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Chapter Two

Ethics Concepts and Theories

1. Principles of Business Ethics

1. Be Trustful: Recognize customers want to do business with a company

they can trust; when trust is at the core of a company, it's easy to recognize.
Trust defined, is assured reliance on the character, ability, strength, and
truth of a business.

2. Keep an Open Mind: For continuous improvement of a company, the

leader of an organization must be open to new ideas. Ask for opinions and
feedback from both customers and team members and your company will
continue to grow.

3. Meet Obligations: Regardless of the circumstances, does everything in

your power to gain the trust of past customers and clients, particularly if
something has gone awry. Reclaim any lost business by honoring all
commitments and obligations.

4. Have Clear Documents: Re-evaluate all print materials including small

business advertising, brochures, and other business documents making sure
they are clear, precise and professional. Most important, make sure they do
not misrepresent or misinterpret.

5. Become Community Involved: Remain involved in community-related

issues and activities, thereby demonstrating that your business is a
responsible community contributor. In other words, stay involved.

6. Maintain Accounting Control: Take a hands-on approach to accounting

and record keeping, not only as a means of gaining a better feel for the
progress of your company, but as a resource for any "questionable”
activities. Gaining control of accounting and record keeping allows you to
end any dubious activities promptly.

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7. Be Respectful: Treat others with the utmost of respect. Regardless of

differences, positions, titles, ages, or other types of distinctions, always treat
others with professional respect and courtesy.

Recognizing the significance of business ethics as a tool for achieving your

desired outcome is only the beginning. A small business that instills a deep-
seated theme of business ethics within its strategies and policies will be
evident among customers. Its overall influence will lead to a profitable,
successful company. By recognizing the value of practicing admirable
business ethics, and following each of the 7 principles, your success will not
be far off.

2. Four Views (theories) of Ethics:

a. The utilitarian view of ethics states that ethical decisions are made
solely on the basis of their outcomes or consequences.

The utilitarian approach, espoused by the nineteenth-century philosophers

Jeremy Bentham and John Stuart Mill, holds that moral behavior produces the
greatest good for the greatest number. Under this approach, a decision
maker is expected to consider the effect of each decision alternative on all
parties and select the one that optimizes the satisfaction for the greatest
number of people. Because actual computations can be complex, simplifying
them is considered appropriate. For example, an economic frame of
reference could be used by calculating dollar costs and dollar benefits. A
decision could be made that considers only the people who are directly
affected by the decision, not those who are indirectly affected. The utilitarian
ethic is cited as the basis for the recent trend among companies to police
employee personal habits such as alcohol and tobacco consumption on the
job, and in some cases after hours because such behavior affects the entire
workplace. Similarly, many companies argue that monitoring how employees
spend their time on the Internet is necessary to maintain the company’s
ethical climate and workplace productivity. If employees are viewing

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pornographic sites, visiting racist chat rooms, or spending hours shopping or

day trading online, the entire organization will suffer.
B. The rights view of ethics says that ethical decisions are concerned with
respecting and protecting individual liberties and privileges such as the
rights of privacy, freedom of conscience, free speech, life and safety, and
due process.
The individualism (rights) approach contends that acts are moral when
they promote the individual’s best long-term interests. Individual self-
direction is paramount, and external forces that restrict self-direction should
be severely limited. Individuals calculate the best long-term advantage to
themselves as a measure of a decision’s goodness. The action that is
intended to produce a greater ratio of good to bad for the individual
compared with other alternatives is the right one to perform. In theory, with
everyone pursuing Self-direction, the greater good is ultimately served
because people learn to accommodate each other in their own long-term
interest. Individualism is believed to lead to honesty and integrity because
that works best in the long run. Lying and cheating for immediate self-
interest cause’s business associates to lie and cheat in return.
Thus, individualism ultimately leads to behavior toward others that fits
standards of behavior people want toward themselves. One value of
understanding this approach is to recognize short-term variations if they are
proposed. People might argue for short-term self-interest based on
individualism, but that misses the point. Because individualism is easily
misinterpreted to support immediate self-gain, it is unpopular in today’s
highly organized and group-oriented society. Dozens of disgraced top
executives from WorldCom, Enron Corp., Tyco, and other companies
demonstrate the flaws of the individualism approach. This approach is
closest to the domain of free choice.
Six moral rights should be considered during decision making:
1. The right of free consent. Individuals are to be treated only as they
knowingly and freely consent to be treated.

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2. The right to privacy. Individuals can choose to do as they please away

from work and have control of information about their private life.
3. The right of freedom of conscience. Individuals may refrain from carrying
out any order that violates their moral or religious norms.
4. The right of free speech. Individuals may criticize truthfully the ethics or
legality of actions of others.
5. The right to due process. Individuals have a right to an impartial hearing
and fair treatment.
6. The right to life and safety. Individuals have a right to live without
endangerment or violation of their health and safety.
C. The theory of justice viewof ethics states that decision makers seek
to impose and enforce rules fairly and impartially. The justice approach
holds that moral decisions must be based on standards of equity, fairness,
and impartiality. Three types of justice are of concern to managers:
distributive justice, procedural justice, and compensatory justice.
Distributive justice requires that different treatment of people not be
based on arbitrary characteristics. Individuals who are similar in respects
relevant to a decision should be treated similarly. Thus, men and women
should not receive different salaries if they are performing the same job.
However, people who differ in a substantive way, such as job skills or
responsibilities, can be treated differently in proportion to the differences in
skills or responsibility among them. This difference should have a clear
relationship to organizational goals and tasks. Procedural justice requires
that rules be administered fairly. Rules should be clearly stated and be
consistently and impartially enforced. Compensatory justice argues that
individuals should be compensated for the cost of their injuries by the
responsible party. Moreover, individuals should not be held responsible for
matters over which they have no control.

The justice approach is closest to the thinking underlying the domain of

codified law because it assumes that justice is applied through rules and
regulations. This theory does not require complex calculations such as those

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demanded by a utilitarian approach, and it does not justify self-interest as

the individualism approach does. Managers are expected to define attributes
on which different treatment of employees is acceptable. Questions such as
how minority workers should be compensated for past discrimination are
difficult. However, this approach does justify as ethical behavior efforts to
correct past wrongs, play fair under the rules, and insist on job-relevant
differences as the basis for different levels of pay or promotion opportunities.
Most of the laws guiding human resource management are based on the
justice approach.

Integrity and Compliance Based Ethics

Integrity

An organization’s success depends on the integrity of its employees. We

have all witnessed the severe problems that result in the personal,
professional and political arena, when anyone, at any level, acts without
integrity. When an organization’s reputation is damaged, there ensues a
tragic loss of both customers and good employees. Organizations of all types
are now taking a proactive approach to preventing problems by offering
trainings about ethics and integrity.

We found that clients seemed confused about the differences between ethics
and integrity. After reviewing the literature on these terms, we have defined
ethics and integrity in a way people can understand and immediately use.

Ethics: is an external system of rules and laws. Usually there are rewards
when we follow the rules and punishments when we break them. A
professional board or committee often monitors compliance. Many
organizations have developed a code of ethics that employees are expected
to obey.

Integrity is an internal system of principles which guides our behavior. The

rewards are intrinsic. Integrity is a choice rather than an obligation. Even
though influenced by upbringing and exposure, integrity cannot be forced by

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outside sources. Integrity conveys a sense of wholeness and strength.

When we are acting with integrity we do what is right - even when no one is
watching. Integrity based ethic codes are ethical standards that define the
organization’s guiding values, create an environment that supports ethically
sound behavior, and stress a hard accountability among employees.

People of integrity are guided by a set of core principles that empowers them
to behave consistently to high standards. The core principles of integrity are
virtues, such as: compassion, dependability, generosity, honesty, kindness,
loyalty, maturity, objectivity, respect, trust and wisdom. Virtues are the
valuable personal and professional assets employees develop and bring to
work each day.

There is a dynamic relationship between integrity and ethics, where each

strengthens, or reinforces, the other. Personal integrity is the foundation for
ethics - good business ethics encourages integrity. A person who has
worked hard to develop a high standard of integrity will likely transfer these
principles to their professional life. Possessing a high degree of integrity, a
person’s words and deeds will be in alignment with the ethical standards of
the organization.

Integrity is what provides the inspiration to convert awareness into action.

The good news: There is intrinsic satisfaction in accessing courage at times
when our integrity is tested.

Questions of Integrity

Our integrity is always being tested. During these challenging times, if we

have the courage to ask the right question we will often know the right
answer. Here is a sample list of questions to guide one in the right direction:

 Do I believe this is the right course of action?

 Am I being just, fair and considerate?
 Would I want others to act the same way?

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 Is there someone I could talk to who would help me enlarge my

perspective?
 Is this the right Time, Intention, Person, Place and Style? (T.I.P.P.S.)
 Could I make an adjustment that would prevent or alleviate harm?
 How will I feel about myself afterwards?

Signs of Integrity

Just as there are signs of good health, like blood pressure, fitness and
nutrition, there are indicators of integrity:

 Open to feedback
 Accepts personal responsibility
 Balances one’s needs with the needs of others
 Practices understanding and compassion
 Seeks the advice of others
 Respectful of views that are different
 Acts with integrity even when it is inconvenient
 Keeps agreements
 Knows the difference between humor and hostility.
Compliance

Compliance based ethics codes are ethical standards that emphasize preventing unlawful
behavior by increasing control and by penalizing wrongdoers. A compliance ethics Program has
at its core a rule-based ethics and represents a legalistic approach to ethics. This type of program
tends to develop elaborate and comprehensive codes designed to deal with as many situations as
possible and emphasizes compliance with rules. It shows a preference for rules, regulations and
policies as a means of encouraging ethical behavior.