BLCH2

Duty Based

"obligation, duty" is the normative ethical position that judges the morality of an action based on the action's adherence to a rule or rules. It is sometimes described as "duty-" or "obligation-" or "rule-" based ethics, because rules "bind you to your duty."

Approaches to Ethical Reasoning

1. Duty-based ethics Duty-based ethical standards often are derived from revealed truths, such as religious precepts. They can also be derived through philosophical reasoning. 2. Outcome-based ethics (utilitarianism) Ethics based on philosophical reasoning, such as that of Jeremy Bentham and John Stuart Mill. Applying this theory requires a cost-benefit analysis, weighing the negative effects against the positive and deciding which course of action produces the better outcome. 3. Corporate social responsibility A number of theories based on the idea that corporations can and should act ethically and be accountable to society for their actions. These include the stakeholder approach and corporate citizenship.

Business Ethics

1. Ethics in Business Business ethics focuses on how moral and ethical principles are applied in the business context. 2. The Moral Minimum The Minimum acceptable standard for Ethical Business behavior, which is usually defined as compliance with the Law. The law has its limits, though, and some actions may be legal but not ethical. 3. Short-Term Profit Maximization One of the most common reasons why ethical breaches occur is the focus on short-term profit maximization. Executives should distinguish between short-run and long-run profit goals and focus on maximizing profits over the long run because only long-run profit maximization is consistent with business ethics. 4. Legal Uncertainties or Grey Areas in Law It may be difficult to predict with certainty whether particular actions are legal, given the numerous and frequent changes in the laws regulating business and the "gray areas" in the law. In addition, many rules of law require a court to determine what is "foreseeable" or "reasonable" in particular situation. 5. The Importance of Ethical Leadership Management's commitment and behavior are essential in creating an ethical workplace. Management's behavior, more than anything else, sets the ethical tone of a firm and influences the behavior of employees. 6 Ethical Codes Most large firms have ethical codes or policies and training programs to help employees determine whether specific actions are ethical. In addition, the Sarbanes-Oxley Act requires firms to set up confidential systems so that employees and others can report suspected illegal or unethical auditing or accounting practices.

The George S. May International Company has provided six basic guidelines to help corporate employees judge their actions for Making Ethical Business Decisions.

1. The law. Is the action you are considering legal? If you do not know the laws governing the action, then find out. Ignorance of the law is no excuse. 2. Rules and procedures. Are you following the internal rules and procedures that have already been laid out by your company? They have been developed to avoid problems. Is what you are planning to do consistent with your company's policies and procedures? If not, stop. 3. Values. Laws and internal company policies reinforce society's values. You might wish to ask yourself whether you are attempting to find a loophole in the law or in your company's policies. Next, you have to ask yourself whether you are following the "spirit" of the law as well as the letter of the law or the internal policy. 4. Conscience. If you feel any guilt, let your conscience be your guide. Alternatively, ask yourself whether you would be happy to be interviewed by the national news media about the actions you are going to take. 5. Promises. Every business organization is based on trust. Your customers believe that your company will do what it is supposed to do. The same is true for your suppliers and employees. Will your actions live up to the commitments you have made to others, both inside the business and outside? 6. Heroes. We all have heroes who are role models for us. Is what you are planning on doing an action that your "hero" would take? If not, how would your hero act? That is how you should be acting.

Cost-Benefit Analysis

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

Stock Option

An agreement that grants the owner the option to buy a given number of shares of stock at a set price, usually within a specific time period.

Kantian Ethics or Categorical Imperative

An ethical guideline developed by Immanuel Kant under which an action is evaluated in terms of what would happen if everybody else in the same situation, or category, acted the same way. This categorical imperative can be applied to any action.

Business Ethics on a Global Level

Businesses must take account of the many cultural, religious, and legal differences among nations. Notable differences relate to the role of women in society, employment laws governing workplace conditions, and the practice of giving side payments to foreign officials to secure favorable contracts.

Sarbanes-Oxley Act

Congress enacted the Sarbanes-Oxley to 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.

Practical Solutions to Corporate Ethics Questions

Corporate ethics officers and ethics committees require a practical method to investigate and solve specific ethics problems. For a five-step pragmatic procedure to solve ethical problems recommended by one expert: 1. Inquiry. Of course, an understanding of the facts must be the initial action. The parties involved might include the mass media, the public, employees, or customers. At this stage of the process, the ethical problem or problems are specified. A list of relevant ethical principles is created. 2. Discussion. Here, a list of action options is developed. Each option carries with it certain ethical principles. Finally, resolution goals should also be listed. 3.Decision. Working together, those participating in the process craft a consensus decision, or a consensus plan of action for the corporation. 4. Justification. Does the consensus solution withstand moral scrutiny? At this point in the process, reasons should be attached to each proposed action or series of actions. Will the stakeholders involved accept these reasons? 5. Evaluation. Do the solutions to the corporate ethics issue satisfy corporate values, community values, and individual values? Ultimately, can the consensus resolution to the corporate ethics problem withstand the moral scrutiny of the decisions taken and the process used to reach those decisions?

Ethical Transgressions by Financial Institutions ▪️Corporate Stock Buybacks ▪️Starling Executive Decisions at American International Group ▪️Executive Bonuses

During the first decade of the 2000s, corporate wrongdoing among U.S. financial institutions escalated. A number of investment banking firms, such as Goldman Sachs, were nearly bankrupted by their risky investments, and others, such as Lehman Brothers, were forced into bankruptcy. Earlier these same firms had engaged in the abusive use of stock buybacks and stock options. AIG, an insurance giant, was also on the brink of bankruptcy when the government stepped in with federal bailout funds. Exorbitant bonuses paid to Wall Street executives added to the financial industry's problems and fueled public outrage. U.S. taxpayers paid the price through the federal bailouts and a deepening nationwide recession.

Ethical Reasoning

Each individual, when faced with a particular ethical dilemma, engages in ethical reasoning—that is, a reasoning process in which the individual examines the situation at hand in light of his or her moral convictions or ethical standards. Businesspersons do likewise when making decisions with ethical implications.

Corporate Citizenship Example

Google has teamed up with investment firm Kohlberg Kravis Roberts to develop four solar energy farms that will serve the Sacramento Municipal Utility District in California. The four solar farms reportedly cost $95 million and will provide enough power for more than 13,000 average U.S. homes.

Making Ethical Business Decisions

Making ethical business decisions is crucial in today's legal environment. Doing the right thing pays off in the long run, both by increasing profits and by avoiding negative publicity and the potential for bankruptcy.

Ethics

Moral Principles and values applied to social behavior. Ethics can be defined as the study of what constitutes right or wrong behavior.

Moral Theories

Normative theories of ethics or "moral theories" are meant to help us figure out what actions are right and wrong. Popular normative theories include utilitarianism, the categorical imperative, Aristotelian virtue ethics, Stoic virtue ethics, and W. D. Ross's intuitionism. I will discuss each of these theories and explain how to apply them in various situations.

Principle of Right or "Rights Theory"

Principle of Rights, or "Rights Theory," believe that a key factor in determining whether a business decision is ethical is how that decision affects the 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.

Religious Ethical Standards

Religious rules generally are absolute with respect to the behavior of their adherents. The commandment "Thou shalt not steal" is an absolute mandate for a person who believes that the Ten Commandments reflect revealed truth. Even a benevolent motive for stealing (such as Robin Hood's) cannot justify the act because the act itself is inherently immoral and thus wrong.

Kantian Ethics or Categorical Imperative Example

Suppose that you are deciding whether to cheat on an examination. If you have adopted Kant's categorical imperative, you will decide not to cheat because if everyone cheated, the examination (and the entire education system) would be meaningless.

Social Responsibility

The idea that companies should embrace its social responsibilities and not be solely focused on maximizing profits. Social responsibility entails developing businesses with a positive relationship to the society which they operate in. According to the International Organization for Standardization (ISO), this relationship to the society and environment in which they operate is "a critical factor in their ability to continue to operate effectively. It is also increasingly being used as a measure of their overall performance."

Stock Buyback

The purchase of shares of a company's own stock by that company on the open market.

Corporate Citizenship

Under a corporate citizenship view, companies are judged on how much they donate to social causes, as well as how they conduct their operations with respect to employment discrimination, human rights, environmental concerns, and similar issues.

Stakeholder Approach

Under this approach, a corporation would consider the impact of its decision on the firm's employees, customers, creditors, suppliers, and the community in which the corporation operates. Some corporations succeeded in reducing labor costs without layoffs. To avoid slashing their workforces, these employers turned to alternatives such as: 1.Four-day workweeks, 2.Unpaid vacations and voluntary furloughs, 3.Wage freezes, 4.Pension cuts, and 5.Flexible work schedules.

Utilitarian

made to be useful rather than to be decorative or comfortable