Business ethics

1. Business ethics Start off with choices Video--What would you NOT do.

2. Definition • Managerial Ethics the study of standards of morality (what is good/bad right or wrong with one’s conduct) of business conduct. • Beyond legal issues. • Often confronted as a manager with making ethical choices.

3. Related to corporate social responsibility • Obligations corporations owe to constituencies (stakeholders). • With Right to earn more comes responsibilities to society. • Free enterprise system will continue to operate as long as it serves the needs of society. How should business help the needs of society? • Is it only economic? If so, is it OK to blatantly discriminate if firm is profitable? • Even in the economic sphere, is it OK to bribe or get kickbacks if provide a good product or service?

4. Purpose of this part of the course. • Assumptions. • Ethics is relative. People act according to both wisdom and social pressure. • A course in Ethics let alone one class in ethics does not make someone more or less ethical. • “Preaching to the Choir”. Many of you have integrity. I encourage you to act with the courage of your convictions. You have to live with yourself all of your life. Speak up or refuse to act when you here or see inappropriate behavior. Examples come later.

5. Ethics covers all aspect of decision and business. Daily interactions • Honesty vs white lies with others • Conflicts of interest • Environmental issues • Product safety and reliability • Accounting and stockholders • Information technology and privacy (cookies).

6. New problem. • Single parent. Excessively late. Talked once and warned. Got better for one month but then back to old patterns. What do you do?

7. How do you determine what is right? • Utilitarianism and individualism. Act in self interest and greatest good. If everyone is free to do so (major assumption), the good of society is served. Consequences of decisions and who gets what? • Examples: Its OK to drill in the Artic National wildlife preserve or • Eliminate all laws that restrict business activity and restricts pursuit of self interest. • Wall street

8. Moral rights perspective • Moral rights: Actions not consequences should be correct. The way you do business is more important than the product or service. • How do you treat your employees, customers, etc. • Wal-mart and return policy in Europe. • Is it OK to lie to people as long as its not breaking a law.

9. Justice view—impartial and fair treatment for all. Treat all similarly. Define rules and follow rules (distributive justice) or processes (procedural justice). • Example, how should be people be paid? • How do we create a level playing field in business. • Or Decision process need to be fair. Managers make decisions affecting customers, employees, community. Decision process needs to be fair.

10. Different perspectives on one topic • The proposed new mall in Ames. • Utilitarian perspective. • Moral rights perspective. • Distributive justice (who benefits from this and how are those resources allocated?). • Procedural Justice (inputs into decision process fair?).

11. Or initial case!

12. Different perspective different concerns • That is why we study these. Business in the US is heavily influenced by Utilitarian perspective. Give people freedom to act. • Business in Europe is more balanced between Utilitarian and Moral rights. • Justice is not very important in the private sector unless unionized. Then very important.

13. Important to • Identify ethical perspectives in discussions. • No one has a monopoly on ethics. • When one perspective goes to excess, there are social problems. • As future business leaders, accept that utilitarian perspective needs to have some constraints. Greed is not always good as the movie demonstrates.

15. Do Businesses really care? • Evidence for caring. • Evidence for not caring.

16. Evidence for Caring • Companies engage in codes of ethics. • Ethical standards for dealing with different issues. • A number of companies put ethics in their mission statements. • Some companies of ethics officers (usually internally auditors).

17. Most importantly • Most companies (not all) operate fairly and honestly with customers and other external groups such as suppliers and bankers

18. Evidence for not caring • Bottom line is to make money at any reasonable cost. • Bottom line is for me to get ahead of others in my career at any reasonable cost.

19. Do employees care • Survey of 2000 secretaries • 58% of secretaries lie about their supervisors whereabouts • 27% have shared confidential information • 17% have notarized a document without witnessing a signature

20. 12% have changed or been involved with changing the minutes of a meeting • 10% have destroyed damaging information • What will you do if asked? • What will you ask others to do?

21. Why Unethical/ethical • Bottom line question.

22. personal • Not really illegal • Convincing yourself its in everyone’s self interest • No one will ever know • The organization will protect you.

23. Situational/moral intensity • Magnitude of the consequences. • Social consensus • Probability of effect or social consequences • Temporal immediacy (the temporal relationship between the action and effect). • Proximity (social connectedness of decision maker to those influenced by the decision).

24. Concentration of effect or the number of people influenced by a decision. • So for example, telling a lie to an employee about being out of an office, to one person building on a flood plain (target store in Ames), to misreprensentation of accounting records.

25. Before I conclude • Responsible for pp 172-179 on Social responsibility. On the exam.

26. Examples • Racially offensive joke? • My brother? • Janetta • Encourage you to act with the courage of your convictions.

27. Most of us have relativistic ethics • Moral dilemmas are complex. We are forced to make lots of choices. Often act in self interest. • Examples with pollution. An owner and an employee. • Both were “good” people. • No difference than the current batch of accountants. Arthur Anderson—Leader in Ethics.

28. Summary ethics is often Short term vs Long term • Your reputation and relationships vs immediate financial gain. • Most firms who take ethics seriously are concerned about long term relationships. People want to do business with ethical firms. • Career success (both financial and personal) is based on ethical relationships with others.