Chapter 7
Business Ethics Essentials
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1. Describe the public’s opinion of business ethics.
the sources of ethical norms in individuals.
3. Analyze economic, legal, and ethical aspects of a decision by using a Venn model.
4. Identify, explain, and illustrate three models of management ethics.
6. Identify and discuss six major elements of moral judgment.
TEACHING SUGGESTIONS
INTRODUCTION – Chapter 7 introduces concepts and background that are essential to
understanding business ethics. The authors explore a wide range of topics that combine to form
a network within which business decisions are made, how they are made, and how managers
develop their abilities to make them.
KEY TALKING POINTS – Unless students previously have taken a course in moral philosophy,
most will have given little thought to the whole issue of ethical decision-making. Although they
certainly will have opinions regarding what constitutes moral behavior (often very strong
opinions), the majority will have little insight into how they make those decisions. One effective
way to introduce this element of moral decision-making is to show a video clip or read a short
passage that presents a clear moral dilemma (e.g., Case 10, Phantom Expenses) and then ask the
students how they would make a decision about that scenario—without allowing them to say
This chapter focuses on two primary topics—the environment within which business ethics
decisions are made and how managers go about making those decisions. By maintaining a clear
focus on moral judgment, the authors provide students with a strong explanation of that process.
there is more to moral development than moral judgment development…” (Moral Development
in the Professions, 1994, page 22). Rest’s four components include:
1. Moral sensitivity – awareness that a moral situation exists
2. Moral judgment – judging which action is morally right/wrong
There is no question that judgment is a critical element in moral behavior, but it is only one
element. Without recognition of the other components, students will not gain a full
understanding of moral behavior within organizations.
Using the Venn diagram, instructors can demonstrate how economics, ethics and the law affect
managerial decisions. Further, the model of ethics employed by management is reflected by the
emphasis placed on each of these responsibilities: (1) immoral managers focus on the firm’s
economic responsibilities to the exclusion of all else, (2) moral managers balance the firm’s
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
5-Engineered Billing
6-The Waiter Rule: What Makes for a Good CEO?
7-Using Ex-Cons to Teach Business Ethics
11-Family Business
13-Location, Location, Location
17-Chiquita – An Excruciating Dilemma
23-McDonald’s Coffee Spill
24-The Betaseron Decision (A)
28-Safety, What Safety
29-Felony Franks (2)- Home of the Misdemeanor Wiener
31-Moral Dilemma – Head vs. Heart
Ethics in Practice Cases:
What Would You Do?
To Hunt or Not to Hunt – That is the Question
Is Resume Inflation and Deception Acceptable?
Are People More Ethical When Being “Watched?”
Spotlight on Sustainability:
Ray Anderson’s Conversion Experience
LECTURE OUTLINE
I. THE PUBLIC’S OPINION OF BUSINESS ETHICS
A. Are the Media Reporting Business Ethics More Vigorously?
B. Is It Society that Is Changing?
III. ETHICS, ECONOMICS, AND LAW – A VENN MODEL
IV. THREE MODELS OF MANAGEMENT ETHICS
A. Immoral Management
1. Operating Strategy
2. Illustrative Cases
a. Enron
b. Everyday Questionable Practices
2. Illustrative Cases
a. Navistar
b. Merck
C. Amoral Management
1. Intentional Amoral Management
2. Unintentional Amoral Management
b. Nestlé
c. Sears
5. Two Hypotheses Regarding the Models of Management Morality
V. MAKING MORAL MANAGEMENT ACTIONABLE
VI. DEVELOPING MORAL JUDGMENT
A. Levels of Moral Development
1. Level 1: Preconventional Level
2. Level 2: Conventional Level
B. Different Sources of a Person’s Values
1. Sources External to the Organization: The Web of Values
a. Religious Values
b. Philosophical Values
2. Sources Internal to the Organization
VII. ELEMENTS OF MORAL JUDGMENT
A. Moral Imagination
B. Moral Identification and Ordering
VIII. SUMMARY
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1. Question: Give a definition of ethical business behavior, explain the components involved
in making ethical decisions, and give an example from your personal experience of the
sources of ethical norms that affect you while making these determinations.
Answer: Ethical business behavior does not mean that no harm is done to anyone. Rather,
ethical business behavior entails being aware of the possible consequences of the firm’s
actions before they take place, making reasoned moral judgments about those
consequences, and choosing the actions that are the most “right” or do the least harm.
Chapter 8 will investigate some of the criteria used to decide “right” from “wrong,” but
this chapter provides a series of important ethics questions, including “what is?” “what
ought to be?” “how do we get from what is to what ought to be?” and “what is our
motivation?” Contemplating theses questions will help managers make decisions that
encourage ethical behavior, especially the normative question of “what ought to be?”
2. Question: To demonstrate that you understand the three models of management ethics –
moral, immoral, and amoral – give an example from your personal experience of each
type. Do you agree that amorality is a serious problem? Explain.
Answer: Immoral management entails knowingly deciding to engage in “wrong” actions,
often ones that harm others in some way. Moral management, on the other hand, consists
of making moral judgments to do the “right” thing. Immoral management often
concentrates on measures of profitability to the exclusion of other criteria, while moral
management incorporates profit as one of several criteria in making a decision. Finally,
scheme to defraud investors of over $50 billion is another example of immoral
management. Examples of amoral management might include a police department that
puts height and weight restrictions in place for police officers. While the department may
believe that it has a legitimate reason to use height and weight requirements and does not
intend to discriminate in its employment practices, it may fail to recognize the inherent
ethical issues with this practice. The management at Starbucks could be considered moral
management. The company pursues economic goals, while striving to operate within the
confines of the law and focusing on activities that will improve the well-being of its
employees, suppliers and the community in general.
3. Question: Give examples from your personal experience of Kohlberg’s Levels 1, 2, and 3.
If you do not think you have ever gotten to Level 3, give an example of what it might be
like.
Answer: Level 1, the preconventional level, focuses on self gratification, and can be seen
in virtually any infant or young child. Unfortunately, adults often display characteristics of
the preconventional level as well. An example of Level 1 would be when a child takes a
certain course of action to avoid a parental punishment (such as “time out”) or to seek a
parental reward (such as permission to do something the child wants to do). The
conventional level is characterized by awareness of and concern for others. The locus of
analysis of consideration of others widens as a person develops morally, from friends and
4. Question: Compare your motivations to behave ethically with those listed in Figure 7-14.
Do the reasons given in that figure agree with your personal assessment? Discuss the
similarities and differences between Figure 7-14 and your personal assessment.
Answer: Figure 7-14 is basically a recasting of Kohlberg’s three levels of moral
development. I personally agree that most people are morally motivated by the “negative”
5. Question: From your personal experience, give an example of a situation you have faced
that would require one of the six elements of moral judgment. Which of these six elements
are most important and why?
Answer: The six elements of moral judgment include moral imagination, moral
identification and ordering, moral evaluation, tolerance of moral disagreement and
GROUP ACTIVITY
Have students review the following Venn Diagram Model (this exercise and diagram are an
extension of Figure 7-6 in the book and are based on the following article: Mark S. Schwartz
and Archie B. Carroll, “Corporate Social Responsibility: A Three-Domain Approach,” Business
Ethics Quarterly (Vol. 13, Issue 4, October 2003), 503–530, the Venn Diagram Model).
Divide students into groups of four to five students and ask them to (1) identify the following
activities as moral, immoral or amoral and (2) categorize the activities as ethical, economic
and/or legal as appropriate:
(1) Enron’s actions of deceiving shareholders by shifting debts from their balance sheet
(2) Arthur Andersen’s ordering the shredding of documents related to their transactions with
Enron
(6) The creation of a website where users can download music for free by sharing files with
other users
(7) Provision of HIV/AIDS drugs below cost in 3rd world countries
(8) Installation of an anti-pollution device
(9) Smith and Wesson’s addition of safety features to its handguns
(10) Ben & Jerry’s distribution of free ice cream in a community
(11) Prostitution in the state of Nevada
Legal/Ethical
Economic/Ethical/Legal
MORAL
Purely Legal
Purely Ethical
Specifically, students should recognize which responsibilities are being pursued by management
in each activity and the management style implicated by the pursuit of certain responsibilities.
INDIVIDUAL ASSIGNMENT
Distribute the following instructions to each student:
Describe an ethical dilemma that you faced in the workplace and the course of action that you
took. Analyze whether your decision was economically, legally and ethically responsible and