BLAW 234 ch.5

Categorical Imperative

A central theme in Kantian ethics is that individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This categorical imperative can be applied to any action.

The Corporate Aspects of CSR

A corporation may see an increase in goodwill from the local community from CSR and a corporation that is viewed as a good citizen may see an increase in sales. At times, the benefit of CSR may not be immediate. For example, the construction of a new plant that meets the high LEED standards may cost more initially. However, the future savings in maintenance and utilities may more than make up for the extra cost of construction. Today, many young people look for socially responsible employers. A company that participates in socially responsible activities may have more impressive and more committed employees as well as higher retention of workers, particularly younger ones.

Conflicting Rights

A potential dilemma for those who support rights theory is that they may disagree on whose rights are more or most important.

People Are Not a Means to an End

Based on this view of human beings, Kant said that 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. Management research has shown that, in fact, employees who feel empowered to share their thoughts, opinions, and solutions to problems are happier and more productive.

The Social Aspects of CSR

Because business controls so much of the wealth and power in this country, it has a responsibility to use that wealth and power in socially beneficial ways. The social aspect requires that corporations demonstrate that they are promoting goals that society deems worthwhile and are moving toward solutions to social problems Companies can be judged on how much they donate to social causes; how they conduct their operations with respect to employment discrimination, human rights, environmental concerns; and similar issues. Some corporations publish annual social responsibility reports, which may also be called corporate sustainability or citizenship reports.

The Relationship of Law and Ethics

Because the law does not codify all ethical requirements, compliance with the law is not always sufficient to determine "right" behavior. Laws have to be general enough to apply in a variety of circumstances. Laws are broad in their purpose and their scope. They prohibit or require certain actions to avoid significant harm to society.

Image Is Everything

Business ethics is concerned not only with the image of the business, but also with the impact that the business has on the environment, customers, suppliers, employees, and the global economy. Unethical corporate decision making can negatively affect suppliers, consumers, the community, and society as a whole. It can also have a negative impact on the reputation of the company and the individuals who run that company.

Behavior of Owners and Managers

Certain types of behavior on the part of managers and owners contribute to unethical behavior among employees. Managers who set unrealistic production or sales goals increase the probability that employees will act unethically. A manager who looks the other way when she or he knows about an employee's unethical behavior also sets an example—one indicating that ethical transgressions will be accepted. Business owners and managers sometimes take more active roles in fostering unethical and illegal conduct. This sort of misbehavior can have negative consequences such as court sanctions or an injunction.

Hiring Procedures

Companies are increasingly using social media to evaluate prospective employees, a practice that some argue is unethical. Job candidates may be judged by what they post on social media OR they may be judged because they do not participate in social media. In either case, many people believe that judging a job candidate based on what she or he does outside the work environment is unethical.

Moral Minimum

Compliance with the law is sometimes called the moral minimum. If people and entities merely comply with the law, they are acting at the lowest ethical level society will tolerate.

Long-Run Profit Maximization

Corporate executives and employees have to distinguish between short- and long-run profit maximization. In the short run, a company may increase its profits by continuing to sell a product even though it knows that the product is defective. In the long run, though, because of lawsuits, large settlements, and bad publicity, such unethical conduct will cause profits to suffer.

Duty-Based Ethics

Ethics based on the concept that every person has certain duties (obligations) to others, including both humans and the planet. Duty-based ethics generally arise from revealed truths, religious authorities, or philosophical reasoning.

Outcome-Based Ethics

Ethics based upon the consequences of action taken or foresworn, without regard to any underlying concept of duty or morality.

"Gray Areas" in the Law

Ethics is less certain than law and is often highly subjective and subject to change over time without any sort of formal process. The law is also uncertain, and numerous "gray areas" make it difficult to predict with certainty how a court will apply a given law to a particular action.

Principle of Rights (or "rights theory")

In deciding whether an action is ethical, one should consider what effect the actions would have on the fundamental rights of others. These "others" include the firm's owners, its employees, the consumers of its products or services, its suppliers, the community in which it does business, and society as a whole.

Resolving Conflicts

In general, rights theorists believe that whichever right is stronger in a particular circumstance takes precedent.

The Foreign Corrupt Practices Act (FCPA)

In response to numerous scandals involving U.S. companies paying bribes to foreign government officials, Congress passed the FCPA in 1977.

Profit Maximization

In theory, if all firms strictly adhere to the goal of profit maximization, resources flow to where they are most highly valued by society. In an ideal world, profit maximization leads to the most efficient allocation of scarce resources. Corporations can focus on their strengths, and other entities that are better suited to deal with social problems and perform charitable acts can specialize in those activities. The government, through taxes and other financial allocations, can shift resources to those other entities to perform public services.

A Systematic Approach

Leonard H. Bucklin of Corporate-Ethics.US™ has developed a five-step process for investigating and resolving business ethics problems; Step 1: Inquiry. First, the decision maker must understand the problem. This step involves identifying the parties involved (the stakeholders) and collecting the relevant facts. Once the ethical problem or problems are clarified, the decision maker lists any relevant legal and ethical principles that will guide the decision. Step 2: Discussion. In this step, the decision maker lists possible actions. The ultimate goals for the decision are determined, and each option is evaluated using the laws and ethical principles listed in Step 1. Step 3: Decision. In this step, those participating in the decision making work together to craft a consensus decision or consensus plan of action for the corporation. Step 4: Justification. In this step, the decision maker articulates the reasons for the proposed action or series of actions. Generally, these reasons should come from the analysis done in Step 3. This step essentially results in documentation to be shared with stakeholders explaining why the proposal is an ethical solution to the problem. Step 5: Evaluation. This final step occurs once the decision has been made and implemented. The solution should be analyzed to determine if it was effective. The results of this evaluation may be used in making future decisions.

Monitoring the Employment Practices of Foreign Suppliers

Many U.S. businesses contract with companies in developing nations to produce goods because the wage rates in those nations are significantly lower. However, the contractor may engage in unethical behavior at its worksite. Companies can assume that their actions in other nations will be discovered and publicized by "corporate watch" groups. As a result, U.S. businesses usually take steps to avoid such adverse publicity by refusing to deal with certain suppliers or by monitoring their suppliers' workplaces to make sure that the employees are not being mistreated.

Business Ethics

Moral principles and values applied to situations that arise in a business setting.

Private Company Codes of Ethics

Most companies attempt to link ethics and law through the creation of internal codes of ethics. These codes are not law but are instead rules that the company sets forth that it can also enforce. Codes of conduct typically outline the company's policies on particular issues and indicate how employees are expected to act.

Religious Ethical Principles

Nearly every religion has principles or beliefs about how one should treat others. Religious rules generally are absolute with respect to the behavior of their adherents. Religious principles can be a unifying force for employees or a rallying point to increase employee motivation. They can also present problems because different owners, suppliers, employees, and customers may have different religious backgrounds. Taking an action based on religious principles, especially when those principles address socially or politically controversial topics, can lead to negative publicity and even to protests or boycotts.

Industry Ethical Codes

Numerous industries have also developed their own codes of ethics. These codes can give guidance to decision makers facing ethical questions. Violation of an industry code may result in discipline of an employee or sanctions against a company from the industry organization. These internal codes are not laws, so their effectiveness is determined by the commitment of the industry or company leadership to enforcing the codes.

Attitude of Top Management

One of the most important ways to create and maintain an ethical workplace is for top management to demonstrate its commitment to ethical decision making. Management's behavior sets the ethical tone of a firm. The discharge of even one employee for ethical reasons has a tremendous impact as a deterrent to unethical behavior in the workplace, even if the company has a written code of ethics. If management does not enforce the company code, the code is essentially nonexistent.

Stakeholders

One view of CSR stresses that corporations have a duty not just to shareholders, but also to other groups affected by corporate decisions—called stakeholders. The rationale for this "stakeholder view" is that in some situations, one or more of these other groups may have a greater stake in company decisions than the shareholders do. Under this approach, a corporation considers the impact of its decisions on its employees, customers, creditors, suppliers, and the community in which it operates. Stakeholders could also include advocacy groups such as environmental groups and animal rights groups. The most difficult aspect of the stakeholder analysis is determining which group's interests should receive greater weight if the interests conflict.

Why Is Studying Business Ethics Important

Originally, the only goal or duty of a corporation was to maximize profits. Although many people today may view this idea as greedy or inhumane, the rationale for the profit-maximization theory is still valid.

The Rise of Corporate Citizenship

Over the years, as resources purportedly were not sufficiently reallocated to cover the costs of social needs, many people became dissatisfied with the profit-maximization theory. Investors and others began to look beyond profits and dividends and to consider the triple bottom line—a corporation's profits, its impact on people, and its impact on the planet. Magazines and Web sites began to rank companies based on their environmental impacts and their ethical decisions. The corporation came to be viewed as a "citizen" that was expected to participate in bettering communities and society.

The Importance of Ethical Leadership

Talking about ethical business decision making is meaningless if management does not set standards—and also apply those same standards to themselves as they do to the company's employees.

Kantian Ethical Principles

The German philosopher Immanuel Kant (1724-1804) identified some general guiding principles for moral behavior based on what he thought to be the fundamental nature of human beings. 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.

The Internet Can Ruin Reputations

The Internet has increased the potential for a major corporation (or other business) to suffer damage to its reputation or loss of profits through negative publicity. Although some of these assertions may be unfounded or exaggerated, the courts generally have refused to consider them defamatory (a tort giving rise to a civil lawsuit). Most courts regard online attacks as expressions of opinion protected by the First Amendment. Corporations often incur considerable expense in running marketing campaigns to thwart bad publicity and may even face legal costs if the allegations lead to litigation.

Ethics

The application of moral principles and values to social behavior.

Prohibition against the Bribery of Foreign Officials

The first part of the FCPA applies to all U.S. companies and their directors, officers, shareholders, employees, and agents. It prohibits the bribery of most officials of foreign governments if the purpose of the payment is to motivate the official to act in his or her official capacity to provide business opportunities. The FCPA does not prohibit payments made to minor officials whose duties are ministerial (routine activities with little or no discretion involved in the action). These are often referred to as "grease" (facilitating payments) and are meant to accelerate the performance of administrative services. Generally, payments to foreign officials are permitted if such payments are lawful within the foreign country. Payments to private foreign companies or other third parties are permissible—unless the U.S. firm knows that the payments will be passed on to a foreign government in violation of the FCPA.

Accounting Requirements

The second part of the FCPA is directed toward accountants. All U.S. companies must keep detailed records that "accurately and fairly" reflect their financial activities and their accounting systems must provide "reasonable assurance" that all transactions entered into by the companies are accounted for and legal. The FCPA prohibits any person from making false statements to accountants or false entries in any record or account.

Ethical Requirements

The study of ethics goes beyond legal requirements to evaluate what is right for society. Businesspersons thus must remember that an action that is legal is not necessarily ethical.

Problems with the Utilitarian Approach

There are problems with a strict utilitarian analysis. In some situations, an action that produces the greatest good for the most people may not seem to be the most ethical.

Responsibility of Employees

There is an ongoing debate about how to balance employees' right to free expression against employers' right to prevent the spreading of inaccurate negative statements across the Internet. For instance, it must be considered whether it is ethical for employees to make negative posts in social media about other employees or—more commonly—about managers. Disgruntled employees may also exaggerate the negative qualities of managers whom they do not like.

Responsibility of Employers

Today, in contrast, a ruling by the National Labor Relations Board (NLRB—the federal agency that investigates unfair labor practices) has changed the legality of such actions. Employees can freely associate with each other and have conversations about common workplace issues without employer interference. This right extends to social media posts. An employer cannot broadly prohibit its employees from criticizing the company or coworkers, supervisors, or managers via social media.

Cost-Benefit Analysis

Under a utilitarian model of ethics, an action is morally correct, or "right," when it produces the greatest amount of good for the greatest number of people that it affects OR creates the least amount of harm for the fewest people. When an action affects the majority adversely, it is morally wrong. Applying the utilitarian theory thus requires the following steps; (1) A determination of which individuals will be affected by the action in question. (2) A cost-benefit analysis, which involves an assessment of the negative and positive effects of alternative actions on these individuals. (3) A choice among alternative actions that will produce maximum societal utility (the greatest positive net benefits for the greatest number of individuals).

The Use of Social Media to Discuss Work-Related Issues

Until recently, companies were free to fire or penalize employees for their behavior on social media sites. Such disciplinary measures were considered ethical and legal.

The Importance of Ethics in Making Business Decisions

When making ethical decisions, a business should evaluate the following factors; (1) The legal implications of each decision. (2) The public relations impact. (3) The safety risks for consumers and employees. (4) The financial implications.

Corporate social responsibility (CSR)

combines a commitment to good citizenship with a commitment to making ethical decisions, improving society, and minimizing environmental impact. Although CSR is not imposed on corporations by law, it does involve a commitment to self-regulation in a way that attends to the text and intent of the law as well as to ethical norms and global standards. Corporate decision makers must not lose track of the two descriptors in the title: corporate and social. The company must link the responsibility of citizenship with the strategy and key principles of the business.

Utilitarianism

dictates that a decision to act or not act should be directed to producing the greatest good for the greatest number of people.