Business Ethics Chapter 2 Ethics? What is Ethics?

1. Business Ethics Chapter 2Ethics? What is Ethics?

2. The Social Contract Theory • The social contract defines the permissible scope of business conduct and goes beyond the purely economic issues. If society wants more from business than profits, business must accept this mandate in order to survive in society. To do otherwise is to breach the social contract.

3. Levels of Corporate Social Responsibility Societal Responsibility Stakeholder Responsibility Ecological Environment Customers Profit Responsibility General Public Owners/Stockholders Employees Suppliers/Distributors Public Interest Groups Source: Marketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius. The Social Contract

4. Social and Corporate Responsibility He broke the social contract.

5. Executive's Fatal Flaw:Failing to UnderstandNew Demands on CEOsJanuary 4, 2007; Page A1RE: Robert Nardelli's demise as chief executive of Home Depot“What Mr. Nardelli missed, however, is that in the post-Enron world, CEOs have been forced to respond to a widening array of shareholder advocates, hedge funds, private-equity deal makers, legislators, regulators, attorneys general, nongovernmental organizations and countless others who want a say in how public companies manage their affairs. Today's CEO, in effect, has to play the role of a politician, answering to varied constituents. And it's in that role that Mr. Nardelli failed most spectacularly.”Wall Street Journal, January 4, 2007

6. Dixie Chicks Break Social Contract with Americans http://www.youtube.com/watch?v=dYyIOYEewxY&feature=related 2006: Dixie Chicks on wrath from Bush remarks

7. Consequential (Teleological) Principles Egoism Utilitarianism Feminism Nonconsequential (deontological) Principles Categorical Imperative Kant – 18th Century German Philosopher Veil of Ignorance John Rawls A Theory of Justice (1971) Political Liberalism (1993) Ethical Relativism (vergers on Political Correctness) The Golden Rule Consequential and Nonconsequential Principles

8. Egoism – Compassion or Competition? • “From an organizational perspective, egoism involves those actions that best promote the long-term interests of the organization. Thus, a corporation may establish a minority hiring program or a college scholarship program, and in doing so, the corporation may well be acting in a purely egoistic manner. These programs may advance the long-term interest of the corporation by improving its public image, reducing social tensions, or avoiding legal problems that might otherwise have arisen.”

9. Vons on Facebook…

10. Mayor Ashley Swearengin = Representing FRESNO Egoism – An act is ethical when It promotes the best long-term Interest of the firm, or in this case City of Fresno.

11. Ethics… • Ethical Theories: • Egoism – An act is ethical when It promotes the best long-term Interest of the firm. • Utilitarianism – The most ethical decision for the greatest good. One that promotes the best ethical conclusion without compromising the overall situation.

12. Ethics… Continued • Feminism – The ethics of caring. Recognizing the importance of personal relationship. • Categorical Imperative – Only when we act from a sense of duty and responsibility do actions have ethical worth. • Veil of Ignorance – Rational agents, unaware of their personal characteristic or places in society., choose the principles they wish to have govern everyone in society.

13. Kantian Ethics • A moral theory that says people owe moral duties that are based on universal rules. • Based on the premise that people can use reasoning to reach ethical decisions. • This theory would have people behave according to the categorical imperative: “Do unto others as you would have them do unto you.”

14. Rawls’s Social Justice Theory • A moral theory that says each person is presumed to have entered into a social contract, with all others in society, to obey moral rules that are necessary for people to live in peace and harmony. • Fairness is considered the essence of justice. • Rawls proposed that the least advantaged must receive special assistance to allow them to reach their potential.

15. Rawls’s Social Justice Theory (continued) • The principles of justiceshould be chosen by persons who do not yet know their station in society. • This “veil of ignorance” would permit the fairest possible principles to be selected.

16. Veil of Ignorance - John Rawls

17. A Social Experiment… The Rawls Effect

18. Let Them Eat Cake… https://hammeringshield.wordpress.com/2013/03/04/903/

19. Ethical Relativism • A moral theory that holds that individuals must decide what is ethical based on theirown feelings as to what is right or wrong. • There are no universal ethical rules to guide a person’s conduct. • If a person meets his or her own moral standard in making a decision, no one can criticize him or her for it. • “The “What Feels Good” approach to life!”

20. How Do You See Yourself? • Morality v. Immorality? Do you see yourself as being moral with a sense of duty and responsibility? Do you see yourself as being amoral, with a sense of knowing right from wrong, but choosing to do wrong because it meets your needs at the time of the action?

21. Ethics Check Questions: • Is It Legal? • What are the consequences? • Is It Balanced? • Does it promote fairness? • How Will It Make Me Feel About Myself? • Can I live with this decision?

22. Ruggerio’s Three common Concerns in Ethical Decision Making: • The obligations that arise from organizational relationships. • The ideals involved in any decisions that are made • The effects or consequences of alternative actions.

23. Amoral Personality • Being neither moral nor immoral: Lying outside the sphere to which moral judgments apply. • A personality that has neither a conscience or normal fear factor.

24. An Amoral Personality While leading the life of a happy family man in the New Jersey suburbs, Richard Kuklinski was also living a bizarre double-life as a Mafia hit man. Kuklisnki tells first had how he brutally murdered men at close range, dismembered and disposed of them before returning home to his family.

25. The Iceman Tapes - Conversations with a Killer (part 2)

27. Moral Personality • Any actions that honor obligations while simultaneously advancing ideals and benefiting people can be presumed to be moral actions.

28. Ethics in Business Fact or fiction?

29. Business Attitude • Caveat emptor – “Buyer Beware” • Corporate Culture Influence- “Top-Down” Approach to the way business gets done. • The “Game Theory” as a way of business • Bluffing • Lying • Cheating

30. Misrepresentation /Falsification

31. Scott Thompson apologizes; director in charge of vetting to step down http://www.newser.com/story/145584/yahoo-board-probes-ceos-fake-resume-debacle.html

32. Business Scandals: • Enron • Adelphia Communications • systematically and fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates. • Global Crossing • conflict-of-interest offenses committed by a former accounting executive and scads of internal-control blunders at the company. • World Com • Arthur Andersen • Martha Stewart

33. SEC Investigations (2002) • Software • Computer Associates • Network Associates • Telecom • Global Crossing • Lucent Technologies • Qwest Communications • WorldCom • Wall Street • Credit Suisse First Boston • Hedge Funds • Capital Markets • Merrill Lynch • Accounting • Arthur Andersen • Deloitte & Touche • Ernst & Young • KPMG • PriceWaterhouse Coopers • Energy • CMS Energy • Dynergy • Enron • Halliburton • Reliant Resources Source: Business Week, June 10, 2002

34. The Smartest Guys in the Room…

35. Corporate Scandal Fines Source: Business Week, Nov. 4, 2002

36. Bush Administration Policy in response to corporate wrong doing: • Sarbanes-Oxley Act of 2002 • Requires that chief executive officers and chief financial officers certify the accuracy of quarterly financial reports. (e.g., a signature must accompany the documents sent in as financial statements of the company.) • Reports knowingly falsified could result in fines up to $1 million and incarceration for up to 10 years.

37. Corporate Citizenship • A theory of responsibility that says a business has a responsibility to do good. • Business is responsible for helping to solve social problems. • Corporations owe a duty to promote the same social goals as do individual members of society.

39. Chairman and CEO, John Mackey

40. Whole Foods CEOs Apologize for Overcharging Customers

41. Corporate Citizenship (continued) • This theory argues that corporations owe a debt to society to make it a better place. • This duty arises because of the social power bestowed on corporations. • A major criticism of this theory is that the duty of a corporation to “do good” cannot be expanded beyond certain limits.

42. BP Oil Spill… 2010

43. BP Oil Spill

44. BP Clean-up

45. A Business Approach to Ethics • U.S. businesses need to develop a model or a framework of ethical behavior. • Business should adopt a “synthesis” approach of revolving ethical issues. Considering “Obligations, Ideals and Effects” and it is weighed towards stakeholders, employees, customers and community.

46. Business Ethics • Business should establish rules and standards, but those rules and standards also need to change as society and the business environment changes. • Only people, not corporations, have the power to make those changes. • How does that effect you?

47. Video to view: The Smartest Guys In The Room Magnolia Home Entertainment 110 minutes Rated R http://www.youtube.com/view_play_list?p=04BAE9B96F17CE61&search_query=enron+the+smartest+guys+in+the+room

48. Ethics Resource Center: http://www.ethics.org/index.html

49. Ethics and Social Responsibility of Business Chapter 2Ethics? What is Ethics?