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Chapter 4: Ethics and Business Decision Making

Chapter 4: Ethics and Business Decision Making. §1: Business Ethics . Ethics is the study of right and wrong behavior; whether an action is fair, right or just. In business, ethical decisions are the application of moral and ethical principles to the marketplace and workplace.

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Chapter 4: Ethics and Business Decision Making

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  1. Chapter 4: Ethics andBusiness Decision Making

  2. §1: Business Ethics • Ethics is the study of right and wrong behavior; whether an action is fair, right or just. • In business, ethical decisions are the application of moral and ethical principles to the marketplace and workplace.

  3. Why is Business Ethics Important? • Directors and Officers owe a complex set of ethical duties to the company, shareholders, customers, community, employees, and suppliers. • When these duties conflict, ethical dilemmas are created.

  4. Importance of Ethical Leadership • Attitude of Top Management. • “Looking the Other Way”. • Creating Ethical Codes of Conduct. • Behavior of Owners and Managers. • Case 4.1 Baum v. Blue Moon Ventures, LLC (2008).

  5. § 2: Approaches to Ethical Reasoning • Duty-Based Ethics - derived from religious and philosophical principles. • Religious Ethical Standards. • Kantian Ethics. • Rights Principles. • Outcome-Based Ethics - seek to ensure a given outcome. • Utilitarianism.

  6. Religious Ethical Standards • The rightness or wrongness of an action is usually judged according to its conformity to an absolute rule that commands a particular form of behavior. • The motive of the actor is irrelevant in judging the rightness or the wrongness of the action. • These rules often involve an element of compassion.

  7. Kantian Ethics • Immanuel Kant: belief that general guiding principles for moral behavior can be derived from human nature. • The categorical imperative is a central postulate of Kantian ethics. • The rightness or wrongness of an action is judged by estimating the consequences that would follow if everyone in a society performed the act under consideration.

  8. Rights Principle • This principle derives from the belief that every duty gives rise to a corresponding right. • The belief in fundamental rights is a deeply embedded feature of Western culture. • The ethicality of an action is judged by how the consequences of the action will affect the rights of others.

  9. Outcome-Based Ethics: Utilitarianism • Jeremy Bentham: An action is ethical based on whether it produces the greatest good for the greatest number of people upon which it has an effect. • A cost-benefit analysis must be performed to determine the effects of competing alternatives on the persons affected. • The best alternative is the one that produces the greatest good for the greatest number.

  10. Corporate Social Responsibility • CSR is the idea that those who manage corporations should be accountable to society for their actions. • Stakeholder Approach: corporations have a duty not only to shareholders but other groups (stakeholders) affected by corporate actions. • Corporate Citizenship: promote goals that society considers worthwhile and take positive steps towards solving problems. • CASE 4.2Fog Cutter Capital Group, Inc. v. Securities Exchange Commission (2007).

  11. § 3: How the Law InfluencesBusiness Ethics • Legal compliance is the ‘moral minimum.’ • Simply obeying the law does not necessarily make the business practice ethical. • Backdating stock options (Apple Computer).

  12. How the Law InfluencesBusiness Ethics • Misleading Regulators – The Case of OxyContin. • Fraudulent marketing which lead to abuse and addiction. • Company kept this information secret. • May 2007, executives plead guilty to criminal charges they misled regulators.

  13. How the Law InfluencesBusiness Ethics • “Gray” areas in the law. • Business leaders must contemplate the ethical implications of a business decision. • CASE 5.3 Guin v. Brazos Higher Education Service Corp. (2006).

  14. § 4: Making Ethical Business Decisions • George S. May company has provided six guidelines: • The law. • Rules and procedures. • Values. • Conscience. • Promises. • Heroes (role models).

  15. §5: Business Ethics on a Global Level • American companies must be trained in cross-cultural business practices. • Monitoring the Employment Practices of Foreign Suppliers. • Corporate Watch groups can disseminate information instantly around world. • Foreign Corrupt Practices Act. • Bribes and Accounting Practices.

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