Business Law (Chp.2) "Business Ethics"

Religious ethics standard

"Thou shall not steal" -motive of the actor is irrelevant in judging the rightness or the wrongness of the action.

Duty Based Ethics:

-Based upon an underlying concept of duty regardless of the consequences of action taken in keeping with duty. -Generally arise from religious beliefs or philosophical reasoning.

Business ethics are important because:

-Directors and Officers owe a complex set of duties to all of their stakeholders -When these duties conflict ethical dilemmas are created

Approaches to Ethical Reasoning

-Duty Based Ethics

Principal of Rights

-In deciding whether an action is ethical, one should consider what consequence her actions would have on the fundamental rights of others -Belief that every duty gives rise to a corresponding right, deeply embedded in Western culture.

Ethics borne of:

-Natural Law -Religious principles -Life experiences -Cultural and societal expectations -Parental and family influences -Educational experiences

Forums where ethical lapses are addressed:

-Professional Liability -Civil Liability -Criminal culpability

Stakeholders of a corporation include?

-Shareholders/ owners -Employees -Customers, Creditors -Suppliers -The community within which a business operates

Business Ethics

-Study of what is right and wrong behavior. -Knowing whether an action is fair, right or just.

Top Management Attitudes

-a manger who is not totally committed to an ethical workplace rarely succeeds in creating one. -Management's behavior sets the ethical tone for an organization -Employees tend to follow what they perceive to be management's lead. -Managers must model ethical behavior for their employees -Managers who set unrealistic sales or production goals will increase the probability that employees will act unethically. -Managers should set realistic goals for their employees to reduce the incentive to "cheat" in order to achieve management's goals -Managers who look the other way when an employee acts unethically conveys the message that unethical behavior is acceptable to the organization.

Utilitarianism

-an action is ethical based on whether it produces the greatest good for the greatest number of people upon which it has an effect. -If it affects the majority adversely, it is morally wrong. -focuses on the outcome of the action and not the nature of the action itself -Does not take into account morals or religious beliefs

Civil Liability

Initiated by harmed individuals or administrative agencies such as the SEC.

Criminal Culpability

Initiated by law enforcement and/ or prosecutors

Professional Liability

Loss of License to practice in certain professions (i.e. lawyer, accountant, physician)

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.

Creating Ethical Codes of Conduct

an ethical code of conduct reflects an organization's commitment to legal compliance and the welfare of the customers, employees and shareholders.

Most effective ways to promote ethical behavior in an organization

creating ethical codes of conduct

Ethical code of conduct

reflects an organization's commitment to legal compliance and the welfare of the customers, employees and shareholders

Long-run profit Maximization

such behavior may lead to costly lawsuits and bad publicity, all of which undercut long term profits and a company's goodwill

Short-Run Profit Maximization

unethical behavior may cause short term profits to increase.