Chapter 3 Intro to Law

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Stakeholders Approach

companies also have a duty to "stakeholders" who are affected by corporate decisions (employees, customers, suppliers, etc.)

Milton Friedman's View

- a business's one and only social responsibility is to maximize profits for shareholders - believes businesses don't have any social responsibilities because if they did they would be spending their own money and other people's money on things the business didn't want/need - believes the ethical duty/responsibility of a corporate executive is to conduct the business in his employers (owners) interests, which is to make as much money as they can while following the law and ethics

Outcome-Based Ethics

- consequentialist - utilitarianism - focuses on the outcomes of the action, not on the nature of the action itself or the moral values and religious - do whatever will lead to an outcome the produces great good for greatest number

Duty-Based Ethics

- non-consequentialist - ethics based on religious beliefs, philosphical reasoning, and the basic rights of human beings - kantian ethics (do not use people)

Kohlberg's Stages of Moral Development

- people make different decisions in similar ethical situations because they are at different stages of moral development - lower stage, middle stage, higher stage

Foreign Corrupt Practices Act (FCPA)

- prohibits all US businesspersons from bribing foreign officials to secure advantageous business contracts - allows for grease payments - payments to lower-level officials to speed up performance of administrative services - does not generally prohibit "bribe" payments to private companies

Moral Minimum

- the minimum degree of ethical behavior expected of a business firm, which is usually defined as compliance with the law - just because an action is legal does not necessarily make it "ethical" - an overemphasis on short-term profit maximization is the most common reason that ethical problems occur in business

Principle of Rights

- the principle that human beings have certain fundamental rights (life, liberty, happiness, etc.) - those who believe in the "right theory" say a key factor in whether a decision is ethical is how that decision affects the rights of everyone else, whichever right is stronger in a situation takes precedence - potential problem is deciding which rights are more important in a given situation

Importance of Ethical Leadership

- top-level management must model and demonstrate ethical behavior to employees - a manager who is not totally committed to an ethical workplace rarely succeeds in creating one - employees take their cue from management

Lon Moeller's Theory of Ethical Reasoning

1. What are your primary values? 2. What is the issue or problem? 3. What are the critical facts related to your decision? 4. What are the possible solutions/actions/responses? 5. Who will be impacted by your decision (that is, who are the key "stakeholders")? 6. What is the effect of the likely solutions/responses on the stakeholders? 7. What is your decision? 8. How will you justify/explain your decision? Is your explanation persuasive?

Ethical Reasoning

a reasoning process in which the person uses their moral beliefs and ethical standards while looking at a particular situation

Corporate Citizenship

companies should act as a good citizen and give back to the community... adds to companies profits

Middle Stage

looking at rules/policies to help guide their decisions as to what is "right and wrong" - a "law and order" stage

Lower Stage

motivated to "do good" because of threat of punishment

Sarbanes-Oxley Act

requires companies to set up confidential systems so that employees and others can "raise red flags" about suspected illegal or unethical business actions and practices

Corporate Social Responsibility

the idea that corporations can and should act ethically and be accountable to society for their actions

Higher Stage

think about the interests of others when making decisions as to what is "right or wrong"


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