Aims

To examine the theoretical underpinnings to the study of ethics in a management setting and to develop ethical reasoning that can guide managers and their companies in applying ethical principles to decisions. To understand how we can classify companies using ethical frameworks.
 
 

Learning Outcomes

At the end of the topic you should be able to:

Identify the main theories that govern the study of ethics,

Understand how the study of ethics can help managers in their decision making,

Critically assess how managerial decisions can be seen as moral dilemmas,

Discuss how firms can be classified in terms of their ethical stance using two ethical frameworks - the Reidenbach and Robin Model and the Carroll Model,

Discuss how individual ethics and ethics of the firm can cause personal conflict of purposes,

Critically assess the ethical standpoint of a firm's strategy.
 

The formal study requirements for this topic are:

Pre-sessional preparation using Internet sources.

Reading and digesting the key material on ethical theory

Preparing an analysis on the ethical stance of the company you work for.

Set Text

Chapter 1 - Business Ethics and the Changing Environment

Chapter 3 - Ethical Principles and Decision Making Guidelines

Chapter 4 - The Corporation as Stakeholder: Moral Dimensions of Strategy, Structure, Leadership, Culture and Self-Regulation

Carroll, A. (1991) The pyramid of corporate social responsibility, Business Horizons, July-August, pp 39-48.

Hosmer, L. T. (1994) Strategic Planning as if Ethics Mattered; Strategic Management Journal, Vol. 15, pp. 17-34.

Neilsen, R. P. (1985) Alternative Managerial Responses to Ethical Dilemmas; Planning Review, Vol. 43, November, pp. 24-29, and then 43.

Singer, A. E. (1994) Strategy as Moral Philosophy; Strategic Management Journal; Vol. 15, pp. 191-213.
 
 

Go to the BOLA site at http://sol.brunel.ac.uk/%7Ejarvis/bola/ethics/index.html  and read and download the summaries of the essential ethical theories that inform ethical reasoning. In particular look at the theories of:

Bentham, Mill and the theory of Utilitarianism

Kant and the theory of Deontology and the concept of duty

Rawls and the theory of Justice

Also look at the concepts of Relativism and Rights

The study of management ethics is an eclectic one as it derives its approach from several fields of study, most notably from that of moral philosophy. Ethical issues frequently occur in management and often extend beyond the more commonly discussed issues of bribery and corruption, collusion, theft, fraud etc. and reaches into such areas as corporate responsibility, corporate citizenship, corporate governance, marketing policy and capital investment decisions.

The study of management ethics is fraught with problems, particularly when issues facing managers are rarely other than complex. Ethical reasoning and ethical enquiry is not a hard science and one where the debate is often problematic. Managers often look for clear-cut answers, but if we apply ethical reasoning to decisions, we rarely find those answers clear-cut and unambiguous. In other words, definitive answers are elusive and with many perspectives. We find our decisions often clouded by dilemmas, paradoxes, inconsistencies, and with differing expectations. Managers need to evaluate these dilemmas by reasoned argument. Yet when we do, we are confronted with key words and phrases whose meaning is open to interpretation. Words like Right, Just, Fair, Proper, Good, Obligations, Rights and Duties are ethical terms that express a judgment about behaviour towards people that we commonly use in assessing management decisions.

For example:
 
 

We believe that there are right and wrong ways to behave towards others

We believe that there are proper and improper actions that managers take

We believe that decisions can be fair and unfair

We can analyse behaviour as being just and good

We can assess decisions as benefiting the majority

We can argue about rights, obligations and duties to others and towards ourselves
 
 

Figure 1: Relationships between morals, values and ethics

In Figure 1, (Hosmer 1994), above we can see the relationships between morals, values and ethics and how these come together to shape an individual's moral position and impact on the way decisions are arrived at. Note that the outcome of a moral dilemma frequently brings benefits to some and harm to others. The challenge is to make sure that any loss or gain is balanced between the parties.
 
 

Task:

Read the Hosmer (1994) article and understand the argument he is making about the link between morals, values and ethics.

Go to  http://www.mapnp.org/library/ethics/ethxgde.htm  and download and then read the following paper: McNamara, C. The Complete Guide to Ethics Management: An Ethics Toolkit for Managers;
 
 

Theoretical underpinning
 
 

To help us in the lexical jungle that we have identified above we can apply philosophical constructs to allow us to understand some of the key words that occur in an ethical analysis. It is not the purpose of this course to dwell on this in detail but to give students an overview of the essential arguments.

Ethical Problems as Management Dilemmas

Ethical problems are managerial dilemmas as they represent a conflict between an organisation's economic performance as measured by its revenues/costs/benefits, and its social performance as measured by its obligations to people inside and outside the organisation. The nature of these obligations is often open to interpretation, but most would agree that they include protecting workers, producing safe products, maintaining competitive markets and observing the legal framework of their operation. Is there a right or proper or just balance between economic performance and social obligation? The answer must be yes, but managers must strive to find that balance. A naïve interpretation of 19^th Century moral philosophy would argue that the balance between economic and social performance is a non issue, as the economic performance is all that counts and that the obligations of the manager is only towards the shareholder and no one else. This is a view explored by Friedman in the middle of the last century. Indeed there is evidence, from America, that the primacy of the shareholder is increasingly prevalent. Indeed, this primacy of the shareholder's interest over others in the system is enshrined in company law and is informed by the agency view of the firm and common in Anglo-Saxon economies. It is interesting to note that in other economic systems, such as Japan, Korea, Germany and France, variations of this model apply and obligations to 'others' (outside stakeholders) can have primacy. A less naïve view would be to recognise that managerial decisions do impact on others and that decisions can have far-reaching and often unintended consequences.

Table 1 below sets out the main theoretical perspectives that inform the principles behind ethical analysis. You will see a similar table on page 81 in the Weiss text.

Carroll's 4-level model has a number of similarities to that of the Reidenbach and Robin model, discussed later. The Carroll model has four levels, and a firm can be classified as being at different levels by looking at its behaviour and its actions in the market place. Figure 2 below diagrammatically represents Carroll's Pyramid of Social Responsibility Model.

At the base of the pyramid is Level 1, Carroll describes this level as Economic. This he argues is fundamental to the firm, as the over-riding need is to be profitable and to protect the longevity and success of the firm. However this does not preclude the firm from behaving in an ethical manner.

Level 2,; Carroll describes this level as Legal, where the need is for the firm to be a law-abiding entity. The law, Carroll argues, offers society a codification of a set of standards to which firms and individuals are bound. The firm should respect both the letter and the spirit of the law.

Level 3; , Carroll describes level 3 as Ethical, the onus on the firm is behave and act in an ethical manner and to avoid harm in its actions.

Level 4; , Carroll describes this level as Philanthropic. The firm, Carroll argues should behave as a good corporate citizen and make contribution to the community in which it operates.
 
 

Figure 2: Carroll’s Pyramid of Social Responsibility Model

 Linked to each of these levels, Carroll describes each level in terms of its essential components. In some ways many of these descriptors can be seen as contentious. For, example, if we look at level 4 in this model - Philanthropic, many scholars argue for a different way of looking at this term. Carroll also discusses three different manager typologies within the pyramid model, namely; Immoral, Amoral and Moral. Briefly these manager types are described and characterised as follows:

Immoral Managers:

Managers whose decisions, actions and behaviour suggest an active opposition to what is deemed to be right and ethical.

These managers care only about their or their organisation’s profitability or success.

Legal issues are there to be circumvented and loopholes in the law actively sought.

Strategy is to exploit opportunities for personal or organisational gain at any cost.

Amoral Managers are neither immoral nor moral but are not sensitive to the fact that their everyday business decisions may have a deleterious effect on others.

These managers may lack an ethical perspective in their organisational lives.

Typically their orientation is to the ‘letter of the law’ as their ethical guide.

Sometimes we can have a sub category - the unintentional amoral manager.

These managers are un-intentionally amoral in their behaviour. They tend to see ethical issues are for their private lives and for not their business lives, where different rules apply.

They tend to believe that business activity resides outside the sphere to which moral judgements may apply.

Amoral managers here may not consider a role for ethics in business.

In moral management, ethical norms that adhere to a high standard of right behaviour are employed.

Moral managers not only conform to accepted and high levels of professional conduct, they also lead on issues of ethical behaviour.

The law is seen as giving a minimal guide to ethical behaviour. The ‘spirit of the law’ in more important than the ‘letter of the law’. The objective is to operate well above what the law mandates the firm to do.

Moral managers want to be profitable and ethical.

Moral managers will use ethical principles to base their judgements upon - justice, rights, the Golden Rule, utilitarianism etc.

When ethical dilemmas arise, moral managers and moral companies will tend to assume leadership in their companies and industries.

The Reidenbach and Robin Model

We have agreed in our earlier discussions that commercial life is increasingly hedged around with choices about profits and ethics.

But while the debate on how an individual’s standards are formed has been under way for centuries, how can organisations sensibly develop an ethical position?

The diagram in Figure 3 below, shows how US academics Eric Reidenbach and Donald Robin, professors of marketing at the University of Southern Mississippi, have established a sort of moral pyramid to demonstrate the range of corporate attitudes.

European companies, too, can use this theoretical model as a basis for dealing with ethical issues.

It is important to note that a multi-divisional organisation may occupy several stages at the same time, and companies may also regress from higher to lower levels.

Figure 3: The Reidenbach and Robin Model

This model proposes a two dimensional form that considers a 4 developmental stages that a company may grow through tempered against a concern for profits and ethical standards. Lets take each stage and briefly describe what they are.

Stage 1 Amoral

At the base are the amoral or ethically challenged companies. They are around strictly for the short term, and are characterised by winning at all costs.

Obedience is valued and rewarded and there is little concern for employees other than their value as an economic unit of production.

The ethical climate of a stage one organisation can be summed up by phases like

"They’ll never know",

"Everybody does it", and

"We won't get caught".

 Stage 2 Legalistic

Legalistic firms obey the law, though ethical concerns are judged on the basis of adherence to the letter if not the spirit of it. No breach of law often means no breach of ethics.

The argument goes that 'If its legal, its OK', 'and if we are not sure, have the lawyers check it out' typifies the legalistic approach. Economic performance dominates evaluations and rewards.

A legalistic company's code of ethics - if it exists - would be dominated by don't do anything to harm the organisation statements.

Some legalistic companies have no ethics code, and do not accept the necessity. Often they see little purpose in expressing explicit ethical standards, and indeed some feel any such statements could lead to difficulties and complication.

Stage 3 Responsive

Managers understand the value of not acting solely on legal basis, even though they believe they could win.

Although a reactive mentality may remain, it is coupled with a growing sense of balance between profits and ethics.

Nonetheless, the basic premise still may be a somewhat cynical ethics pays.

Management begins to test and learn from more responsive actions. A responsive company's ethics code would reflect a concern for other stakeholders, but additional ethics support vehicles, such as hotlines, are less likely to be found.

Most stage two companies would leave ethical concerns aside until they become a problem only then would they consider remedial action.

Stage 4 Emerging Ethical

Managers have an active concern for ethical outcomes:

We want to do the right thing. Values are shared across the organisation. Ethical perception has focus but may still lack organisation and long term planning.

Ethical values in such companies are part of the culture. Codes of ethics are action documents, and contain statements reflecting core values.

These organisations accept that their code of ethics is a starting point - any code not monitored and enforced rapidly becomes a dead letter.

One leading UK bank has put in place a range of instruments for enlisting staff commitment to its code, including ethics hotlines and regular assessment of code effectiveness.

 Stage 5 Ethical Companies

This stage represents what the researchers call the ethics organisation.

Here there is a total ethical profile, with carefully selected core values (and an approach to hiring, training, firing and rewarding) reflect it.

The answer is not to attempt to turn staff and companies into saints, but rather to strike a suitable ethical balance in business operations, in order to minimise reputational risk.

Although the concept of social responsibility may change from time to time, the pyramid model gives us a framework for understanding the evolving nature of the firm's economic, legal, ethical and philanthropic performance.

Task 1

If we take both models -

The Carroll Model and the Reidenbach and Robin Model, we see a number of similarities. Your task for review is as follows:

1. Compare and contrast the Carroll Model with that of the Reidenbach and Robin Model. Look at the similarities and the differences. Which model, in your view is the more useful?

2. Go to the web sites of large companies like Shell, the Body Shop, Monsanto and Lockheed Martin, and look carefully and compare their 'principles' statements. Where would you place these companies on the models? Why?

 Task 2

Consider the two models again and thinking about your own organisation, how would you classify your organisation in terms of the models. Justify your position.

As a manger yourself, where would you objectively place yourself using the Carroll typology.

 Task 3

Consider the case of the tobacco companies that scientists and the government agree, sell a 'harmful product'. Can you make an ethical case for and against the continuation of that trade?

Where would you place the tobacco companies on the Reidenbach and Robin scale and the Carroll model? Justify your position.
 
 

Ethics and the Individual

The actions of a company should be ethical. This means more than conforming to what is legal. Ethical and moral standards go beyond the prohibitions of the law. Business decisions are not simply efficient or inefficient, or effective or ineffective; they are also 'good' and 'bad' in a moral sense. Individual versus organisational conflicts arise when personal values of the employee conflicts with the requirements of organisational tasks.

Often, in a management situation an individual, either as a manager or an employee is faced with personal decisions of an ethical kind. So is there any way in which we think about how we would react? Table 2 lists seven possible responses to an ethical dilemma that faces an individual and gives the pros and cons for each.

Read Case 1: Dow Corning Corporation and Silicone Breast Implants; Weiss, pp. 275-284.

Address the questions that relate to the case on page 282.

In the class we will consider the issues that arise from the Dow Corning Case and consider the Virgin Dirty Tricks scandal as a video case study and discussion. Go to the text version of the Virgin Case Study.
 
 
 

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