Business Ethics Exam 1

Why managers behave ethically

*Most of us: 1. To avoid some punishment 2. To receive some reward Many of us: 3. To be responsive to family, friends, or superiors 4. To be a good citizen Very few of us: 5. To do what is right, pursue some ideal

Issues definition

A matter that is in dispute between parties. The dispute evokes debate, controversy, or differences of opinion.

Example of intentional amoral management

"this isn't personal, it's just business. I have to let you go." -intentional amoral management

#1 predictor of employee behavior

#1-- behavior of superiors Other factors: 2. ethical practices of one's industry or profession 3. behavior of one's peers in the organization 4. Formal organizational policy (or lack of one) 5. Personal financial need

cloning fears

***Fears: growing people for organs, commercializing humans, seeking immortality, playing 'God', safeness of cloned foods

***Strict liability

**holds anyone in the value chain liable for a defective product that was UNREASONABLY dangerous SO, even if you recall to mitigate issues, if the product was DEFECTIVE, you can still be sued. If the product was DEFECTIVE, it doesn't matter if the consumer was negligent.

Characteristics of moral management

-Conform to high level of ethical or right behavior -Conform to high level of personal and professionals standards -Ethical leadership is commonplace -Goal is to succeed within confines of sound ethical precepts -High integrity is displayed -Embrace letter and spirit of the law -Possess an acute moral sense and moral maturity -Are the "good guys"

Characteristics of immoral management

-Intentionally do wrong -Self-centered and self-absorbed -Care only about self or organization's profits -Actively oppose what is right, fair, or just -Exhibit no concern for stakeholders -Are the "bad guys" -An ethics course probably would not help them

Model of Issues Management Process

Identification of Issues Prioritization of Issues Analysis of Issues Formulation of Issue Reponses Implementation of Issue Responses Evaluation, Monitoring, and Control of Results

example-- issues MSU faces

-student retention and success -pandemic-- safety and health -maintain low cost-- accessibility and tuition -institutional reputation-- value of degree -offerings and opportunities on campus ** Budget tension- less money from the state, so either make cuts, or incur public debt, (or outsource-- ex. dining)

Rawl's Principles of Justice

1. Each person has an equal right to the most basic liberties comparable with similar liberties for others 2.Social and economic inequalities are arranged so that they are both: a)reasonably expected to be to everyone's advantage and b)attached to positions and offices open to all

Managing business crises: Fink's three stage model

1. Identifying the crisis 2. Isolating the crisis 3. Managing the crisis

Management's goal in crisis management

1. People harmed 2. Product (recall, send people to fix it, etc.) 3. Communications ** Tell employees the plan first** Super tricky, because you must manage reputation, but not create more liability for the company

Ethical decision making process

1. State/analyze the problem 2. Identify all courses of action you could take 3. Evaluate 1 course of action a. Economic b. Legal c. Ethical 1. Policies 2. Top management 4. Implement chosen course of action

***mark to market accounting

An accounting method in which assets are valued in the balance sheets at what they would sell for in the market Enron: MTM accounting allowed them to place 20 million in profit on their books right away from a contract they entered to sell energy for 20 years to a company this showed money on their books that they did not have and may never get. NOT honest behavior, but not illegal. SEC allowed them to do it. set the stage for fraudulent accounting

E-commerce issues

Intellectual property Privacy and informed consent ***-General Data Protection Regulation (GDPR)-- protects data related to people in the EU Protection of children -Children's Online Privacy Protection Act (COPPA) for under 13 Security of Information -ransomware **We have few privacy laws in the U.S.

Genetic testing and profiling

2006 - Human Genome Project Testing - determine your genetic predisposition to disease. ***Good: match lifestyle to risk, better treatment ***Bad: genetic profiling; privacy, insurance, employment issues ***Genetic Information Nondiscrimination Act (GINA)-- applies to employment and health insurance; ILLEGAL to discriminate due to this

common law

A legal system based on custom and court rulings

Crisis definition

A major, unpredictable event that has potentially negative results that can significantly damage an organization A low-probability, high-impact event that threatens the viability of the organization that has an ambiguous cause, effect and resolution Types: Economic Personnel Physical Criminal Information Reputational Natural disasters

***immoral management

A style devoid of ethical principles and active opposition to what is ethical

Legal/Ethical management

Activities that are both ethical and legal often provide indirect economic benefits. Consequently, very few activities fall within this category

purely economic activity (immoral and/or amoral management

Activities which are purely economic in nature must: -have a direct or indirect economic benefit -be illegal (criminally or civilly) or passively comply with the law -be considered amoral or unethical ex.) purely motivated by the bottom line $$

***Amoral management

Intentional: does not consider ethical factors (not common) Unintentional: casual or careless about ethical factors (more common)

Purely Ethical Activities

Any purely ethical activity that has no direct or indirect economic or legal implications Ex.) Chick Fila not open on Sundays

Legal responsibility

Business firm's responsiveness to the legal expectations mandated and expected by society in the form of federal, state and local jurisdictions, or through legal principles as developed in case law

Teleological theory: Egoism

Defines right or acceptable behavior in terms of the consequences for the individual

economic responsibility

Captures those activities which are intended to have either a direct or indirect positive economic impact on the corporation in question Positive impact is based on two distinct but related criteria: (i) maximization of profits and/or (ii) the maximization of shareholder value

Sweatshops

Characterized By: -Child Labor -Low Pay -Poor Working Conditions -Worker Exploitation -Health and Safety Violations

Reputation for ethical leaders: Moral person

Composed of three major attributes: -Traits: Stable personal attributes such as integrity, honesty and trustworthiness -Behaviors: What you do and not what you say -Decision Making: Needs to reflect a solid set of ethical values and principles

Moral Management

Conforms to high standards of ethical behavior

Personal and managerial ethics: Three approaches to resolving ethical conflicts

Conventional approach Principles approach Ethical Tests approach

Purely Legal Activities

Corporate actions that are not considered ethical and have no direct or indirect economic benefit fall into this category Ex.) the law says you have to list side effects of products; can make more money if they don't, but the law says they have to

Economic/ethical management

Corporate activity is not based on legal considerations, but is ethical and economic simultaneously. Generally involves passive compliance with the law because almost all illegal activities would be considered unethical.

Test of Common Sense

Does this action I am getting ready to take really make sense? What is the consequence to me?

Factors influencing organizational ethical behavior

Ethical Issue Intensity + Individual Factors + Corporate Culture = Ethical or Unethical Behavior

General Data Protection Regulation (GDPR)

European Union regulation that requires businesses to protect the personal data and privacy of European Union citizens-- impacts other nations as well Personal data is classified as anything that can be used to identify a person people must "opt-in" for their info to be used people can choose for their data to be deleted potential fine for breaking this *Should the U.S. implement a similar type of privacy law?

legal vs. ethical example

Example 1: Law says: 25 mph speed limit (this is the ethical minimum) 5 over (this is the conventional understanding) Example 2: just because something is legal doesn't mean it is ethical-- When there is incliment weather, we go SLOWER than the speed limit says to.

Test of Ventilation

Expose your proposed action to others and get their thoughts on it example: Jane ask her employees about how to report expenses

Teleological theory: Utilitarianism

Focuses on acts that produce the greatest ratio of good to evil for everyone

Characteristics of amoral management

Intentionally Amoral Managers: -Don't think ethics and business should "mix" -Business and ethics are existing in separate spheres -A vanishing breed Unintentionally Amoral Managers: -Don't consider the ethical dimension of decision making -Don't "think ethically" -Have no "ethics buds" -Well-intentioned, but morally casual or unconscious -Ethical gears are in neutral

Reputation for ethical leaders: Moral manager

Involves three major activities -Role Modeling: Work through visible action -Communications About Ethics and Values: Explain the values that guide important actions -Utilization of Rewards and Discipline: Use to send signals regarding conduct

Genetically-Modified Foods

GMOs (genetically-modified organisms) - modification of DNA in plant-based foods to give them desirable traits. Positives: plants with increased food yields, disease/pest-resistance, herbicide-tolerance, improved nutrient content. Promises - "feed the hungry", cheap/limitless foods, increased profits for farmers. Issues: these organisms produce biochemicals that are foreign to our food supply and body; allergies and gastrointestinal problems

Arguments for (justifications) and against bribery

Justifications -Necessary to do business -Common practice -Accepted practice -Form of commission, tax, or compensation Against: -Wrong -Illegal -Compromise personal beliefs -Promotes government corruption -Once started, never stops -Prohibits taking a stand for honesty, morality, ethics -Benefits recipient only -Creates dependence on corruption -Deceives stockholders

Setting realistic objectives

Manager must set realistic objectives and goals- -Unrealistic goals create a situation that is conducive to unethical behavior •There are ethical implications to even the most routine managerial decisions •Managers must be aware of innocently creating situations in which others perceive a need to be unethical

Decision time: the Want vs. the Should self

SHOULD SELF: Prediction-- forecasting errors "I should behave ethically....therefore I will" Recollection-- Memory Revisionism & *Shifting Standards "I should have behaved ethically....therefore I did" WANT SELF: Decision Time-- Ethical Fading & Visceral Responses "I don't see the ethical implications of this decision....*so I do what I want to do" Example: "I SHOULD eat healthy, so I should get a salad." *Goes to Mr. B's *Gets a salad AND a piece of pizza and justifies the piece of pizza (I was active today and got a lot done, so I DESERVE this. And I am having something healthy too) **There is a disconnect between the should and the want

Reputation for ethical leaders: 2 pillars

Moral person: traits behaviors decision making Moral manager: Role modeling Ethics communication Effective rewards and discipline

Top management leadership

Moral tone of an organization is set by top management -All managers and employees look to their bosses at the highest level for their cues as to what is acceptable practice. -Top management is in the best position to provide a highly visible role model. -Not restricted to top management - includes vice presidents, plant managers, supervisors, and all managerial personnel.

Colonial Pipeline Ransomware Attack

One of the largest ransomware attacks to date fuel supply was shut down for a few days Should the Colonial Pipeline have paid the ransom to get their information back? Paying the ransom could encourage "The Dark Side" to do it again

ways to make moral management actionable

Senior management leads the transition from amoral to moral management: -Business ethics training -Codes of conduct -Mission/Vision statements -Ethics officers -Tighter financial controls -Ethically sensitive decision-making processes -Leadership by example Recognize that amoral management exists

levels at which ethical issues may be addressed

Personal level: Situations faced in personal lives Organizational Level: Workplace situations faced as managers and employees Industry level: Situations where a manager or organization might influence business ethics at the industry level Societal and Global levels: Local-to-global situations confronted indirectly as a management team

Foreign Corrupt Practices Act

Prohibits American companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping business. Enforced by DOJ and SEC Applies to direct bribes and those made through intermediaries Exception: "facilitating payments" for "routine governmental action" Criminal penalties include fines and imprisonment

Ethical responsibility

Refers to the ethical responsibilities of business as expected by the general population and relevant stakeholders

Bribes

Relatively large amounts of money given for the purpose of influencing officials to make decisions or take actions that they otherwise might not take. If the officials considered the merits of the situation only, they might take same other action.

Grease Payment

Relatively small sums of money given for the purpose of getting minor officials to: -Do what they are supposed to be doing •Do what they are supposed to be doing faster •Do what they are supposed to be doing better

Kohlberg's levels of moral development: Level 2-- CONVENTIONAL

Stage 3- good boy/nice girl morality Stage 4- law and order morality Focus: others Oftentimes because of circumstances, we are this category

Strengths and weaknesses of EGOISM

Strength: -Allows personal decisions to fit into the situation complexities Weaknesses: -Ignores actions that may be inherently wrong -May come into conflict with the idea of justice -Difficult to formulate satisfactory rules for decision making

Strengths and weaknesses of utilitarianism

Strengths: -Forces thinking about the general welfare and stakeholders -Allows personal decisions to fit into the situation complexities Weaknesses: -Ignores actions that may be inherently wrong -May come into conflict with the idea of justice -Difficult to formulate satisfactory rules for decision making

Two types of ethical principles

Teleological theories: Focus on the consequences or results of the actions they produce Deontological theories: Focus on duties

Principles Approach: major principles

Teleological: -Egoism -Utilitarianism Deontological: -Kant's CI -Rights -Justice Either / Or / And: -Caring -Virtue ethics -Servant Leadership -Golden Rule

Ethical Tests approaches

Test of common sense Test of one's best self Test of making something public Test of ventilation Test of the purified idea Gag test

Deontological theory: Principle of Justice

involves considering what alternative promotes fair treatment of people Outward view- fair treatment of OTHERS Types of justice: Distributive Compensatory Procedural Rawlsian

Kohlberg's levels of moral development: Level 3-- POSTCONVENTIONAL

The GOAL is to be in this category! Focus: humankind Stage 5: Universal ethical principle orientation Social contract orientation Also called autonomous or principled level

***Conventional approach to business ethics

involves a comparison of a decision or practice to prevailing societal norms of acceptability This is what is acceptable to society ex) your experience based on family, religion, laws, etc. we all have different experiences that shape what we do

Ethics

involves a discipline that examines good or bad practices within the context of moral duty and obligation

descriptive ethics

involves describing, characterizing and studying morality focuses on "What is"

Role of leadership

To guide and direct others toward the achievement of a goal •To motivate others and enforce organizational rules and policies •To influence the corporate culture and ethical posture of the organization (rewards and punishment)

normative ethics

involves supplying and justifying moral systems focuses on "What should be"

Guidelines for conflicting obligations, ideals, and effects

When two or more moral obligations conflict, choose the stronger one When two or more ideals conflict, or when ideals conflict with obligations, honor the more important one When effects are mixed, choose the action that produces the greatest good and the least harm

Test of Purified Idea

Who has the authority to "bless" this action? Ask a person of authority

Genetic engineering

Would you modify your fetus' DNA in utero to avoid future problems and give it desirable traits (gene therapy)? IVF - Would you pick the embryo with the best genetic profile? Issues: Gattaca - a world of genetic perfection.

Deontological theory: Kant's Categorical Imperative

a duty-based principle of ethics. A sense of duty arises from reason or rational nature Formulations: 1. Act only on rules that you would be willing to see everyone follow 2. Act to treat humanity in every case as an end and never as a means 3. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law Example: disclose defect rate and disclose product defects

Example of unintentional amoral management

a manager creates height and weight requirements for police officers so that they won't get hurt in certain situations. However, this discriminates against some women, and some shorter/smaller men. -unintentional amoral management

Statute

a written law passed by a legislative body

Economic, Legal, and Ethical (MORAL Management)

an activity that is motivated by the bottom line, the legal system, and ethical principles The GOAL management

Business Ethics

concerned with good and bad or right and wrong behavior and practices that take place in business

Sarbanes Oxley

created after the Enron case

Enron- Performance review committee- Rank & Yank

employees were graded from 1 to 5, and the lowest ranking employees would be terminated created a culture where people did not want to speak up about the unethical behavior, for fear of termination

Sources of ethical norms

fellow workers family friends the law local community religious beliefs regions of country profession employer society at large

Deontological theory: Principle of Rights

focuses on examining and possibly protecting individual moral or legal rights examples of legal rights and claimed moral rights: civil rights minorities rights women's rights employee rights consumer rights religious affiliation rights

Principle of Caring and Virtue Ethics

focuses on individuals becoming imbued with virtues BECOMING a person of integrity, trustworthiness, honesty, and virtue if you become a person of these things, then whatever you do will be the right thing Aristotle and Plato

The Golden Rule

focuses on the premise that you should do unto others as you would have them do unto you The Golden Rule is... 1. accepted by most people 2. easy to understand 3. a win-win philosophy 4. a compass

Current positions on federal funding of stem cell research

last year, the govt. invested over 800M in this research. The govt has spent billions on this. GW Bush gave funding to this research, but put boundaries-- they couldn't create new lines of embryos for this research Obama said you CAN create new lines as long as permission from parents is received

Ethics

often represents a standard that exceeds the legal minimum

Law

often represents an ethical minimum reflects society's codified ethics

Kohlberg's levels of moral development

preconventional, conventional, postconventional

***False Claims Act- Qui Tam Provisions

private citizens who know of people or companies that are defrauding the government may sue on the government's behalf and share in the proceeds of the suit. they qui tam provisions allow an individual, acting as a whistle-blower, to bring suit and share in the damages recovered as a result of the lawsuit. issue: this creates financial incentives to report and sue rather than work it out with the employee

Arthur Anderson

provided auditing AND consulting services for Enron They audited their financial statements to make sure they weren't misleading AND they provided consulting services, telling them how to organize the financial statements Later, they shredded all evidence of what they were doing and were charged with Obstruction of Justice. They won the case, but went out of business because of lack of integrity

Moral Philosophy

refers to the principles or rules that people use to decide what is right or wrong. Moral philosophies present guidelines for determining how to settle conflicts and for optimizing the mutual benefit of people living together in groups. There is no single moral philosophy that everyone accepts. Moral philosophies are ideal moral perspectives that provide abstract principles to guide an individual's social existence. Most employees do not think about what particular moral philosophy they are using when confronted with an ethical issue.

Moral Conduct

relates to principles of right and wrong in behavior

Labeling Ethics issue

should producers have to list when a food contains GMOs? Also, many non-GMO foods still contain GMOs there is a regulation issue in the U.S.

Kohlberg's levels of moral development: Level 1-- PRECONVENTIONAL

stage 1: Reaction to punishments stage 2: seeking of rewards Focus: self (we are motivated by rewards and punishments)

Promise of stem cells, and ethical dilemma

stem cells can be used to repair malfunctioning tissues and to replace damaged cells Does using an embryo in this way constitute destroying a human life? Embryonic stem cells can be obtained from fertility clinics and cloning those in favor use a UTILITARIANISM approach Those opposing of this research use a PRINCIPlE OF RIGHTS APPROACH

conventional law

the norms of society

Enron- Special Purpose Entities- structured finance

these companies were created by Andrew Fastow, CFO of Enron, with the sole purpose to do business with Enron and to take their debt. Conflict of interest, because Fastow was on both sides of the transactions banks would invest in these SPE's so that they would get interest in return

Role of motivation

to focus employee behavior toward goal achievement within the organization •to understand an individual's hierarchy of needs and how they influence motivation and ethical behavior

Economic/legal management

very few activities which corporations engage in are both economic and legal, while also considered unethical. Activities which are based on the legal system would likely be considered ethical as well. The exception might be those companies that opportunistically comply with the law, searching for and using legislative and administrative loopholes for economic gain AMORAL MANAGEMENT- don't consider ethical factors ex.) Vegas- gambling and legal prostitution economic impact of legal prostitution-- tax it, increase tourism if it is legal, you can regulate it and make it safer for both parties.