chapter 7

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Chapter 7
Business Ethics Fundamentals


After studying this chapter, you should be able to:

1. Describe how the public regards business ethics.
2. Define business ethics and appreciate the complexities of making ethical judgments. 3. Explain the conventional approach to business ethics.
4. Analyze economic, legal, and ethical aspects by using a Venn model. 5. Enumerate and discuss the four important ethics questions. 6. Identify and explain three models of management ethics.
7. Describe Kohlberg’s three levels of developing moral judgment. 8. Identify and discuss the elements of moral judgment.


INTRODUCTION – Chapter 7 introduces concepts and background that are essential to the understanding of 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 have previously taken a course in moral philosophy, most will have given little thought to the whole issue of ethical decision-making. Although they will certainly have opinions regarding right and wrong 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, and then ask the students how they would make a decision about that scenario—without allowing them to say what their decisions are. Many will get frustrated with this exercise, but will soon recognize the point being made—that they go through a process to get to their decisions, but rarely do they pay any attention to that process.

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. However, by doing so, they also fall into the trap to which most moral philosophers succumb: neglect of other elements of moral behavior. James Rest, a contemporary of Lawrence Kohlberg, developed what he termed a Four Component Model of Moral Behavior, which outlines the psychological steps that must occur for moral action to occur. As Rest says, “…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 3. Moral motivation – prioritizing moral values relative to other values 4. Moral character – courage to carry out the morally right action

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.

PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:

Jim and the Indians (from Smart, J. J. C. and Williams, B. 1973. Utilitarianism for and against. Cambridge, England: Cambridge University Press. pp. 97-98.) Dick Grasso and the NYSE: Is it a Crime to Be Paid Well?

The Waiter Rule: What Makes for a Good CEO?
Do as I Say, Not as I Did
Martha Stewart: Free Trading or Insider Trading?
The Case of the Killer Phrases (A)
To Hire or Not to Hire
Does Cheating in Golf Predict Cheating in Business?
The Travel Billing Expense Controversy
Phantom Expenses
Family Business
Chiquita: An Excruciating Dilemma Between Life and Law
McDonald's: The Coffee Spill Heard ‘Round the World
Safety? What Safety?
Little Enough or Too Much?
The Betaseron Decision (A)
A Moral Dilemma: Head Versus Heart
Wal-Mart and Its...
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