business ethics final

ethics vs law

law- written, unfair, subject to change

ethics-not writtten or enforced, based on morality

2 schools of thought for ethcis and law

1st school: law prefails in public life clearly defined and applies to everyone. Ethics govern our private lives

2nd school. ethical rules aplly “ if it is legal, then it is ok”

Why is the law not enough?

Law is a rude instrument

not everything immoral is illegal

law is too slow

obeying the law merely is not enough for managing a business

unrequired litigationm

CSR the classical view 

Corporations do no serve the same goal as other organizations in society

Primary criteria of business performance is economic grotwth

leave social concerns to social institutions

Friedman’s classical views ( 5 conditions)

1. CSR of a brand is to serve the interests alone that maximize shareholder wealth, dont spend shareholder money on general social interest

2. Maximize shareholder wealth, act in shareholder interest is incompatible with pursuit of CSR

3. Employee=agent, employer=principal agent expected to follow principle event at expense of morality

4. Friedman advocates that organization are artifical persons therefore lack social moral responsibility

5 “ taxation argument.

• investors entrust their money to managers of corporations in order to make profit for shareholders. Spending it is a form of taxation

Counter arguments to Friedman-

managers have no obligation to earn profit for shareholders without a car on how its used

not just create profit but preserve equity invested in a corporation

shareholders are not pure economic

operations in free market economy result inconsiderable inequatlites of distribtuion of income and wealth

must have some government intervention to preserve public welfare

free market prone to instability

organizations are arificial, but omprised of people with morals

Shareholder vs stakeholder

The debate between prioritizing shareholder wealth and considering the interests of all stakeholders involved, including employees, customers, and the community.

corporations shoiuld have economic and non economic views

best interest of corporation is also managers

acting in best interest for the long term of a company

Responsibility of corporations

inner circle ( economic)- basic responsibility for effficienct exeution of economic function

intermediate circle ( legal and ethical)

outer circle ( society

CSR

above all even if corporations are artifical they have people that have actions that entail social and moral responsibility

normative ethics

A branch of ethics that examines standards for right and wrong behavior, often guiding corporate practices and decision-making.

deontological ethics 

An ethical theory that emphasizes the importance of duty and rules in determining moral actions, focusing on adherence to principles rather than consequences.

teleological ethics

An ethical theory that assesses the morality of actions based on their outcomes or consequences, often prioritizing the greatest overall good.

cosequentialist ethics

An ethical theory that evaluates the morality of actions based on their outcomes, often similar to teleological ethics but specifically focused on the consequences derived from specific actions.

hedonistic ethics

A branch of teleological ethics that considers actions morally right if they promote pleasure or happiness and morally wrong if they produce pain or unhappiness.

virtue ethics

An ethical theory that emphasizes the role of character and virtue in moral philosophy, arguing that moral excellence leads to a good life.

utlitarianism

A form of consequentialist ethics that advocates for actions that maximize overall happiness or utility, suggesting that the best action is the one that produces the greatest good for the greatest number.

utilitarian reasoning

identify all directly and indrectly affected

specificy good and bad consequences

• promotes cooperation

• cost benefit analyiss

• efficiency in agency relation

Rule utilitarianism

A form of utilitarianism that evaluates the moral correctness of an action based on the consequences of following generally applicable rules, prioritizing the greatest utility resulting from adherence to those rules.

Challenges to rule utlitiarianism

conseuquences hard to preduct, not moral to focus on just the end

ignores morala duties/rights

ends justifies means,- excuses injustice

Act utilitarianism

use any means to an end to accomplish a goal ( injustice)

corporate interest over the general public

Kantianism

An ethical theory that emphasizes duty, moral rules, and the inherent value of individuals. It argues that actions are morally right if they adhere to a universal moral law and respect the dignity of all persons.

Kantianism ethics

Deontological ethics

• act is right if it repsects morality and wrong if it violates it

Moral absolutism

Categorical vs hypothetical imoerative

Two types of imperatives in Kantian ethics; categorical imperatives command actions universally and unconditionally, while hypothetical imperatives depend on individual desires or goals.

Three formulations of the categorical imperative

1rs formulation ( universal law) - acts only on a maxim you can will to become universal law

if a principle of action could not be adopted by everyone, it is impermissable to act

2nd formulation ( humanity as an end)

• treat humanity always as an end never as a means

• respect life

3rd formulation

• by willing something and acting upon it, you estblish a norm of connection

• by acting i reveal who i am

Relevance of kantianism in business ethics

all affected stakeholder interests are protected

prohibits violating human rights

encorurage employee empowerment

corporations

promoties justice and fairness

challenges to kantianism

challenge of moral risk contradicts the idea oto follow categorical imperative

positove end cannot justify a questionable means

too formalistic to accomidate

no hierarchy of values

virtue ethics

An ethical theory focusing on an individual's character rather than rules or consequences, emphasizing virtues such as honesty, courage, and compassion as fundamental to moral behavior.

Aristotle ethic theory

teleological view

aretaic view

Aristotle teleological aspecct

provides corporations with a sense of mission, goal, plan

above all is an end desired for its own sake

eudaimonia ( ultimate happiness)

best end of life

means to live and fare well

Applicability of virtue ethics

deliberate about resolution of conflict

identify right thing to do at the right time

considerate means to an end

parituclarize moral truth

objections to virtue ethics

feelings and their signifcant rule> egoism

habituation and perfectability vs rule moralty

conflict between some virtues

eltiism

type of character

virtuous

continent= strong willed- selfish, but still has control over own actions

incontinent= weak willed- knows right vs wrong, doesnt have self control

vicious

Whistle blowing 

the act of reporting unethical or illegal activities within an organization, typically by an employee.

whistle blowing conditions

1. ( relationship) relationship to organization

2 ( privacy) non public information

3 ( Important) substantiality of info

4 ( how) means of communication at the receiving end

5 ( purpose) voluntary end

6 ( moral) moral motivation

whistle blowing justification

1 Is the situation of sufficient moral importance?

2 Do you have all the facts and have you properly understood their signficance?

3 HAve all internal channels and steps een exhausted before you rat?

4 what is the best way to ray?

5 What is my responsibility in view of my role in the organizations?

6 What are the channels for success?

Arguments to support whistle blowing

core morality is violated

save an organization from future crissis management

can benefit employee or consumer if buisness practices violated rights

Duska’s view- an employee owes loyalty the child or wife, not company since it is an artificaly entity

Argument against whistle blowing

create bad permanent look on a company

will hurt future job prospects

may cause disunity and distrust in work places

friedman view, shareholder perspective

employee is an agent of the company

the loyalty argument

employee is agent of an employer

an agent is a person who is engaged in act of interest for another and is authorized to act on their behalf

employee obligated to be above all loyal

In conclusion: Whistleblowing is not necessarily in compatible with loyalty and in some circumstance loyalty may require whistleblowing

whistle blowing policy

deficient procuedre for reporting

well framed personnel to receive and investigate reports

commitment to take appropriate action

gurantee agaisnt retelation

How to prevent whisle blowing

donte create situation for it to happen

encourage free work space

have employees participate in decision making

promote self assessment

Rights of employees

1. protection against unjust dismissal

2. right to freedom of thought and expressions in the workplace

3. right to participate in decisions which affect employees

4. compensation practice

5. privacy

6. protection against discrimination

7. whistle blowing

8. occupational health +safety

Just dismisall

1. inadequate job performance

2. not skilled

3. economic adjustment

4. inappropriate behavior

Unjust dismissal

1. when an emmployee is dismissed without a good cause

2. when the dismisall occurs without a hearing - due process

Employee at will

an employer may terminate an employee at any time and for any reason unless an employment contract specifies otherwise

• both employee and employers have the right to enter into a mutually agreement without interference

• can act within agreed terms

Employee at will justifications

Propert rights theory

freedom of contract theory

the effiency argument

E.W. Property Rights arguments

1. employers have properties of some kind ( machinery)

2. employees have property of some other kind ( labor)

3. employment is an exchange of a workers productive powers for the wages that are given out in return by the factory owners

4. in this exchange, both parties are free toe xercise rights of property ownership

Conclusion: Any restriction of the kinds of agreements tha employers and employees can make is a violation of property rights on both parties

Freedom of contract argument

• employment is viewed as contractual arrrangement between employer and employee

• voluntary agreement

effiency argument

• employees at will can be a win win situation

• can benefit the operation of benfits

Employers: Freedom to determine number of employees, selection of best workers, can discipline and dismiss poor performnace

employees: find better job prospects for their abilities, legal restrictions on dismissal

Exceptions to employees at will

1. employees ought not to be subject to discipline, demotion, or dismissal for refusing to break the laaw

2. employees ought not to prevent employmees from receiving the full benefit of their legal rights and entitements

3. employer right to fire shoudnt interfere with abilitiy of government to promote social welfare

EaW Against property rights

EaW impoverishes workers and subjects them to the will of others

• propertty rights have the potential to enable emoplyers to benefit at hte expense of employees and to exercise not merely econmic but also positiove

EaW Against freedom of contract argument

leads to exploitation

incompatible with worker protective legislation

difference in bargaining power

EaW Against effiency

assumes fair labor markets

retaliation and scrutiny exist in reality

Due process

1 No good cause

2 no fair hearing

Why it matters?

• Harm

• Dignity

• Fairness

Discrimination

unfair treatment in hiring, firing, pay, promotion, conditions of work based on irrelavent characteristics

-friedmans view- economically irration, it would generaly be in the interest of the firm to not discriminate

Utilitarian approach to discrimination

discrimination is econimically inefficient

reduces productivity

harms social welfare

-perpetuates racism and sexual harrasment

rule utilitarian- any act of discrimination would also be morally wrong, since it violates rule of justice as fairness

Kantianism view on discrimination

Categorical imperative 1

• cannot be universalized treatment

Categorical imperative 2

• violates dignity and respect; treat people as a means not an ends

• violates moral autonomy

Justice argument- discrimination is aviolation of principles of justice

Aristotle and Rawls view on discrimination

Aristotle- virtue ethics, discrimintaton is injust because irrelavent charactersistics does not effect performance of a job

rawls- even if discrimination was advantageous, denial of opportunity can not be justified because industries would be derived of an important human good, namely, and opportunity of self development

How to avoid discrimination

• clear hiring policy

• recruitment and selection

• use of objective tests for performance

• use of ethical guidelines

• use external parties in recruiting employees

3 forms of workplace aggression

physical-verbal

active-passive

direct-indirect

cause of aggression

personal- low selfesteem, hostile person

social-provocation, displaced aggression, triggers

contexteual-perceived unfairness

sexual harassment

1. quid pro quo- sexual favors exchanged for job benefits

2. creation of hostile work environemt- harmful performance, safety

Why its wrong:

• dignity

• dehumanizing

• violates principle of justice

Prevention

• SH policy

  • communicate policy

  • set up procedures

  • take appropriate actions

Affirmative action

arguments for: promote social integration

more available workers and talent

compensation for historical injustice

helps ensure more equality

Utilitarians stress thatt preferential treatment are necessary to eradicate racial and sexual discirimination in order to speed up integration

Affirmative action objections

reverse discrimination

stigmatization

undermines merit based work

overreach of the government in the private sector

Dworkins key distinction equal treatment vs equal opportunity

The philosophical argument distinguishing between treating individuals the same regardless of background (equal treatment) and ensuring individuals have the same chances to succeed (equal opportunity).

Employer obligement

must protect their employees

• employees have rights to be informed about potential health

• right to refuse hazardous work

• empoyers can be resonsible for worker harm or injury

Concept of direct cause

Refers to a clear and identifiable link between an employer's actions and the harm or injury suffered by an employee, establishing liability.

Voluntary risk assumption

employees many time voluntaryily assume the risk of inherent hazards associated with their work, acknowledging that they understand and accept these risks as part of their employment.

workers must be free of choice and know the risks

Worker safety utilitarian view

if aware of danger, you will protect yourself better

overall welfare is best achieved by allowing market forces to determine owerst acceptable risk

the general social welfare is benefited by existence of an employee right

Right utlitarianism:

if safety is in danger, rule violation

employees right above agrees with stakeholder perspective in csr

Worker safety kantianism

1st and 2nd formulations

• autonomy requires informed choices

• workers must participate in risk decisions

Product safety: 3 theories

1. due care theory

2. contractual theory

3. strict liability theory

Due care theory

manufacturers take all reasonable precautions to ensure that products they produce will not cause harm

• liable if there is an act of negligence

Contractual theory

liability based on sales agreement or biolation of contract

• moral and legal obligations

strict liability theory

manufacturers responsible for all harm from a detective product when due care is still applied on 2 contracts upheld

-manufacturer responsible without negligence

3 types of defects

manufacturing defects

design defects

failure to warn

Ethical arguments for strict liability

effiency: Utilitarian justification →secures greatest amount of protection for lowest cost

equity-strict liability is fairest why of distributing cost involves in manufacturing

expenses are higher to improve resources of product safety

• however consumers must be educated in safety in prroper use

objections to strict liability

absence of fact

threat of liability suits stifles innovation

lawsuits place a burden of compliance, even putting some firms out of business

studies need to be checked for each kind of accidents in favor of stict liabiity

• provides incentive for manufacturers to take great precautions

• would have it properly distributed the cost so that they are fair to call parties

• - utilitarian background and justifications

consumer rights

well being, protected from harm

fairness

offered choices ( freedom)

voice in making major marketing decisions

Caveat emptor vs caveat venditor

Caveat Emptor- Let the buyer beware

buyer has full responsibility

Caveat Venditor- Let the seller beware
seller is responsible for product quality and safety.

Objections to advertising

• morality

• repetitive

• exaggerated claims

• outright falsehoods

• deceptive adveritsing

The concept of rational clause

rational choices require adequate information

• when a false belief influences behavior of substantial interefecence constitutes: connsumers

  • ability to protect oneself

  • affecting choice for serious purchases

Impact of marketing on people

1 over consumption

2 consumption becoomes an ends in itself

3 life as presented in ads consists of simple steroetyical situations not reality

4 harmful effects on peoples conceptions of themselves

5 “ objectifiactions of the self”

impact of marketing on society

reinforces stereotypes

targets vulnerable groups

encourages harmful consumption

social marketing

• using marketing tools for social good ethical reasons

• avoids public debate, forestall difficult topics

• manipulation

• solutions are to radical of change

corporate governance

factors that determine how decisions are made in corporations

and how they align with the interests of stakeholders.

shareholder primary

Doctirne stating that shareholders ought to control the firm. Firms hob is to maximize shareholder wealth

why shareholders?

• They have a claim to right of control and profits justification for their control

Public policy justifiactions

• society benefits when investors feel protected

• encourages investment

• reflected in corporate law and reputation

Market Justification

• corporations arise from voluntary contracts

• governance rules reflect effiency promoting market transactions

Shareholder contract

CG=contract between shareholders + firm. It grants- gives managers specific duties

• control rights to sharehoder

Purpose- promote effiency

• protect shareholder claim to profit

• serve social welfare indirectly

stakeholder theory

1. descriptive- explains how firms activelyoperate

2. instrumental- happy stakeholders→ more profits

3. normative success- stakeholder have intrinsice moral value

   1. managers shoulds further then interests for their own sake

3 theories to CG

Property Rights Theory

Contract Theory

Social Instituions

Property Rights Theory CG

• corporation=private property of shareholder assumptions

  • shareholder bear financial risk

  • managers are agents

  • profit maximization

• Governance implies:

  • prioritze shareholder value

  • stakeholders matter only if they affect profits

  • Friedmans view

Contract theory CG

Corporation as a nexus of contracts between various stakeholders, where agreements bind their relationships and define obligations and rights.

Assumptions: - shareholders are residual claimants

governance minimzes transaction costs

focus on incentive and effiency

Government implication:

• design efficent contract

• fix incentive failure

• contractual partners

Social institution theory CG

corporation=social institution, has public responsibility

Assumptions: corporations actions affect society

law crerates corporations→ accountability

Governance implies:

• protect multiple stakeholders

• balance profits with social welfare

• emphasize sustainability and ethics

What is corporate compliance?

Corporate compliance refers to a company's efforts to adhere to legal standards, regulations, and ethical practices within its operations, ensuring accountability and transparency.

Efforts to:

• prevent misconduct

• guide ethica behavior

• create ethical worksapces

Ethical program components

Code of ethics

training

communication system

reporting mechanisms

discipline

investigation

2 types of ethical programs: compliance strategy and integrity strategy

1. compliance strategy

• rule based

• focus on law and punishment

• prevent wrong doing

2. Integrity strategy

• value based

• emphasize culture and responsibility

• encourages ethical judgementts

Why adopt a code of ethics

clarify expectations

guide behavior

build consensus

empower employees to raise pressure

Limitations: over rigidity

if not prohibted, its allowed

cynicism

can become symbolic only