Business Ethics Exam 1

What is this class about?

Making business decisions while considering the moral context, antecedents, actions, and consequences of actions in a business context.

What is the "Corporate Code of Ethics: Necessary but not Insufficient" article about?

Most codes are not sufficient to prevent bad behavior. Ideas about how to close the gap and promote an ethical code. Must embed the ethics in the organization. Providing training on what the code means and how to use it. Consistent communication of the importance of ethics from the leaders to the employees helps. A relevant and user-friendly code of ethics and awareness raising programs could increase the effectiveness of codes of ethics.

Why be ethical?

Need to be a role model unto others (particularly managers need to be to employees)

What does Martin argue?

People will not be convinced to act for moral reasons. They are focused on self-interest and will do anything to succeed. They see the world as a harsh, competitive place. If they are made to obey the rules, they will cheat if they think they can get away with it.

What did you learn from the Violin scenarios? Some examples?

Personal experience, open-ended question.

If the government bond rate is 1.5% and the inflation rate is at 2.5%, what could possibly happen?

Ponzi schemes can form.

What does Vice argue?

Some people may not be ethical because the constant attention to serving others and staying within acceptable limits on behavior is boring. Misses the constant struggle within the individual regarding the extent to which one sacrifices one's self-interest to serve other's interest.

What do role models do?

Tell the truth Keep promises Respect others Treat others as they would like to be treated

What does it mean to be ethical? What are Clawsen's 4 elements of ethical leadership?

Telling the trugh Keeping one's promises Treating others fairly Respecting the rights of others (*These can sometimes conflict with one another)

What does a business ethics code do?

Tells you how you should go about making decisions on behalf of the company.

What is eudaimonia?

The association between the virtue of character and happiness. Aristotle.

What happens when knowledge is not distributed equally throughout the market?

The economics of markets fail.

What does Skinner argue?

There is no bullet-proof rationale to follow in acting ethically in business. Three main arguments have been put forward to justify morality: 1) God commands it; hope or fear of heaven and hell promote self-interest, not morality. Why should you do something just because a higher power said to? What if you don't believe in a higher power? 2) Happiness requires it; idea that a virtuous life is thee most fulfilled one (with most virtues centered on thee welfare of others). Says that immoral people wouldn't know happiness, but some of them would probably beg to differ. Eudaimonic argument. 3) Acting immorally is irrational; Rationalist argument with the following rationale - my interests matter, others are relevantly similar to me, therefore others' interests matter as much as mine. However, can be interpreted that others' interests are their own interests, and that they do not matter to me. There is no solid argument to convince an egotistic, amoral to be moral.

Why should we act ethically in business?

If it is good for an individual to act ethically, then it is good for an organization to act ethically as well. Not everyone agrees. HBR authors state that it is more profitable to be unethical.

What does Friedman argue?

1) Businesses should act in the interests of the stockholders. 2) It is immoral to invest the stockholder's money into charities or anything other than the increase in profits because otherwise you are not doing what you are supposed to be doing - increasing the wealth of the stockholders 3) Argument exists in a world with no ongoing relationships. Short-term engagements. 4) Contradicts himself in the last sentence by saying that you should avoid deception and fraud. So all along he's said that making money is the only thing that matters, and then he says "making money AND doing so ethically" 5) Social responsibility is to raise profits, not to benefit the community through charity.

Why should we act ethically?

1) Legal reasons 2) Public Image reasons 3) Pragmatic reasons, acknowledging that in some ways acting ethically might be the most direct path to success. Someone doing something ethical or generous in expectatoin of a reward. 4) Moral reasons, doing something simply because it is the right thing to do

Why are you in this class?

1) To become aware of many ethical issues in business 2) To understand the ethical foundation of business 3) To help understand the ethical standards of business 4) To help clarify your own ethical standards 5) To help make you make grounded ethical decisions and to be able to explain those decisions to others 6) to help you understand the role of a manager in helping his or her subordinates learn about and put ethical principles into operation 7) To help you understand the boundaries between ethics and law and to understand that those boundaries are flexible over time as laws change 8) To prepare you for ethics training which is part of most companies and virtually all professions training programs 9) To understand the role of ethics in terms of the mission of TCU and the Neeley School of Business

What does the Alm and Torgler (HBR) article argue?

1) according to accepted economic theory of crime, individuals should make the decision of whether of not to commit a crime based on several factors, including the likely payoff, the expectation of being caught, and the level of penalty 2) There is a lack of enforcement of tax law in many countries, therefore we should expect to see high rates of tax non-compliance. In actuality, the non-compliance rate is far lower than expected. 3) reasons for compliance are far more complicated and diverse than economic models would predict. 4) Middle ground between Velasquez and Friedman. Who is more right? This article explains the gap between actual non-compliance and expected non-compliance as being ethics. This implies that Velasquez is more correct. 5) Treachery can pay, there is no compelling economic reason to tell the truth 6) The penalty and severity is not enough to stop some people. Penalty of serving 1000 years versus 5200. 7) Chances of being caught, though very low, can sometimes be enough to deter people. But still not a main driver. 8) Sense of social responsibility seems to be the big driver.

Important issues for business ethics

1) does not justify a separate moral standard 2) operates in a constantly changing environment 3) requires conversation since it is impossible to cover all possible circumstances with a code of ethics or code of business behavior

What does the Velasquez article argue?

1)Businesses should act ethically 2) Moral norms are self-regarding (the easy one to follow) and others-regarding (the harder one to follow) 3) Birds of a feather (ethical businesses stick with other ethical businesses and vice versa) 4) The prisoner's dilemma experiments. If everyone was immoral and acted in treachery, then business wouldnt happen. It is in people's best interests to not screw each other over. 5) People should cooperate. Conclusion: everyone should work together. However, this can lead to trust behavior.

What are some problems with codes of ethics?

1)Many codes are old and tired - written many years ago and never updated or amended 2)Lack of training 3)Lack of consistent reinforcement 4)Failure to use to justify employment or customer-related action 5)Failure to update to reflect changes in industry and business environment 6)Confusion of employees and others who are covered by the code - what is required and what is optional? 7)If everything in the code is an "ethical" judgment, then isn't there room for differences of opinion on everything in the code?

What is the purpose of a code of ethics?

1)Meet regulatory requirements 2)Help develop an ethical culture 3)Send signals to employees, customers, vendors, and the community as to the organizations' expectations for its own behavior and the behavior of others 4)To meet regulatory requirements: Sarbanes-Oxley (SOX) for publicly-held corporations Form 990 for non-profits Federal Sentencing Guidelines which cover any entity or individual who appears in federal court.

What should a code of ethics include?

1)Statement of mission and values 2)Statement of internal or entity policy compliance standards 3)Statement of external or regulatory policy compliance standards 4)Process standards

What does Machiavelli argue?

A prince should cultivate the image of caring and concern while in reality being neither. It is a conceit and a fraud for a prince to appear caring and concerned when he or she may have to sacrifice his or her subjects to retain power (or in business, make profits)

What is a code of ethics?

A written set of guidelines issued by an organization to its workers and management to help to conduct their actions in accordance with its primary values and ethical standards.

How does friendship affect business ethics?

Affinity fraud can occur (Enron). Collusion can occur among friends working together.

What is the "The Bottom Line Benefits of Ethics Code Commitment" article about?

Asks what thee advantage of having a code is. Seeing how much codes and actions benefit performance. Having both stakeholders and company performance expressed in the code helps things along. Having ethics staff and lawyer write the code is beneficial.

What does Tim Chappell argue?

Being ethical is about developing an ethical outlook. A set of views and commitments about what is worth living for and what is worth dying for; what is really admirable and what is really contemptible; what we must do at all costs and what we must not do no matter what.

Ethical decision making occurs at three separate levels:

Individual Managerial Firm

What is the difference between consequentialists and anti-consequentialists?

Consequentialists consider the context and potential consqeuences of their actions before they act. Typically business executives. Anti-consequentialists act on principle and do not consider consequences. Typically attorneys. ex) Kant. Must tell the truth all the time.

How does an imbalance of knowledge between a buyer and seller affect the ethics of a transaction?

Disclosure agreements are legally required and legal remedies can be awarded to the victimized party. Can be considered fraud. ex) If Pawn Stars finds a genuine Picasso in someone's garage, they are legally required to disclose to the seller what it is worth. They are not allowed to take it for $10 if the owner offers that not knowing the worth of the painting.

What is the "Global Business Ethics: Regulation, Code, or Self-Restraint" article about?

Discusses how to control the behavior of a company, industry, and the world. You can have ethical codes, regulate their behavior, or ask them to exercise restraint voluntarily. Regulatory- treaties, processes. Must regulate people who won't exercise restraint. The global infant formula agreement to not market formula to poor mothers who don't have the funds to buy it or the education to know that their breast milk is better. Global Codes - Sullivan principles in South Africa. Apartheid hurting the international commerce of the country and Sullivan proposing that international companies do business with the people that did not agree with the Apartheid principles, instead of doing business with the regime that implemented Apartheid. Trying to get global business codes in place but it is slow going. Voluntary - would theoretically be the most effective.

What role does a code of ethics play in creating and maintaining an ethical workplace?

Establishes expectations by management, employees, owners, community, customers, suppliers and distributors, other stakeholders. ex) Johnson&Johnson - Tylenol case Union Carbide - MCI Bhopal case

What are the foundation principles for ethical behavior in business?

Ethics is an integral part of business - commerce cannot occur without it.

What to learn from Week 1?

Everyone has their own approach and ethical style that they apply to situations. Do you justify your actions before you take them or after?

What is business ethics?

How personal morals apply in the business realm. They are the same ethics, the only thing that is different is context. A reasoned conversation about morals, values and virtues. Talking about what should be done and weighing the consequences.

What does Beer argue?

Wall Street failed in 2008 due to 1) lacking a higher purpose (Charles Schwab and US Bancorp didn't touch the subprime mortgage securitization market due to the fact that it wasn't in their best long-term interests. They have their customer's best interests in mind and therefore weathered the crisis pretty well) 2) lacking clear strategy 3) mismanaging their risk Internally, the voice of conscience was silenced within these big firms via intimidation. Empowered those who were already inclined to do the wrong thing.

Virtues

conditions of people (wisdom, courage)

Values

desired states of affairs (health, justice)

Morals

rules that guide behavior

Ethics

the study of morals, values, and virtues. The study of ethics yields well-established rules of right and wrong that prescribe what humans ought to do.