Business Ethics Chapters 1-3 by CAR

What challenges/objections are there to utilitarianism and cost benefit analysis?

1. Fails to respect individual or minority rights 2. Should we assign a single uniform measure to value ($) to all things?

What is an ethical dilemma?

A situation in which two or more "right" values are in conflict (page 39)

What is the Edelman Trust Barometer?

A trust survey

Mortgage Originators

Relaxed lending standards and created sophisticated products consumers did not understand

Why be ethical? Who cares?

Individuals, employees, managers, executives, industries, societies

Enron Scandal

Institutionalized, systematically create fraud, reports to shareholders. Based business on false accounts. Arthur Anderson was their firm and was found complicit to the scandal.

Internal (Locus of Control)

Internals are more likely to see the connection between their own behavior and outcomes and therefore take responsibility for their behavior

Who is Lawrence Kohlberg? (1927-1987)

Professor of Psychology. Best known for how he developed theory of moral development.

Investors

Punished companies that did not deliver huge returns

What the the Queen vs. Dudley and Stephens case in 1884?

Queen v Dudley and Stephens (1884) 14 QBD 273 DC is a leading English criminal case which established a precedent throughout the common law world that necessity is not a defence to a charge of murder. ... When one of them, the cabin boy Richard Parker, fell into a coma, Dudley and Stephens decided to kill him for food.

Kant's categorical imperative, human dignity, and all persons must be treated as ends in themselves

"Act as if thy action were to become by thy will a universal law of nature." Human dignity is a major principle for Kant. It is wrong to use a persons simply for a means to an end. All persons must be treated as ends of themselves, not means to an end.

Regulators

"Asleep at the switch" -- also looking for their next jobs (high-paying) in the financial industry (which they are regulating)

What are some of the contributing factors of the financial disaster in 2008?

"Herd Mentality," Investment Banks, Lots of Cheap $, Rating Agencies, and "Innovation"

What was the decision of Queen vs. Dudley and Stephens?

"The prisoners' act in this case was willful murder. The facts as stated in the verdict are no legal justification of the homicide..." Chief Justice Coolridge "It is not needful to point out the danger of admitting the principle that has been contended for. Who is to be the judge of this sort of necessity? By what measure is the comparative value of lives to be measured? Is it to be strength, or intellect, or what?...Such a principle once admitted might be made the legal cloak for unbridled passion and atrocious crime...In this case, the weakest, youngest, the most unresisting, was chose. Was it more necessary to kill him than one of the grown men? The answer must be No."

Factors that led to the 2008 financial crisis; be able to distinguish between Direct Causes and Contributing Factors

(Pages 4-10) It was cheap to borrow, real estate was good investment, Liar Loans or no doc loans, the banks created more risk/mortgage back securities, rating agencies gave false ratings

What are Bruce Weinstein's 5 fundamental ethical principles?

1. Do no harm 2. Make things better 3. Respect others 4. Be fair 5. Be compassionate

Dependency Thesis of CER

-All moral principles deriving their validity from cultural acceptance -Weak dependency equals application of principles -Strong dependency equals principles themselves

Why bother teaching ethics?

-Bad apples are encouraged by bad barrels -Good character isn't always enough -Adults develop moral judgement into their 30s -Conduct is influenced by environment

What were the results of the financial disaster?

-Business failures or contradictions -Government bailouts -Unemployment -Consumer distress: foreclosures and bankruptcies -Tattered reputations (corps, indust., & countries) -Plummeting trust in government and institutions

Rawls' Veil of Ignorance

-Justice is fairness -Whole approach is if you use the availability of ignorance principle would develop ethical rules who don't advantage or disadvantage anyone -Our own characteristics create biases

What is wrong with the "bad apple" argument?

-People are good or bad and organizations are powerless to change these rules -One bad apple representative will change an entire organization -Discarding one bad apple won't change an organization's problem

In 2016, which percent of consumers around the world trusted institutions in general?

49%

What percent of consumers refuse to purchase products from companies they don't trust?

77%

What percent of consumers purchase products from companies they trust?

91%

What is the Locus of Control?

An individual's perception of how much control he or she exerts over events in life. Internal vs. External

What is the bottom line as to why the financial disaster in 2008 happened?

Arrogance, greed, and total recklessness

Machiavellianism

Associated with unethical action, used to describe people uninterested, deceptive and manipulative.

What are bad apples and bad barrels?

Bad apples are people with poor character, bad barrels are bad work environment that don't condone and expect unethical behavior

Cognitive Barriers to Good Ethical Judgment

Barriers to fact gathering are overconfidence and "confirmation trap." Barriers to consideration of consequences are reduced number, self vs. others, ignore consequences that affect few, risk underestimated by the illusion of optimism and illusion of control, and consequences over time -- escalation of commitment

Why is cognitive moral development important?

Because most people reason are at the conventional level and are looking outside themselves for guidance. That makes "leading" on ethics essential.

Home Owners

Bought more houses than they could afford. Home values plummet and mortgages are "under water" - home values sink and are worth less than their mortgages

What are two different ways to look at the concept of price gouging?

Can be either fair or unfair, price gouging is good economics. Unfair is unethical. It is good to have price gouging laws.

What is the concept "Fish don't know they're in water" have to do with moral decision making?

Can't see culture that you are in until you are on the outside. You don't know you are ethnocentric so you think it is the best because you are stuck inside the circle

What theory do we follow when we are not swayed only by the results? When we feel that not only consequences but also the intrinsic quality or character of an act was what mattered morally...(2nd Trolley Scenario)

Categorical Moral Theory

What influences a person's ethical behavior? (Page 76)

Characteristics of individuals: Individual differences, religions, culture, cognitive blatancies, cognitive moral development, Locust of Control, Machiavellanism Characteristics of organizations: pressures and culture

Imagine this ethical scenario. You're having a romantic dinner and order an expensive bottle of wine as part of the festivities. The waiter has not been very attentive and you might say he was even a bit rude. When the check arrives, you notice that the wine hasn't been included in the bill. What would you do?

Choices: -Tell the waiter about the oversight -Keep it to yourself but leave a larger tip than you were planning to -Keep it to yourself and leave your standard tip -Use some of the money you've saved to donate to your favorite charity

What theory do we follow when we are inclined to locate the morality of an act in the results if produced? (1st Trolley Car Scenario)

Consequentialist Moral Theory

Cultural Relativism

Depends on your culture you are in. Viewpoint that moral or ethical systems that vary from culture to culture are all equally valid and not one system is better than the other

Prescriptive approach to deciding what is right

Derived from ethical theories in philosophy and offers decision making tools to help you decide what decision you should make as a conscious moral agent who thinks carefully about ethical choices and who wants to make the ethical right decision

What is the cost benefit analysis as outcome of utilitarianism?

Determining if benefits outweigh costs of a proposed policy/project/action. Express all benefits and costs in a common measure.

Deontology

Duty based, em-manual, focused on obligation, duties, or principles. Do what is right all the time.

Who said, "Relativity applies to physics, not ethics"? And, what does that statement mean?

Einstein, his view of relativism and he rejects it.

How do we make ethical decisions?

Ethical awareness to ethical judgement to ethical actions

Locus of Control (external to internal)

External thinks outside forces control everything they do--more unethical Internal thinks they have control of what happens to them--do what's right more

True or False? The financial market disaster of 2008 was largely due to illegal behavior by a range of business organizations.

False -- most activities were legal, but unethical (page 4)

Teleology / Utilitarianism / Consequentialism

Focused attention on the actions or results on the consequence or action

Basic details of the Ford Pinto case and know what the case illustrates and why it is important.

Ford Pinto explodes when rear ended , Ford said they could make a simple adjustment around the gas tank. Cost benefit analysis for adjustment happened and they decided it was better not to fix it. Eventually they did fix it.

Kohlberg 3 Levels/6 Stages of Moral Reasoning

Level 1: Preconventional (or pre-moral level) Stage 1: Obedience and Punishment Oriented Stage 2: Instrumental Purpose and Exchange Level 2:Conventional (Most people don't make it past level 2) Stage 3: Interpersonal Accord, Conformity, Mutual Expectations (good boy/good girl) Stage 4: Social Accord and System Maintenance (Law and Order, what society says) Level 3: Postconventional and Principles Stage 5: Social Contract and Individual Rights Stage 6: Universal Ethical Principles (human rights, justice, equality)

Legislators

Lobbied and "paid" by the financial industry to relax regulations - "the markets can self-regulate"

Ethnocentrism

Looking at the world in only the eyes of your culture. The view that interprets all of reality in the values of your culture. "Your culture is best"

Open Book Management; what does it illustrate?

Making everyone involved within the company. Everyone knows financial information. Shows transparency.

Diversity Thesis of CER

Morally right and wrong, varies from society to society. No universal moral standards held by all societies.

CEOs

Much of their compensation is driven by stock price - this focused them on the short term; Also many did not understand the sophisticated financial products their firms peddled

What is the relationship between ethics and the law?

Overlap between laws and ethics. Just because something is legal , doesn't mean its ethical. Just because its unethical, doesn't mean its illegal. Law reflects minimum norms and standards of business conduct.

Financial Professionals

Paid huge salaries and bonuses for short-term results

Stakeholders

Parties who are affected by the business and its actions and who have an interest in what the business does and how it performs No equity in the company but the interest is there

Psychological approach to deciding what is right

People teach us that often we often don't even recognize the ethical dimensions of the situation at hand. How people actually think and what they feel and what they do describes behavior.

Bentham

Righteousness of human actions is determined by the net amount of consequences produced

J.S. Mills

Rule of utilitarianism: overcome challenge of measuring pain and pleasure. Sought general rules to bring the greatest good

No-doc loans and liar loans; what's the difference and why does it matter?

Same thing, no doc loans sound better though. Eucharistic language can keep individuals from thinking about ethical implications or more neutral language.

What are some of the direct causes of the financial disaster of 2008?

Shadow Financial Market, Subprime Mortgages, Regulatory Climate, and Incentives

What does the trolley problem illustrate?

Sometimes we are inclined to locate the morality of an act and the results it produces. Consequentialist theory of 1-5 people dying. In some cases when we are not swayed, the character of an act was what mattered morally.

Conventional Ethical Relativism (strengths and weaknesses)

Strengths: All moral principles justified by virtue or cultural acceptance and there are no objective moral principles. Relative to culture that you are in. Weaknesses: Fails to deal with the problem of the reformer, question of defining a culture, and whole enterprise of moral criticism

Moral Subjectivism

Subject to individual, depends on what the person thinks is right. Ex. Ted Bundy

What are two ways people think about what is the right thing to do?

Teleology and Deontology

Review the trolley dilemma.

The Trolley Dilemma is the situation whether you choose to pull the trolley track to save 5 people and kill one, or to not do anything and see 5 people die.

Define business ethics.

The principles, norms, and standards of conduct governing an individual or group

Textbook definition of ethical behavior

The principles, norms, and standards of conduct governing an individual or group // Behavior that is consistent with the principles, norms, and standards of business practice that have been agreed upon by society

Moral Disengagement

The tendency for people to deactivate their internal control system in order to feel okay about doing unethical things

True or False? For Aristotle, virtues are necessary to live the "good life"

True

True or False? The textbook authors argue that good ethics is absolutely essential for effective business practice.

True (page 3)

True or False? Leading up to the market crash in 2008, rating agencies such as Standard and Poor's, Fitch Group, and Moody's continued to provide high ratings to mortgage securities and did not foresee a decline in housing prices.

True (page 7)

True or False? According to the bad apple theory, people are good or bad and organizations are powerless to change these folks.

True -- however, the textbook authors and your professors are not proponents of the bad apple theory

Moral Objectivism

Universal and objective moral principles for all people

What is the form of teleology demonstrated by Bentham and Mill?

Utilitarianism

Why be ethical? Who cares?

We should care. Individuals care about ethics being motivational. Leaders, managers, employees and people of society care.

Rating Agencies

Went public and became shareholder owned; paid fees by companies they were supposed to rate; took the investment banks' advice on how to rate securitized mortgages (AAA ratings while many were complete junk)

Virtue Ethics

What kind of person should we be? Goal of life is happiness; virtues are no applied in different aspects of our life. Virtues are not enough to live the good life