Business policy,ethics and society

This section will cover (a) definition of business policy: strategic decisions in the enterprise; (b) ethical behaviour above and beyond the requirements of the law: what might this involve e.g. in respect of products and markets in which the business is prepared to operate? (c) does business have a responsibility towards ‘society’? For example, should businesses decide without being legally required to do so, to undertake activities which they think are in the national interest even if this may appear to conflict with strictly commercial interests? (d) if ethical/social decisions are required, who is to make them — at what levels of an enterprise — e.g. does the board make them all or are they also expected below board level? This section will also cover: (e) practical examples in the light of changing attitudes towards business and market behaviour in the 1980's and 1990's; (f) implications of attitudes towards corporate crime and of behaviour which may not be illegal but which may be regarded as ‘unacceptable’: this will be discussed with examples from experience in Australia and other countries. The section will first explain the meaning of the phrase ‘business policy’ and will briefly outline the kinds of strategic decision which have to be made in business enterprises. It will go on to consider whether there are things a business ‘ought’ or ‘ought not’ to do even if they are within the law. The section will illustrate these problems with examples in the light of changing attitudes towards business policy and market behaviour in the 1980's and 1990's. It will take into account some recent cases of corporate crime in Australia and elsewhere and also of behaviour which while neither against the law or outside the power of the board, might be thought ‘inappropriate’.     

Corporate social responsiveness: Choosing between hierarchical and contractual control

Metaphors from strategic management can be applied effectively to business ethics programs. While effective strategies help implement ethical decisions that are formulated in good faith, ostensibly value-neutral control mechanisms can indirectly affect the substantive nature of policies and decisions themselves. This article examines the effectiveness of various corporate social responsibility implementation strategies. It also addresses the effects of implementation choices on the substantive formulation of ethical decisions and policies.Implementation and evaluation of corporate social responsibility programs through models of responsiveness are integrated into the social policy cycle using four tools: strategic control and performance control approaches, and hierarchical control and contractual control structures. The choices made among these forms of control approaches and structures, which as implementation mechanisms are typically considered to be value-free devices, may affect the substance of corporate social responsibility content. Hierarchical control structures, which use outside directors, tend to be associated with performance control approaches, and are biased towards applying utilitarian approaches to ethical decision making. Contractual control structures are compatable with strategic control approaches, and generally favor the application of principle-based approaches to ethical decision-making. Both the content and the quality of ethical decisions will be affected by differences between hierarchical and contractual control.Steven R. Salbu is an Assistant Professor at the Graduate School of Business, University of Texas at Austin; J. D. William and Mary. He has recent/forthcoming publications inBusiness Ethics Quarterly, Business and Professional Ethics Journal, Harvard Journal of Law and Public Policy, Tulane Law Review, Indiana Law Journal, St. John's Law Review, Marquette Law Review. He is an ethics consultant for Fortune 500 companies and was awarded the Wharton Advisory Board Outstanding Teaching Award.The author gratefully acknowledges the helpful suggestions of John Allison, Tom Dunfee, and Bill Shaw.     

The Hypothesized Relationship Between Accountability and Ethical Behavior

Unethical behavior is important to study because it may have an adverse influence on organizational performance. This paper is an attempt to better understand why individuals behave as they do when faced with ethical dilemmas. We first explore the definition, theories and models of ethical behaviors and accountability. This discussion of societal ethics and accountability as forms of social control segues into a discussion of how accountability may influence ethical behaviors. Based on the business ethics and accountability literatures, we suggest a number of research questions and hypotheses that need to be tested, as well as an appropriate research strategy.     

Promoting Ethical Judgment in an Organisational Context

The essay argues that individual ethical judgment is a necessary ingredient in an organisation’s ethical performance. Attempts to systematise judgment, removing it from individual responsibility are not successful, and sometimes can even be counterproductive. Focus on systems of accountability can actually detract from the production of ethical behaviour. A number of examples are provided. Although it is much more difficult to produce, individual responsible decision-making and individual judgment should be the features that an organisation focuses on in its interest to promote ethical performance. Accountability systems are important; but they have very limited application toward production of an ethically excellent environment. The essay argues that there has been too much attention paid to accountability systems within organisations, and much too little paid toward the development and cultivation of individual ethical decision making and responsible behaviour.     

Successful U.S. Entrepreneurs: Identifying Ethical Decision-making and Social Responsibility Behaviors

This two-part study analyzed some of the ethical choices made by founding entrepreneurs during the creation and development of their ventures in order to identify the areas in which founding entrepreneurs must make decisions related to ethics or social responsibility during venture creation and development. Content analysis was used to identify decisions with ethical components and/or implications from in-depth interviews with 10 successful business founders. The research for part one of the study was guided by the following research question: In what areas must entrepreneurs make decisions with ethical and/or social responsibility implications during new venture creation and development? The authors identified four distinct categories of decisions where ethical or social responsibility components exist: (1) individual entrepreneurial values-related decisions, (2) organizational culture/employee well-being decisions, (3) customer satisfaction and quality decisions, and (4) external accountability decisions. In the second part of the study, the decisions identified in part one were analyzed using a framework derived from prior research in ethics. This framework was developed from the work of Kant (1964) who theorized about human morals and Rawls (1971) who developed theories about justice. Part two of the study was guided by the following research questions: Do entrepreneurs have values and ethics similar to those held by society in general? If they don’t, how do their values and ethics differ? The comparison revealed that the ethics and/or values that the entrepreneurs either explicitly or implicitly acknowledged were in fact similar to those of society in general.     

Ethics in the transnational corporation; the “moral buck” stops where?

This paper addresses two issues. The first issue relates directly to transnational corporations, while the second issue is broader and relates to all diversely held companies. To address the first issue I cite three representative instances where wanton environmental damage has signalled a lack of moral judgment on the part of a transnational corporation. I conclude from these instances that ethical considerations are not given adequate weight in corporate investment decisions. This leads to the second issue. Who should be making ethical decisions within the corporate milieu? I conclude that neither management nor the typical shareholder should be expected to exercise moral judgment because they are not free agents. They have fiduciary responsibilities that must override personal moral suasion.     

Ethical Decision Making and The Law

This paper will examine the effects of gender, age, work experience, academic status and legality on certain ethical decisions. Six scenarios representing ethical dilemmas were presented to both undergraduate and MBA students in an attempt to determine if various demographic factors influenced ethical decision making. While some past studies have suggested that gender has an important effect on ethical decision making, this study does not completely support this conclusion and suggests that age and/or length of work experience should be included in any study of ethical decision making.The legality of the decisions was determined and compared to the reason given by the students for their decisions. In some cases the choice made by a majority of the students was not the one that was supported by the legal authorities which suggests that there may be conflicts between the ethical system of the respondents and the behavior expected of them by society.     

Motivations of the Ethical Consumer

There are strong indications that many consumers are switching towards more socially and environmentally responsible products and services, reflecting a shift in consumer values indicated in several countries. However, little is known about the motives that drive some toward, or deter others from, higher levels of ethical concern and action in their purchasing decisions. Following a qualitative investigation using ZMET and focus group discussions, a questionnaire was developed and administered to a representative sample of consumers; nearly 1,000 usable questionnaires were collected. The degree of awareness, concern and action regarding 16 ethical issues was quantified, using a measure developed from the Stages of Change concept within the Transtheoretical model. Motivations for ethical behaviour, in relation to each individual’s most salient ethical issue, were investigated using initially 22 motive statements within the framework of the Decisional Balance Scale (DBS). The findings suggest that the DBS and Stages model have an explanatory value within the ethical decision-making context, and that the motives identified do reflect the Decisional Balance Constructs. Indeed the study suggests that respondents’ motivational attitudes are a function of their stage of ethical awareness, concern and action. Therefore, the Decisional Balance Scale may well prove useful for designing appropriate interventions and communications to facilitate movement towards more ethical decision-making. These findings yield strategic insight for communicating messages to ethical consumers and for better understanding their purchasing decisions.     

The Responsibility and Accountability of CEOs: The Last Interview with Ken Lay

Responsibility and accountability of CEOs has been a major ethical concern over the past 10 years. Major ethical dilemmas at Enron, Worldcom, AIG, as well as other well-known organizations have been at least partially blamed on CEO malfeasance. Interviews with Ken Lay, CEO of Enron, after his 2006 fraud convictions provides an opportunity to document his perceived role in the demise of Enron. Possibly no other CEO has had as much impact on the scrutiny and legalization of business ethics as Ken Lay. This analysis is timely because of many information sources now available and the recent Supreme Court decisions on Enron conviction appeals. Using Ken Lay as the focal point, a review of literature provides the background for research questions to explore the role of the CEO in developing an ethical corporate culture.     

The ethical leader: An ascetic construct

The way in which ethical standards are neglected or applied is a function of individual character. The best guarantee of ethical leadership, therefore, lies in the identification of those already predisposed to live according to high moral standards. The ascetic construct is offered as a type of personality with such a predisposition. The ascetic is self-controlled, purposeful, and mindful with regard to consequences. The character traits of the ascetic leader are predicted to increase ethical awareness and ethical accountability within his organization or hers. This will increase the probability of the organization's economic success because it will reduce uncertainty on the part of customers and investors. A better understanding of the ascetic personality may be helpful in identifying those with the potential for becoming highly ethical leaders.Harold Jones is a graduate of the University of Nebraska at Omaha and Garrett Theological Seminary. After eight years in the ministry, he worked for twelve years as a stockbroker and as a branch office manager for an affiliate of a New York Stock Exchange member firm. In 1992, he retired from business to begin working on his Ph.D.     

The Dilemma of Accountability for Professionals: A Challenge for Mainstream Management Theories

Professional institutions are increasingly confronted by fiscal constraints and political pressures to improve and increase their accountability in a competitive consumer-driven market. Accordingly, the need to ensure efficiency and accountability is of strategic importance. This article reports on a qualitative study of medical professionals that assessed the utility of financial incentives and external control methods derived from agency theory to ensure accountability of professionals. The authors argue that approaches derived from stewardship and institutional theories can extend the principal–agent perspective to sustain greater social and ethical accountability.     

Making codes of ethics ‘real’

This article outlines a training activity that can enable both business and governmental professionals to translate the principles in a code of ethics to a specific list of company-related behaviors ranging from highly ethical to highly unethical. It also explores how this list can become a concrete model to follow in making ethical decisions. The article begins with a discussion as to what will improve ethical decision making in business and government. This leads us to explore the factors that can most easily lead to improvement, namely a comprehensive code of conduct and employee training. From there we look at the Critical Incident Technique as a training strategy that has the potential for identifying those behaviors that distinguish really outstanding behaviors from those that go by the book, and can be used to encourage more independent thinking and to set expectations for future decisions. If employees are given the skills and examples that will enable them to make better decisions, they can apply them to any situation.Peter Dean has 20 years experience in business and academic arenas designing, implementing and evaluating programs in communication skills, leadership, team building, interpersonal ethics, decision making, train-the-trainer and organizational change. Peter conducts courses on applied ethics at Penn State University.     

Mixed Motives and Ethical Decisions in Business

Discerning the motives that lead businesspeople to make ethical decisions in economic contexts is important, for it aids the moral evaluation of such decisions. But conventional economic theory has for too long assumed an egoist model of motivation, to which many contrast an altruist view of ethical choices. The result is to see business decision making as implying dilemmas. On the other hand, we argue, if one assumes multiple motives, economic and ethical, in ordinary business decisions, a more fruitful model of ethical motivation in such decisions emerges. In this paper multiple motives are assumed to be the norm in a world of large organizations, complex decisions and stakeholder management. An example of a technology acquisition decision, with environmental overtones is presented in illustration of this approach. A method for discerning motives, primarily in terms of behavioural efficacy is presented. On this basis a two step approach to morally evaluating mixed motives in business decisions is proposed. First, the fit of motives with substantive ethical values should be ascertained, and then the efficacy of moral motives in yielding ethical behaviour and outcomes should be determined. This approach, we conclude, offers a much more concrete model of the actual role of moral motives in business decision making. It also signals the importance of moral learning in organizations.     

The Impact of Codes of Ethics on Decision Making: Some Insights from Information Economics

Although it is suggested that an important role for codes of ethics is to influence decision making, the little research into the impact of codes of ethics on decisions finds little impact. Insights from information economics help to explain this.If an individual will select (forego) the action that a code of ethics indicates to be ethical (unethical) in the absence of a code, then expressing that position in a code of ethics will have no impact on the action chosen. Even if the individual will select (forego) the action that a code of ethics indicates to be unethical (ethical) in the absence of a code, the presence of a statement in the code of ethics must cause the individual's beliefs to change enough so that he or she changes actions. This can be a fairly high obstacle.     

Desire to be ethical or ability to self‐control: Which is more crucial for ethical behavior?

Promoting ethical decisions and behaviors is challenging for any organization. Yet managers are still required to make ethical decisions under conditions which deplete their self‐control resources, such as high stress and long hours. This study examines the relationships among symbolic and internal moral identity, self‐control, and ethical behavior, and investigates whether self‐control acts as the mechanism through which moral identity leads to ethical behavior. Findings indicate that internal moral identity overrides symbolic moral identity in the relationship with self‐control and that self‐control fully mediates the relationship between internal moral identity and ethical behavior. The implications for organizations is that while rules, procedures, and ethics training are useful, managers with a strong moral compass will be more likely to practice self‐control leading to more ethical behaviors.     

Are We Sending Mixed Messages? How Philosophical Naturalism Erodes Ethical Instruction

To develop critical thinking skills, higher order ethical reasoning, a better grasp of the implications of ethical decisions, and a basis for ethical knowledge, it is necessary to explore the philosophical premises foundational to one’s ethical persuasion. No philosophical premises are more important than those pertaining to the nature of human personhood and business’ responsibility to respect the inherent value of human beings. Philosophical naturalism assigns the essence of human personhood strictly to causal interactions of physical matter. Substance dualism, on the other hand, posits both a physical aspect and an immaterial substance to personhood, interacting within the totality of each being. This paper argues for the logical superiority of substance dualism in achieving the overriding objective of discerning ethical knowledge. Substance dualism offers a better explanation – and one that more closely follows the way most people commonly experience themselves and others–than naturalism for free agency and accountability, meaningful moral standards, confidence in knowing what ethical decisions to make, and the moral drive residing in conscience. Marjorie J. Cooper (aka Caballero), Ph. D. is a Professor of Marketing in the Hankamer School of Business at Baylor University in Texas. She received her B.A. from Wheaton College in 1970, her M.B.A. from Oklahoma City University in 1977, and her Ph. D. in Business Administration from Texas A&M University in 1981. Her articles have appeared in the Journal of Marketing, Journal of Advertising, Journal of the Academy of Marketing Science, Journal of Advertising Research, Journal of Business Research, Psychology & Marketing, Journal of Professional Selling & Sales Management, Journal of Business & Industrial Marketing, Business Horizons, Journal of Promotion Management, Journal of Small Business Management, Human Systems Management, and elsewhere.     

The responsible shareholder: a case study

Shareholders are sometimes considered to be, in moral terms, the owners of a company, they are after all the carriers of the residual liabilities and bear a higher proportion of the financial risk. However, in company law, the shareholders' responsibility is limited, and in financial terms shareholders are only liable up to the fully paid value of the share certificate. Moreover, when the shares are sold, the responsibility and risk are transferred completely to the new bearer of the shares. Whether this gap in moral and legal perceptions can be judged to be satisfactory in business ethics terms is a moot point and will be partly explored in this case study which seeks to analyse the shareholder's responsibility towards a firm in which they own shares. The case study company chosen as a vehicle to explore these issues is that of Turner & Newall; a company that subjected its employees, communities and customers to a major health hazard – asbestosis. This paper will use the Turner & Newall archive materials to illustrate the moral hazards that can arise for shareholders. In particular it will examine the ethical responsibilities of shareholders towards those stakeholders who were exposed to the dangers of asbestos. This case is a significant test of the veracity of the legal system of company control, and exposes the ineffectiveness of that system in accountability terms. The case study also deals with specific issues that arose in the asbestos crisis, as well as with more general issues in our present system of corporate governance and shareholder responsibilities.     

Ganxi's Consequences: Personal Gains at Social Cost

Is guanxi ethical? This question is largely ignored in the existing literature. This paper examines the ethical dimension of guanxi by focusing on the consequences of guanxi in business, from ethically misgiving behaviour to outright corruption. Guanxi may bring benefits to individuals as well as the organisations they represent but these benefits are obtained at the expenses of other individuals or firms and thus detrimental to the society. As guanxi has an impact on the wider public other than the guanxi parties, it must be studied in the context of all stakeholders. It can be argued that guanxi is an inevitable evil under the current political and socio-economic systems in China. Its role and importance in business life will be diminished as the country moves towards an open market system.     

A Step Forward: Ethics Education Matters!

Ethics education matters! Contrary to some common beliefs that ethical behavior is inborn, this study suggests that education does matter. This paper examines ethics education and its relationship with students’ ethical awareness and moral reasoning. Attitudes Towards Business Ethics Questionnaire and 10 vignettes were deployed as the major measurement instruments. It is hypothesized that students with ethics education will have both a greater ethical awareness and ability to make more ethical decisions. Hypotheses were tested in two undergraduate business courses at a major research university where 707 students were sampled. Results suggest that ethics education improved students’ ethical awareness and moral reasoning. Interestingly, results also seem to show that students’ readiness moderated their learning outcomes.     

Correction to: Developing Ethical Confidence: The Impact of Action-Oriented Ethics Instruction in an Accounting Curriculum

After the USSR collapsed, the Russian economy underwent serious changes from being plan-based to a market economy. These changes, together with political instability, created a business environment where no attention was paid to ethics. Russian managers have little experience operating in a market economy, which created many misunderstandings with foreign partners, especially regarding ethical issues of doing business. This study examined the factors influencing the ethical judgments of Russian employees to understand how they perceive ethical issues and make ethical or unethical decisions at work. The Ferrell and Gresham (J Mark 49:87–96, 1985) framework was employed in this study to understand the process of making ethical decision by an individual. Transparency was proposed as a moderator of the relationship between opportunity factors and employees’ ethical judgments. Findings of this study show that Russian employees tend to be more tolerant towards ethically questionable behaviors at a workplace. Moreover, the results also demonstrate that transparency moderates the influence of opportunity to behave unethically on ethical judgments.