members of management, and the board of
directors.??? Link/compare to reality

10
The Role of Corporate
Culture in Ethical Decision
Making (1 of 2)
The culture of an organization may be
explicitly articulated or left unspoken.
Explicit statements of values, beliefs, and
customs usually come from upper
management.
Memos, written codes of conduct,
handbooks, manuals, forms, and ceremonies
are all formal expressions of an
organization’s culture.

11
The Role of Corporate
Culture in Ethical Decision
Making (2 of 2)
Corporate culture is often expressed informally
- for example, through comments, both direct
and indirect, that communicate the wishes
of management.
The “tone at the top” is often cited as a
determining factor in creating a high-integrity
organization.
The “tone at the top” can be positive or negative
(destructive side of leadership)

12
Ethical Frameworks and
Evaluations of Corporate
Culture
Two basic dimensions in an organization’s
culture:
1. Concern for people—the organization’s efforts to
care for its employees’ well-being.
2. Concern for performance—the organization’s
efforts to focus on output and employee
productivity.

13
Example of Four Culture

Types
• Apathetic/careless:(1Minimal
of 2) concern for
either people or performance. Individuals
focus on their own self-interest.
• Caring: High concern for people but minimal
concern for performance issues. It is difficult to
find nationally recognizable companies that
maintain little or no concern for performance.
• Exacting: Little concern for people but a high
concern for performance. Focuses on the
interests of the organization.

14
Example of Four Culture

Types
• Integrative: combines
(2 ofhigh
2) concern for people
and for performance. An organization
becomes integrative when superiors
recognize that employees are more than
interchangeable parts

16
Cultural Audit
A cultural audit is an assessment of the
organization’s values. It is usually conducted by
outside consultants but may be performed
internally as well.
Usually conducted by outside consultants but
may be performed internally as well.
Communication about ethical expectations and
support from top management help to identify a
corporate culture that encourages ethical
conduct or leads to ethical conflict.
20
Ethics and Corporate Culture

(1 of 3)
If a firm’s culture encourages unethical

behavior, its employees may act unethically,
and vice versa.
Management’s sense of an organization’s
culture may not be in line with the values
and ethical beliefs that actually guide a
firm’s employees.

23
Compliance versus Values-
Based Ethical Cultures (1 of 4)
Compliance-based: The accounting professional
model:
• Rules create a compliance culture organized around
risk.
• Compliance-based cultures use a legalistic approach
to ethics.
• Codes of conduct are established with compliance as
their
focus, with rules and policies enforced by
management.
• Instead of revolving around an ethical culture, the
company revolves around risk management.
• The approach is good in the short term because it helps
management, stakeholders, and legal agencies ensure
laws, rules, and the intent of compliance are fulfilled.
24
Values-based
• Relies on an explicit mission statement that defines
the core values of the firm and how customers and
employees should be treated.
• Board of directors/upper management should add
to value statements by formulating specific value
statements for its strategic business units (SBU).
• Certain areas may have rules associated with
stated values, enabling employees to understand
the relationship between the two.

25
• Values-based
• The focus is on values such as trust, transparency,
and respect to help employees identify and deal
with ethical issues.
• When using this approach, explain why rules exist,
what the penalties are if rules are violated, and how
employees can help improve the ethics of the
company.

28
Whistle-Blowing and Legal
Protection (2 of 3)
Whistle-blowing reporting the corruption
means exposing an employer’s wrongdoing to
outsiders (external to the company), such as
the media or government regulatory agencies.
Sometimes used to refer to internal reporting of
misconduct to management, especially
through anonymous reporting mechanisms
often called hotlines.

31
Recommendations for
whistleblowing
implementation (1 of 2)
• Making whistleblowing available via the
Internet (including e-mail), easy
accessible
• Keeping such activity confidential and
protective for whistleblowers,
• Available seven days a week, twenty-four
hours a day.
• Whistleblowers should be provided with the
opportunity to report in their local language,
ensuring anonymity.
32
Recommendations for
whistleblowing
implementation (2 of 2)
• These choices should be provided by an
independent organization, specifying
inappropriate behaviors to be reported,
• Providing feedback for whistleblower,
• Offering the possibility for
whistleblowing by
suppliers/customers.

35
Leaders Influence
Corporate
Culture
• Organizational leaders use their power and
influence to shape corporate culture. Leaders
should be both effective and ethical.
• Organizational leaders want to be better leaders –
Positive
to become someone with clear visions, strategic
insights, and motivational talents that produce
corporate as well as personal success.
• Positive, romantic conceptions of leader behaviors
(e.g.ethical, charismatic leadership) and how
these behaviors have positive impact on followers
(e.g. self-efficacy and on organizations as a whole
38
Dark side of charisma (1 of 4)
Charismatic leaders may vary in their

ethical standards.
The label charismatic has been applied to
very diverse(Good and bad) leaders:
• in politics(Adolf Hitler, Benito Mussolini,
Franklin Delano Roosevelt),
• in religious spheres (Prophets, Jim Jones),
• in social movement organizations
(Mahatma (Gandhi, Martin Luther King, Jr.,
Malcolm X) and
• in business(Lee Iacocca, Jeffrey Skilling,
Dennis Kozlowski)
2
Managing Business and
Ethical Values
The core business and ethical values awareness
itself does not cause the lasting and
development of the ethical company.
Managing business and ethical values is a

process with the particular phases (stages).

3
Ethical Values Process
(1 of 8)
MBV phase Phase component Characteristics

- Values should be discovered by the
owners, senior management,
Discovering core managers of organizational units and
business and employees.
ethical values The discovered values should be:
authentic, shared, constant, few,
guaranteeing the development of
individuals and the organization
Source: Stachowicz-Stanusch (2007, pp. 39-

41).

4
(2 of 8)
Description of core • the organization level
values • the organizational unit level
• the employee level
Definition of desired The definitions of desirable behaviors
behaviors and unacceptable behaviors should
Definition of concern the organization level, the
Development of unacceptable organizational unit level, and the
core business and behaviors employee level.
ethical values Formulating the The declaration/statement of core
declaration / business and ethical values refers to
statement of core customers, shareholders, local
business and ethical communities as well as partners.
values It should be clear, fascinating,
triggering pride among the employees,
Source: Stachowicz- sch (2007, pp. 39-41). arousing interest
Stanu

7
(5 of 8)
Implementing core Organization leaders should communicate
business and ethical to employees what will be done for core
values by: values implementation (goals), how it will be
Institutionalization done (objectives) and how the effect of
1. Supporting core
of core business core
values in values implementation will be measured.KPI
and ethical values organization’s goals, Each core business and ethical value
objectives and should be expressed by a organization
measures through particular objectives, tasks for its
realization and measures enabling to
assess the effectiveness of its activity.

8
MBV phase
(6Phase
of 8) component Characteristics
Implementing core Organization’s policies, procedures and
business and ethical codes which:
• form dialogue at the institutional, unit
values by:
and individual level around fundamental
2. Formalization
values,
organizations • guide and enhance the conduct of
Institutionalization policies procedures employees in performing their duties in
of core business and codes pursuit of core values ,
and ethical values Developing code of ethics/ code of conduct
Create a position of Ethics
Officer/Compliance Officer/Ombudsperson
Description of reporting and adjudication
process
Developing procedures of whistleblowers
protection

41).
9
(7 of 8)
Protecting, Includes:
• trainings (shaping necessary capabilities
Controlling and
to implement core values)
Monitoring core • regular monitoring and controlling of core
business and ethical value implementation level through
Institutionalization values checking compliance between employee
of core business behaviors and the behavior patterns
and ethical values assigned to core business and ethical
values
• recruitment (employee culture adequacy)
• motivation (formal rewards – promotion,
bonus, informal rewards – praise,
certificates, diplomas)

41).

10
(8 of 8)

- Supplementing core business and
ethical value sets or changing their
definitions that result from e.g. a
Redefining core merger, alliance, changes in the
business and organization environment,
ethical values development, organization
Closing the expansion,
loop
the atmosphere of distrust and hostility,
cynicism and pessimism inside the
company
41).

11
Managing Business and Ethical
Values Process
Threats
In the management practice there is a danger
of the managing business and ethical values
process to be vulgarized.
Such organizations as the mafia or sects are
organizations that have perfected to the maximum
the institutionalization of particular core values (such
as family, obedience, faith), detaching them
however from basic, human moral/ ethics values.
The socialization process may also become a
cause for the dissemination of inadequate behavior
patterns based on core values, such as, for
instance, corruption behaviors.

12
Potential Sources of Failure of Managing

Business and Ethical Values Process
• The state of values – lesson will be effective if subject is clear,
understandable, few, guarantees development and implies
passion,
• The state of organization members’ awareness of core values,
• The state of discrepancy between core values and practices,
standards, processes through which they would be realized (not
„walk the talk” situation),
• The lack of effectiveness of process agents as managers, being
the effect of the lack of cohesion, communication, from the top
examples, the efectiveness sanctions for doing inconsistent
with core values
• Mistakes in recruitment processes that result in hiring people
with value systems incompatible with organizational core values
• Motivating proces, trainings (the lack of ability to implement
organizational values, the lack of reflection of acts cohesive
value
systems with core values with rewards, motivation system).
23
Core Values Definitions
Example 2 – definitions for different stakeholders
(1 of 3)
Value Integrity
Student Completing all assigned work, activities and tests in an
honorable way that avoids all cheating, lying, and stealing,
Maintain records of research notes, outlines, rough drafts and
reference works to validate individual effort,
Seek supplemental assistance from teachers, parents or
peers to understand lessons and assignment.
Academic Teacher Support the school’s core values that prioritizes student
learning over letter grades,
Collaborate with other teachers and departments to avoid
multiple large projects coming due at the same time,
Check student papers for plagiarism.
Source: based on http://www.ethicsed.org. Example of an Honor Policy; The University of

Connecticut Code of Conduct. Available at: http://www.audit.uconn.edu/doc/codeofconduct.pdf

24
(2 of 3)
Value Integrity
Scientist Properly collect, record and maintain research data,
Take responsibility for all publications and presentations of
which we are author or co-author,
Appropriately acknowledge, in publications and
presentations, those who have contributed to our
research.
Administration Staff Support publication of the Honor Code and Pledge/promise
in the student and faculty handbooks and the Honor Policy
on the school’s website,
Facilitate ongoing conversations and reflection about the
Honor Policy and Honor Code,
Support the Academic Honor Committee with annual
budget

Connecticut Code of Conduct. Available at:
http://www.audit.uconn.edu/doc/codeofconduct.pdf

25
(3 of 3)
Value Integrity
Parent/Guardian Review and understand the Honor Code and honor
guidelines for individual teachers’ classes,
Communicate your support for the school’s core values and
Honor Code and discuss with your student their opinion of
academic integrity and its relevance to their education,
Support the imposition of consequences if the Honor Code is
violated and discuss with your student the value of
maintaining academic integrity

Connecticut Code of Conduct. Available at: http://www.audit.uconn.edu/doc/codeofconduct.pdf

27
Definitions of unacceptable
behaviors
in higher education
Honesty, Using crib notes during an exam, arranging with
Excellence, another student to copy answers during an
CHEATING Respect, exam, writing a paper in English and having
Integrity someone else to translate into the required
foreign language.
Honesty, Copying someone else’s term paper, buying a

Excellence, term paper, using a paper for more than one
PLAGIARISM Respect, class without the teacher’s permission.
Integrity
Honesty, Making up sources for a bibliography, changing
Excellence, data so they look better in a lab report, writing
FABRICATION a lab report without doing the experiment.
Respect,
Integrity

28
Communicating of Core
Business and Ethical
Values (1 of 4)
Tools for communicating of core values:
• Good example of top management behavior,
• Written values in form of declaration,
• Language – including new vocabulary
reflecting core values,
• Company’s publications such as annual report,
brochures, newsletters,
• Myths, story tales,

31
Communicating of Core
Values (4 of 4)
The role of a leader at all organizational levels
is supporting each employee to:
• Understand core values,

• Believe why those values are important,
• Use and present values,
• Transfer values in numerous ways,
• Enhance those values.

37
Institutionalization of Core
Values
• Supporting core values in organization’s
goals, objectives and measures
• Formalization organizations policies
procedures and codes
• Protecting and Controlling core
business and ethical values

47
Institutionalization of Core Business
and Ethical Values
Ethics Officers Responsibilities
Ethics officers are usually responsible for:
• assessing the needs and risks an organization-wide program
must address
• developing and distributing a code of conduct or ethics
• establishing and maintaining a confidential service to
answer employees’ questions about ethical issues
• making sure the company is in compliance with government
regulation
• monitoring and auditing ethical conduct
• taking action on possible violations of the company’s code
• reviewing and updating the code.

51
Ethics Training
(1 of 2)
A major step in developing an effective ethics program is
implementing a training program to educate employees about
the firm’s ethical standards.
It can educate employees about the firm’s policies and expectations,
relevant laws and regulations, and general social standards.
It can make employees aware of available resources, support
systems, and designated personnel who can assist them with
ethical and legal advice.
It can empower employees to ask tough questions and make
ethical decisions.
Full awareness of a company’s philosophy of management, rules,
and procedures can strengthen both the corporate culture and
the ethical stance of peers and supervisors.

55
Redefining Core Business
and Ethical
Values
Supplementing core business and ethical value sets or

changing their definitions that result from e.g. a merger,
alliance, changes in the organization environment,
development, organization expansion, the
atmosphere of distrust and hostility, cynicism and
pessimism inside the company

2
Ethical Leadership
• Leadership: Ability/authority to guide/direct others

toward a goal. Ethical decisions are one dimension of
leadership.
Ethical leadership creates an ethical culture.
Leadership has a significant impact on ethical decision making
because leaders have the power to motivate others and
enforce the organization’s norms, policies, and viewpoints.
Ethical leadership has a positive relationship with the
organizational citizenship of employees and a
negative relationship with deviance, or misconduct.

3
Requirements for Ethical
Leadership
• Ethical leadership skills develop through years
of training, experience, and learning other best
practices of leadership.
Ethical leaders:
• Must model organizational values
• Place what is best for the organization over their own
interests
• Train and develop employees throughout their
careers
• Establish reporting mechanisms
• Understand employee values and perceptions
• Recognize the limits of organizational rules and
values
4
TABLE 11-1: Seven Habits of
Strong Ethical Leaders
1. Ethical leaders have strong personal character.

2. Ethical leaders have a passion to do right.
3. Ethical leaders are proactive.
4. Ethical leaders consider all stakeholders’ interests.
5. Ethical leaders are role models for the organization’s values.
6. Ethical leaders are transparent and actively involved in decision making.
7. Ethical leaders take a holistic view of the firm’s ethical culture.

7
Ethical Leadership
and Organizational Culture (1 of
2)
Ethical leaders generally adopt one of two

approaches to leadership:
• A compliance-based approach emphasizes
obedience to rules and regulations and sets
processes in place to ensure compliance.
• An integrity-based approach views ethics as an
opportunity to implement core values.

23
Ethical Leadership
Communication (5 of 2)
• Nonverbal communication is communication
expressed through actions, body language,
expressions, or other forms of communication
not written or oral.
• Listening involves paying attention to both
verbal and nonverbal behavior
Listening is just as important as speaking.
Ethical leaders developing good listening skills tend
to establish credibility and trustworthiness with
employees.

34
The RADAR Model (1 of 2)

When ethical misconduct or issues arise, the leader
should have plans in place to answer stakeholder
concerns and recover from misconduct.
We adopt the acronym RADAR to describe an ethical
leader’s duty to:
• recognize ethical issues
• avoid misconduct whenever possible
• detect ethical risk areas
• answer stakeholder concerns when an ethical
issue
comes to light
• recover from a misconduct disaster by improving upon
weaknesses in the ethics program.

3
Social Responsibility, Sustainability,
and Corporate Social
Responsibility (CSR) (1 of 2)
• Sustainability is the potential for the long-term
well-being of the natural environment, including all
biological entities, as well as the mutually
beneficial interactions among nature and
individuals, organizations, and business
strategies.
• Sustainable development has become a top
concern for many businesses as it involves
meeting the needs of the present without
compromising the ability of future generations to
meet their own needs.

4
• Sustainability, like social responsibility, seeks

to maximize positive and minimize negative
impacts on stakeholders; therefore,
sustainability issues fit our stakeholder
orientation model.
Sustainability is only one aspect of ethical decision
making.

5
• Corporate social responsibility (CSR) is a

much broader issue encompassing consumer
protection, corporate governance, employee
well-being, and more.
CSR—and by relation sustainability—is a major
initiative due to stakeholder expectations.

7
Reasons Social
Responsibility is a
Corporate Ethics Issue
1. Socially responsible activities can create
competitive advantages.
2. Both positive and negative information about
products and organizations is more available.
3. Organizations can use their products and
brand identity to create social value, quality,
and consumer loyalty.
4. Companies use their sustainable and socially
responsible decisions to differentiate their
firms and promote their products.
21
Business Response to
Sustainability Issues (2 of 2)
• Better environmental performance can increase

revenue in three ways: through better access to
certain markets, differentiation of products, and the
sale of pollution-control technology
• Better environmental performance can reduce costs
by improving risk management and stakeholder
relationships, reducing the amount of materials and
energy used, reducing capital and labor costs, and
possibly reducing fines for government compliance.

26
Steps in Strategic Implementation of

Environmental Responsibility (1 of 5)
1. Recycling initiatives
2. Stakeholder assessment
3. Risk analysis

27

• Recycling Initiatives
• Recycling is the reprocessing of materials,
especially steel, aluminum, paper, glass, rubber,
and some plastics, for reuse.
• Companies and even local and regional
governments are finding ways to recycle water to
avoid discharging chemicals into rivers and streams
and preserve diminishing water supplies.

29

• Stakeholder Assessment
• This process requires acknowledging and actively
monitoring the environmental concerns of all
legitimate stakeholders.
• A company should have a process in place for
identifying and prioritizing the many claims and
stakes on its business and for dealing with trade-
offs related to the impact on different stakeholders.
• Strong relationships with stakeholders involves the
willingness to acknowledge and openly address
potential conflicts.

30

• Risk analysis
• Risk analysis allows companies to assess
environmental risks associated with business
decisions, but the difficulty lies in measuring the
costs and benefits of such decisions.
• Debate surrounding environmental issues forces
corporate decision makers to weigh evidence and
take some risks.
• Many environmental decisions involve trade-offs for
various stakeholders’ risks, and companies should
use both formal and informal feedback methods to
continually assess stakeholder relationships.
32
TABLE 12-3 Strategic

Sustainability Audit
Yes No Checklist
□ □ Does the organization show a high commitment to a strategic environmental policy?
□ □ Do employees know the environmental compliance policies of the organization?
□ □ Do suppliers and customers recognize the organization’s stand on environmental issues?
□ □ Are managers familiar with the environmental strategies of other organizations in the industry?
□ □ Has the organization compared its environmental initiatives with those of other firms?
□ □ Is the company aware of the best practices in environmental management regardless of industry?
□ □ Has the organization developed measurable performance standards for environmental compliance?
□ □ Does the firm reconcile the need for consistent responsible values with the needs of various stakeholders?
□ □ Do the organization’s philanthropic efforts consider environmental issues?
□ □ Does the organization comply with all laws and regulations that relate to environmental impact?

Sample review questions
Ethical considerations in the process of downsizing
Discuss two responsibilities of employee and employer
Discuss the appropriate relationships between business and civil society

Explain how Globalization reshaping relations between corporations and CSOs
What actions may be taken by an organization to increase the whistleblowing effectiveness?
Please discuss one major corruption/ ethical scandals from GCC corporations. What
was the scandal main issues and the consequences?
Discussed the complex role of governments and the interdependencies and mutual
interests that they have with business
Looked at the way globalisation shifts the role of business and government in
regulating issues of relevance to business ethics
Remember that we had revision within group project presentation

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Chapter 1

Understanding Business Ethics

Professor: Mohamed Abdelhakim

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It is difficult to precisely define what is business

• Management involves coordinating and overseeing

Decision means a process of selecting one alternative

To decide/manage you will need information and

Ethics are a key factor in responsible decision making

Information Requirements of Key Decision-Making

Senior managers, middle managers,

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Ethics are moral rules of particular individuals that

• Ethics (in political and legal context) it relates to

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• Ethics (in economic world) means compliance with

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• Values: Enduring beliefs and ideals that are socially

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Webster defines the notion of “core” as “the central,

According to J. Porras and J. Collins (1994), core

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Examples of companies and their core values

Company Core values

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Organizations often have a set of core values or principles

Core values guide the way business is done - what is

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Economic crises of recent years and

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Why Study Business Ethics?

• Identify ethical issues

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Studying business ethics is

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Studying business ethics is

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The Benefits of Business Ethics

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The Benefits of Business

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The Benefits of Business

• Issues fostering the development of an ethical

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The Benefits of Business

• Ethics Contributes to Investor Loyalty

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The Benefits of Business

• Ethics Contributes to Customer Satisfaction

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The Benefits of Business

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Corporate marketing ethics policies should be

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Set of moral values that control peoples’ behaves at workplace

Relationships and Business

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Stakeholder Interaction Model