Chapter 5 Business, Societal, and Ethical Contexts of Law

1. Chapter 5 Business, Societal, and Ethical Contexts of Law

2. BUSINESS ETHICS • Attention to business ethics is critical during times of fundamental change such as the financial crisis that began in late 2008. • In such volatile times, unethical and/or illegal practices are often highlighted.

3. Moral Philosophy • Principles-Based Approach – Ethical decisions made according to a set of established principles such as religious tenets. • Consequences-Based Approach - Provides the most good for the greatest number of people.

4. TRAITS OF EFFECTIVE ETHICALPROGRAMS • Management has articulated a clear vision of integrity throughout the organization. • Reward systems are aligned with the vision of integrity. • Responsibility is seen as individual rather than collective so that individuals are willing to assume personal responsibility.

5. TRAITS OF EFFECTIVE ETHICALPROGRAMS cont’d • Policies and practices of the organization are aligned with the vision. • The vision of integrity is well integrated into the decision-making process so that any significant management decision has ethical value dimensions.

6. CORPORATE SOCIAL RESPONSIBILITY • The fundamental notion underlying CSR is that conscience resides not just in individuals but also in a corporation.

7. The Enron Scandal • The systematic looting of the corporation by its executives and the massive fraud and subsequent cover-ups that culminated in a public crash made Enron the symbol of corporate greed and arrogance.

8. Key Enron Players • Lay - Chairman • Skilling - CEO • Fastow - CFO • Causey – Chief Accountant

9. Arthur Andersen • Anderson was Enron’s CPA/Audit firm. • The government indicted the entire firm of Arthur Andersen on charges of obstruction of justice. • Anderson went out of business.

10. The Narrow View: Invisible Hand • What is good for business is good for America because the market’s efficiencies provide an invisible hand that guides morality and responsibility. Corporations acting unethically would inevitable suffer.

11. The Moderate View: Government’s Hand • The regulatory hands of the law and the political process, rather than Smith’s invisible hand, provide the basis for ethical decision making.

12. The Broad View: Management’s Hand • The broadest view of CSR is that corporations have a social responsibility and that profitability is secondary.

13. learning outcomes checklist • 5 - 1 Articulate a working definition of business ethics. • 5 - 2 Differentiate between primary and secondary stakeholders. • 5 - 3 List alternate approaches to ethical decision making based on different theories of moral philosophy.

14. learning outcomes checklist • 5 - 4 Identify the challenges to business ethics management and articulate a response to each challenge. • 5 - 5 Define values management and articulate several reasons why values management is important in business operations. • 5 - 6 List the common traits of an ethical organization. • 5 - 7 Demonstrate an understanding of how to develop a code of ethics and conduct.

15. learning outcomes checklist • 5 - 8 Employ an ethical decision-making paradigm used by managers for resolving ethical dilemmas. • 5 - 9 Give examples of ethical lapses using historical case studies of businesses facing ethical dilemmas. • 5- 10 Articulate the various views on corporate social responsibility and defend a particular view.