Chapter 9 - Business Ethics

Principle of Rights

"rights theory"; the belief that human beings have certain fundamental rights; whether an action or decision is ethical depends on how it affects the rights of various groups, such as owners, employees, consumers, suppliers, the community, and society; a dilemma for those who support rights theory is that they may disagree on which rights are most important; believe that whichever right is stronger in a particular circumstance takes preceence

Apply Utilitarianism

1) a determination of which individuals will be affected by the action in question 2) a cost benefit-analysis 3) a choice month alternative actions that will produce max societal utility (the greatest positive net benefits for the greatest number of individuals)

Businesses should evaluate..

1) the legal implications of each decision 2) the public relations impact 3) the safety risks for consumers and employees 4) financial implications ...when making decisions

Alternative to Layoffs

1. 4 day weeks 2. unpaid vacations and voluntary furloughs 3. wage freezes 4. pension cuts 5, flex work schedules

Utilitarianism

John Stuart Mill; an approach to ethical reasoning in which an action is evaluated in terms of its consequences for those whose it will affect; a "good" action is one that results in the greatest good for the greatest number of people; may not seem the most ethical

Kantian Ethical Principles

Kant believed that human beings are qualitatively different from other physical objects and are endowed with moral integrity and the capacity to reason and conduct their affairs rationally; when people are treated merely as a means to an end, they are being treated as the equivalent of objects and are being denied their basic humanity

Triple Bottom Line

a corporation's profits, its impact on people, and its impact on the planet

Cost-Benefit Analysis

a decision making technique that involves weighing the costs of a given action against the benefits of that action

Business Process Pragmatism

a systematic approach to organizing ethical concerns and issues 1) inquiry - understand/identify the problem 2) Discussion - list of possible actions and evaluate them 3) decision - craft a consensus decision or plan of action for the corp 4) justification - articulate the reasons for the proposed action(s); share with stakeholders 5) evaluations - occurs once the decision has been made and implemented; solution should be analyzed to determine if it was effective

Categorical Imperative

an ethical guideline developed by Kant under which an action is evaluated in terms of what would happen if everybody else in the same situation acted the same way

Duty-Based Ethics

an ethical philosophy rooted in the idea that every person has certain duties to others. Those duties may be derived from religious principles or from other philosophical reasoning

Outcome-Based Ethics

an ethical philosophy that focuses on the impacts of a decision of society or on key stakeholders

Ethical Req.

businesspersons must remember than an action that is legal is not necessarily ethical

Internal Codes of Ethics

codes are not laws, they are rules that the co sets forth and that it can also enforce; typically outline the co's policies on particular issues and indicate how employees are expected to act

The Internet Can Ruin Reputations

cyberspace provides a forum in which displeased groups can post derogatory remarks; the internet has increased the potential for a major corp to suffer damage to its reputation or loss of profits thru negative publicity

Hiring Procedures

employers conduct internet searches to discover what job candidates have posted on their social media pages; many believe that judging a candidate based on what they do outside of the work environment is unethical and it invades privacy; people who don't use social media also raise red flags, which can be seen as unethical as well

Gray Areas

ethics is less certain than law, but law can also be uncertain; make is difficult to predict with certainty how a court will apply a given law to a particular action

Ethics Training

for an ethical code to be effective, its provisions must be clearly communicated to employees

Religious Ethical Principles

generally are absolute with respect to the behavior of their adherents; e.g. 10 Commandments of the Old Testament and the Qur'an (Muslim) and Hindus use the four Vedas

Global Business Ethics

given the various cultures and religions threat the world, conflicts in ethics frequently arise between foreign and US businesspersons

Stakeholders

groups that are affected by corporate decisions; e.g. employees, customers, creditors, suppliers, and the community in which the corp operates; a corp should consider the impact of its decision on the stakeholders

Sarbanes Oxley Act

help reduce corporate fraud and unethical management decisions; the act requires companies to set up confidential systems so that employees and others can raise "red flags" about suspected illegal or unethical auditing and accounting practices

Profit Maximization as Goal

if all firms strictly adhere to the goal of profit maximization, resources flow to where they are most highly valued by society: corps can focus of their strengths; profit maximization can lead to the most efficient allocation of scarce resources; many have become dissatisfied with this theory

Legal Requirements

laws have to be general enough to apply in a variety of circumstances

Outcome Based Ethics

looks at the impacts of a decision in an attempt to maximize benefits and minimize harms; utilitarianism theory

Foreign Corrupt Practices Act (FCPA)

prohibits US businesspersons from bribing foreign officials to secure advantageous contracts; passed by Congress as a response to US corp foreign reps involved in scandals; does not prohibit payment of substantial sums to minor officials whose duties are ministerial

Short-Run and Long-Run Profit Maximization

short run: a company may increase its profits by continuing to sell a product, even tho it knows that the product is defective long run: because of law suits, large settlements, and bad publicity, such unethical conduct will cause profits to suffer thus, business ethics is consistent only long-run profit maximization

Business Ethics

the application of moral and ethical principles in a business context

Ethical Reasoning

the application of morals and ethic to a situation; applies to everyone involved in the business

Corporate Citizenship

the corp came to be viewed as a citizen that was expected to participate in bettering communities and society

National Labor Relations Board (NLRB)

the federal agency that investigates unfair labor practices made some social media guidelines illegal; e.g. Costco cannot prohibit its employees from criticizing the company or coworkers, supervisors, managers via social media

Corporate Social Responsibility (CSR)

the idea that corporations can and should act ethically and be accountable to society for their actions; can help companies grow and prosper; social aspect of CSR requires that corps demonstrate that they are promoting goals the society deems worthwhile and and are moving toward solutions to social problems; corps that are viewed as good citizens may see increases in sales

Moral Minimum

the min level of ethical behavior expected by society, which is usually defined as compliance with the law

Why is studying ethics important?

the public perception of the corp has changed from an entity that primary generates revenues for its owners to an entity that participates in society as a corporate citizen

Ethics

the study of what constitutes right or wrong behavior; it is the branch of philosophy that focuses on morality and the way in which moral principles are derives and applied to one's conduct in daily life; fairness, justness, rightness, or wrongness of an action

Attitude of Top Management

top management has to demonstrate its commitment to ethical decision making; managers who set unrealistic production or sales goals increase the probability that employees will act unethically; business owners misbehavior can have negative consequences for themselves and their business

Image

unethical corp decision making can negatively affect suppliers, consumers, the community, and society as a whole; as well as the reputation of the co. and the people who run it