What are Management Ethics?
Ethics and Morality, Defined
What is the meaning of the word “ethics”? What is the meaning of “morality”? What, if anything, do the two words have in common? And why are these words important to the practice of business management? Before we get into our discussion, let us take a close look at the definition of each of these two words.
I have a doctorate in business specializing in marketing, and I once taught business ethics (as an adjunct professor) in the weekend MBA program of the highly regarded Cameron School of Business, at University of St. Thomas, in Houston, Texas.
The Free Dictionary, online, gives several good and useful definitions of “ethics.” It says this word means:
1. A set of principles of right conduct; a theory or a system of moral values: "An ethic of service is at war with a craving for gain" (Gregg Easterbrook).
2. (Used with a sing. verb) The study of the general nature of morals and of the specific moral choices to be made by a person; moral philosophy.
3. (Used with a sing. or pl. verb) The rules or standards governing the conduct of a person or the members of a profession: For example, medical ethics.
The word “morality” is defined by the same source as:
1.Conformity to the rules of right conduct; moral or virtuous conduct.
2. Moral quality or character.
3. Virtue in sexual matters; chastity.
4. A doctrine or system of morals.
5. Moral instruction; a moral lesson, precept, discourse, or utterance.
With our definitions in mind, it is clear that both morality and ethics refer to “standards.” These standards represent our society's rules governing “right or wrong conduct,” whether they are concerned with the management of business, or with the “right or wrong” of personal codes of conduct (morality). In business, ethical conduct is considered to be good and moral, and unethical conduct is considered to be bad, and immoral.
Ethics, as a topic of study, is concerned with an individual’s moral standards or the moral standards of a society. Management ethics, therefore, are concerned with moral standards used in the conduct of business management.
In a perfectly competitive free market, the pursuit of profit should, by itself, be enough to ensure that members of society will be served in the most socially beneficial ways. But, since there is no such thing as a perfectly competitive free market, time and again, we are inundated with news stories about corporate misconduct and illegal activities taking place in the world of business. Presented in the next segment is such a story that, even though it happened nearly 50 years ago, is still considered a "landmark" case of unethical (and illegal) corporate wrongdoing.
"Whistle-Blowing," The Famous B. F. Goodrich Case Study
B. F. Goodrich Tires and Goodrich Corporation were once the same company (the company once known as B. F. Goodrich Tires, in 1988, was sold to Michelin). In 2001, the company name was changed to what it is today, Goodrich Corporation. However, back when the company was B. F. Goodrich Tires, in 1967 the company was offered a chance to bid on a contract to supply wheels and brakes for U. S. Air Force vehicles.
The company had innovative technical designs featuring a lightweight, four-rotor brake, and that helped them to win the Air Force contract. Before the brakes could be accepted, they had to pass Air Force qualifying tests and the company had to present a report discussing in detail, for the Air Force, how the brakes passed specific qualifying tests. The company had approximately one year to design and test the brakes, with two weeks reserved for flight testing. In June of 1968, the brakes failed during test flights, and a former B. F. Goodrich employee, Kermit Vandivier, accused the company and its personnel of falsifying the qualification tests.
Because of the accusation, a United States senator, William Proxmire (a Wisconsin Democrat), requested a formal governmental inquiry into the qualification testing. A four-hour Congressional hearing, chaired by Senator Proxmire, convened to investigate brake problems of the Air Force A7D Aircraft, in which the B. F. Goodrich brakes had been installed.
Kermit Vandivier worked for B. F. Goodrich as a technical writer. Feeling that he could not talk to his supervisor, he went "behind the backs" of his managers at B. F. Goodrich (he also contacted his attorney and later the FBI), to report the events that were occurring at the company. It is important to note that during the time when this occurred, it was uncommon for an employee to blow the whistle on corporate wrongdoing.
Vandivier was later dismissed from the company for revealing the information, and his conscience bothered him because, as a technical writer for the company, he had taken part in preparing the falsified report that became part of the crime of conspiracy to defraud the U.S. government.
As an employee of B. F. Goodrich, and as a man with a family to support financially, Vandivier felt that he was stuck between a rock and a hard place. If he had refused to help falsify the report, he would have been fired immediately for not doing what he was being paid to do as an employee. At the same time, he knew if he chose to help falsify the report, he would be running the risk of the deception being discovered later, and that then he would be considered as part of a criminal conspiracy. Not only would he be risking loss of a job, he'd also be facing possibly having to serve time in prison. Vandivier did what he believed was the only thing he could do: He did his job, but he also contacted the FBI to protect himself, legally, from further participation in his company's criminal activity. After he was made an "outcast" inside the company, Vandivier wrote a letter of resignation and submitted it to the plant's chief engineer, a man who was far removed from the day-to-day workings of the company. Upon receiving the letter, in which Vandivier had detailed all of his accusations against the company, the chief engineer fired Vandivier.
In 1972, Vandivier wrote an article titled, "Why Should My Conscience Bother Me?" The article gave the former B. F. Goodrich employee's version of the brake-testing incident, and it helped to eventually make the case a landmark example of a lone individual standing up to blow the whistle on the wrongful deeds of a large corporation.
What Do You Think?
Should ethical/moral standards apply to corporations, or only to individuals? Vote below to tell us what you think.
Questions For You to Consider
Where do business management morals come from? Why is morality important in business? Do people always live up to the moral standards they hold? Do you always do what you believe to be morally right? Do you always pursue what you believe is morally good? Why or why not?
If he believed in the value of honesty and integrity, then why did Vandivier behave as he did? Did he feel he had to betray his values in order to keep his job? Was his paycheck and his ability to earn a living more important than his values? Why or why not?
Did Vandivier believe that it is right to tell the truth, and wrong to tell to a lie? Did he believe it is wrong to endanger the lives of others? Did he believe that integrity is good and dishonesty is bad? Why did he behave as he did, if he held these beliefs? If you were ever in a similar situation, what would you do?
M.G. Velasquez is author of a textbook titled, Business Ethics: Concepts and Cases. I used his text when I taught a course in business ethics as part of an executive MBA program at a local university. In his text (which includes the B. F. Goodrich case study, among many other case studies), Valasquez defines business ethics as: "A study of moral standards and how they apply to the systems and organizations through which modern societies produce and distribute goods and services, and to the people who work within these organizations."
According to the Velasquez text, business ethics investigates three different kinds of issues:
- Systemic Issues: Ethical questions about the economic, political, legal and other social systems within which business operates.
- Corporate Issues: Ethical questions about a particular company.
- Individual Issues: Ethical questions about a particular individual or individuals within a company.
Were there systemic, corporate, and/or individual ethical issues in the case of Vandivier? Or, were all three types of issues present in this case?
Does it make sense to you for there to be ethical/moral standards in the management of business? What are the reasons for or against such standards? Why should we continue (or not) to have them as part of the practice of doing business? What can be said in their favor, and what can be said against them? Is it really reasonable for for us to hold corporations to standards of ethics and morality? What would be most likely to happen if we didn't?
A Society That Prizes Standards
Ours is a society that believes it is good to have standards. We see them as a necessary and vital part of civilized behavior. We have standards of etiquette that we use to judge good and bad manners; standards of law are used to judge legal right and wrong; standards of language tell us what is grammatically correct or incorrect; standards of aesthetics are used to judge good and bad art, and athletic standards are used to judge the quality of game and rules of conduct that must be observed by individuals and teams in the world of sports.
As a society that observes standards, we also have standards related to ethics and morality, as well as standards used outside of a moral or ethical framework. Whenever we make judgments about the right or wrong way to do things, or about what things are good or bad to do, we are using “standards” or rules, of some kind, to make our judgments. Moral standards:
- Are those related to matters we believe to be of serious consequence.
- Are based on what society regards as good reasoning and not on authority.
- Override any self-interest.
- Are based on the impartiality of considerations (universality).
- If transgressed against, are associated with feelings of guilt, shame, and are subject to being discussed as being morally right or wrong.
There must be moral aspects to any free-market system to help define the competitive nature of the system. Anti-competitive activities undermine the competitive nature of the free-market system. When companies take part in activities that are deceptive in nature, the marketplace is no longer competitive, just or fair. Once the competitive nature of the system is compromised, the market system is no longer "free."
Employers want to be served by their employees in ways that will advance the employer's self-interests. At the same time, and as a loyal agent of the employer, the manager/employee has a duty to serve the employer in ways that will advance the employer’s self-interests. Still, the employer has an obligation to society to be ethical in managing his/her business. Business people are residents of society, and as such, they must obey the laws of society. In addition to obeying laws, it is also in the best interest of the business and society, for companies to have and to adhere to a code of ethics.