Business Ethic Chap 1-3

Basis of Utilitarianism

- "The greatest good for the greatest number" - Actions are morally right is they promote happiness and pleasure - Opposes policies to benefit only small social, economic, or political minority - Acknowledges support from competing available alternatives - Happiness is the ultimate good

Why?

- "Why" matters because without offering reasons, one is giving an opinion. - "Why" matters because superficial agreement can mask underlying disagreement. - Many people attempt to answer "why" in religious terms, but religions differ from culture to culture. - Philosophical ethics provides justifications applicable to all people regardless of their religious starting points.

Law

- Body of rules governing society and the actions of individual members - Set of rules and regulations - Governed by the Government - Expressed in public writing - Violation of law is not permissible and is punishable - Intent to maintain social order and peace, while protecting citizens - Legal binding

Ethics & the Law

- Businesses requires consideration of the law - Legal and ethical norms are not identical - Societies that value individual freedom will be hesitant to require more than just the ethical minimum - Complying with only the law may lead to more regulation (Sarbanes-Oxley Act, Consumer Financial Protection Bureau) - Laws may be ambiguous and may not be in place for new situations

Stages of Cognitive Moral Development

- Developed by Lawrence Kohlberg - 6 developmental stages in ethical decision making - Individuals respond to ethical dilemmas based on their own self-interest, societies views, or reasoning based on conscience - Leadership influence has effect on ethical decision making

Goals of Business Ethics

- Developing knowledge and need to identify ethical issues - Understanding how people behave ethically - Deciding how one should act - Creating ethical organizations - Thinking through the social, economic, and political policies that we should support as citizens.

Challenges to Kantian Human Rights and Duties

- Disagreement about what rights truly are basic human rights - Unclear how to apply the approach when rights conflict

Challenges to Human Rights vs Legal Rights

- Disagreement about what rights truly are human rights - Unclear how to apply the approach when rights conflict

Utilitarianism & Ethics

- Free market is ulitarian - Some agree with Adam Smith, free and competitive markets are preferable - Dispute between market and administrative versions of utilitarianism lead to disputes in business ethics - Egoism is consequentialist, but focuses on the happiness of the individual

Challenges to Utilitarianism

- How do we determine the greatest good for the greatest number? - The ends justifies the means - There are certain responsibilities that we must obey that don't increase happiness - Does not exhaust the range of ethical concerns

When Ethical Decision Making Fails - Intellectual or Cognitive

- Ignorance - Considering limited alternatives - Finding comfort in simplified decisions - Satisficing - selecting alternative that only satisfies the minimum decision criteria

3 Levels of Ethical Decisions

- Individual - Organizational - Social/Governmental

Social Justice

- Liberty and equality are key components of justice - More fundamental and persistent than legal rights

Ethics

- Moral philosophy guiding people about basic human conduct - Set of guidelines - Governed by individual, legal and professional norms - They are abstract - No criminal punishment for violation - Made to help decide what is right and wrong - Doesn't have a binding nature

Kantian Human Rights and Duties

- People must never be treated as mere tools - Dignity of individuals means we can't do whatever we want to someone else - Some decisions are off limits - Moral duty to respect human rights of others - Humans have a right of autonomy - The U.S. Declaration of Independence speaks of "inalienable rights" that cannot be taken away by government.

Ethics vs Social Sciences

- Personal integrity - how to act individually - Social responsibility - how we should live together - Philosophers believe ethics is normative, dealing with reasoning about how we should act - Social sciences also examine human decision making, but are descriptive rather than normative - How they SHOULD act, not how they DO act

Personal and Professional Decisions

- Personal integrity correlates with individual decision making - Implications of personal and professional decision making must be considered - Some roles are social and some are institutional - Managers, executives, and board members must encourage ethical behavior

Risk Assessment

- Process identifying potential events that can affect entity, and manage those events - Provide assurance regarding achievements of entity objectives - When there are harms and benefits, ethics must be accounted for - Components: operational, financial, reputational, regulatory - Assess each component with "Likelihood to Occur" and"Controls to Address/Mitigate"

Theorectical Reasoning

- Reasoning about what we should believe

Practical Reasoning

- Reasoning about what we should do

Virtue Ethics expanded

- Seeks description of of character traits that constitute a good and full human life - virtue ethics shifts focus from what a person should do to a focus on who the person is - Character isn't independent of identity

Ethics of Principles/Justice & Rights

- Some decisions should be a matter of principle or justice, not consequence - the ends don't always justify the means - Principles are ethical rules that put values into action. - Principles create ethical duties that bind us to act or decide in certain ways. - Principles are considered a justice approach to ethics with the goal that everyone is treated fairly.

When Ethical Decision Making Fails - Motivation or Willpower

- Sometimes easier to do the wrong thing - Regret later due to lack of courage at the time - Courage needed when responding to peer pressure

Norms

- Standards of appropriate and proper behavior

Utilitarianism: Ethical Consequences

- Utilitarianism has been called a consequentialist approach to ethics and social policy. - We should act in ways that promote good consequences (happiness, health, etc.)

Ethical Frameworks

An attempt to provide an answer to how should human beings live their lives.

Stakeholder

Anyone who affects or is affected by decisions made within the firm

How Should We Live - Individually

Based on value structures: - Defined by moral systems - Referred to as morality or personal integrity - Ethics refers to how morals are applied in decisions

Social/Governmental

Businesses' decisions are influenced by social, economic and political environments

Normative Approach

Steps back from facts and asks: - What should I do? - What rights and responsibilities are involved? - What good will come from this? - Am I being fair, just, virtuous, kind and loyal?

Ethical Decision Making Process - Step 1

Determine facts of the situation: - Perceptual differences surrounding how individuals experience and understand situations can explain ethical disagreements -Regarding facts in a decision is more reasonable

Ethical Decision Making Process - Steps 4-6

4 - Consider available alternatives (using moral imagination) 5 - Make a decision, carry out the plan 6 - Monitor and learn from outcomes

Principle-based/justice framework (deontological)

Directs us to act based on moral principles such as respecting human rights (Immanuel Kant)

Individual

Each person interacts with businesses as customers, employees, and citizens

Egalitarian

Equality is central element of justice: - Socialist egalitarian theories argue for equal distribution of basic goods and services - Others argue equal opportunity is crucial - Greater governmental responsibility to guarantee equality of opportunity

Separation Thesis

Ethical standards should be kept separate from business decisions as business has its own standards

Utilitarianism

Ethical tradition that directs us to decide based on consequences of our acts (Jeremy Bentham)

Social Scientific Approach

Explores factors that led to one decision over another, or asking the manager why he acted that way

How Should We Live - Collectively

How we live together in a community: - Referred to as social ethics - Judge company from social perspective - Both of these are involved in managerial decisions

Kantian Hypothetical vs Categorical

Hypothetical duties: - Could include a professional code of conduct that binds you only if you are in that position Categorical duties: - No ifs, I should or must obey no matter what

Ethical Decision Making Process - Step 3

Identify all people affected by the decision, known as stakeholders: - Often involves conflicts and dilemmas

Libertarian

Individual liberty is central element of justice: - Individuals free from government intrusion as long as they are not harming others - Profit pursuit within law

Human Rights vs Legal Rights

Legal rights place certain issues outside the realm of the employment contract. Human rights lie outside the issues between employers and employees

Stages of Cognitive Moral Development Outlined

Level 1 - Pre-Conventional: - Stage 1: acting to avoid punishment - Stage 2: acting to further one's own self interest Level 2 - Conventional: - Stage 3: meeting expectations of others - Stage 4: upholding laws meeting societal expectations Level 3 - Post-conventional: - Stage 5: personal values used to achieve social consciousness - Stage 6: self selection of universal moral principles

Organizational

Organizational culture and corporate leadership have important roles to play in decision making

Kantian Guidance Rules

Principles to guide our decisions: - Legal rules - Organizational rules - Role-based rules - Professional rules Ethical duties should be categorical imperatives, which are overriding principles in ethics

Ethical Decision Making Process - Step 2

Recognize an ethical decision/issue: - First and second steps may be reversed - Economic and ethical decisions are not mutually exclusive - Ethical decision based on how it affects well-being of people involved - Normative myopia: inability to recognize ethical issues - Inattentional blindness: focusing on too narrow range of questions - Change blindness: when gradual change goes unnoticed

Monitor and Learn

Revisit ethical decision and analyze the outcome: - Were the facts correctly identified? - Were the stakeholders correctly identified? - Is there a need to revisit the decision with better moral imagination?

Virtue Ethics

Tells us to consider the moral character of individuals and how various character traits can contribute to, or obstruct, a happy and meaningful human life (Aristotle)

Psychological Egoism

The idea that people are naturally selfish and make decisions for personal benefit

Values vs Ethics

Values - underlying beliefs that cause us to act in one way rather than another - Many different values are recognized - Individuals have them and so do institutions - Ethical values serve the ends of human well-being

Friedman Doctrine

· Businessmen often talk about the "social responsibilities of business" but may not realize they are advocating for socialism. · The term "business" cannot have responsibilities; only individuals can. · Corporate executives have a responsibility to conduct business in accordance with the desires of the business owners, generally to make a profit while following the rules. · Corporate executives should not impose their personal beliefs or spend the company's money for social objectives that may conflict with profit maximization. · Spending someone else's money for social objectives is akin to imposing taxes and deciding how tax proceeds should be spent. · Such actions should be determined through political processes, not by corporate executives. · Imposing social responsibilities on corporate executives blurs the lines between government and private enterprise. · Social responsibility should be the domain of individuals, not businesses. · Private competitive enterprise forces people to be responsible for their own actions and prevents them from exploiting others. · Corporate executives should not use social responsibility as a cloak for actions driven by self-interest. · Businesses advocating for government control of prices, wages, or incomes are shortsighted and undermine the free market system. · The free market relies on unanimity, while the political mechanism depends on conformity. · The doctrine of social responsibility would extend the political mechanism into every human activity, making it fundamentally collectivist. · In a free society, the only social responsibility of business is to increase profits within the rules of open and free competition.