LES 305 Exam 1

Conflict of interest

When a person’s best interest is not in the best interest of another person or organization to which the individual owes loyalty.

Rationalizations

Invented explanations that hide or deny true motivations, causes, or actions

-Excuses people give themselves for not living up to their expectations

-”not my fault”

-Rationalization is great enemy of moral progress

Self-Serving Bias

The tendency people have to seek out information and use it in ways that advance their own self-interest

Incrementalism

Slippery slope that often causes people to slide unintentionally into unethical behavior.

-Accounting fraud begins with people fudging small numbers that grow

Loss Aversion

Notion that people hate losses more than they enjoy gains

-People more likely to lie and cheat to avoid something they already have than to acquire it in the first place

Overconfidence Bias

Tendency people have to be more confident in their own abilities, such as driving, teaching, or spelling, than is objectively reasonable.

Framing

A point of view refers to the way we look at a given situation.

Law

consists of formal rules created and enforced by government.

-Violating it can lead to fines, lawsuits, loss of licenses, or criminal penalties.

- establishes the minimum required standard for conduct.

Ethics

involves broader moral obligations, professional standards, social expectations, and principles of fairness.

-These expectations are not always written into statutes, but they shape whether customers, employees, investors, and communities view a business as trustworthy.

-therefore acts as a higher standard than law

The Four common business dilemmas

1. Taking things that don’t belong to you

2. Saying things you know are not true

3. Buying influence or engaging in a conflict of interest

4. taking unfair advantage

The Other Eight Ethical Categories

1. Giving or allowing false impressions: Advertising a “limited-time” price that is routinely offered

2. Hiding or divulging information: Hiding a product defect or forwarding private client data

3. Personal decadence: Substance misuse or reckless personal conduct that affects work

4. Interpersonal abuse: Publicly degrading a junior employee

5. Organizational abuse: A company knowingly exposing workers to unsafe conditions

6. Violating rules: Bypassing approval limits by splitting one purchase into several smaller ones

7. condoning unethical actions: A supervisor learns of falsified records and chooses not to report them

8. Balancing competing ethical obligations: Protecting client confidentiality while facing a credible public-safety threat

Moral Relativism

Right and wrong depend heavily on context

-Strength: Recognizes cultural and situational complexity

-Business Risk: Can become rationalization or eliminate firm standards

Ethical Absolutism

Some principles apply in every context

-Strength: Provides consistency and accountability

-Business Risk: May seem rigid when legitimate duties conflict

Veil of Ignorance (By John Rawls)

It asks people to design the rules of a fair society while completely blind to their own status, race, gender, wealth, or physical abilities within that future society. Because you might end up poor, sick, or marginalized, you naturally build a system that protects everyone fairly.

-“Would I agree to this rule if I didn’t know which role I would occupy?”

Rights Theory (Associated by Robert Nozick)

individuals have fundamental rights to life, liberty, property, and personal autonomy

-“Whose fundamental rights might this decision violate, and can that violation be justified?”

Virtue Ethics (Plato and Aristotle)

holds that ethical behavior flows from a person’s character. A trustworthy manager does not act honestly only because a policy or law requires it; honesty has become part of who that manager is. Over time, repeated choices develop habits, and those habits shape organizational culture.

-”What kind of person—and what kind of organization—should we become?”

Five Practical Ethical Decision

1. Drucker’s “Do No Harm” : “Will this action harm someone?”

2. Blanchard and Peale’s Three-Part Test ⚖: “Is it legal? Is it balanced? How does it feel?”

3. Buffett’s Front-Page Test 📰: “Would I be comfortable seeing this decision reported publicly for my family and community to read?”

4. Wall Street Journal C3 Model 📊: Compliance: Is it legal? Contribution: What does it contribute to the company and stakeholders? Consequences: What are the full effects?

5. Laura Nash’s 12-Question Model 🔍: Questions such as “Have I defined the problem accurately?”, “How would the other side define it?”, “Whom could this injure?”, and “What does this signal about our values?”

The 6-step Ethical Analysis

1. Gather All available Facts

2. Identify missing information and assumptions

3. List every stakeholder’s concerns

4. Develop a range of resolutions using ethical frameworks: Do not assume the only options are “do nothing” or “do everything.” Apply fairness, rights, virtue, and other relevant lenses to each option.

5. Evaluate each resolution for legality, cost, and impact

6. Make a recommendation

Divine Command Theory

ethical duties derive from God or from the authoritative teachings of a religious tradition: conduct is morally right when it follows those commands and morally wrong when it violates them.

Ethical Egoism

a person ought to act in their own rational self-interest.

-Which action best serves my interests when I think carefully about the consequences?

Ayn Rand: Self-interest is permissible and can be virtuous; individuals should pursue their own goals without guilt

Thomas Hobbes: Unconstrained self-interest creates conflict and chaos; laws are needed because order benefits everyone

Adam Smith: Rational, long-term self-interest differs from narrow selfishness

Utilitarianism

an action is judged primarily by its outcomes rather than by whether the action is inherently permitted or forbidden.

Kant’s Categorical Imperative

1. Universal law: Act only according to a principle—or maxim—that you could consistently will everyone to follow.

2. People as ends: Never treat people merely as means to your own goals. Employees, customers, suppliers, and investors are not simply tools for increasing revenue or protecting a bonus. Respecting them as ends means recognizing their ability to make informed choices and their inherent dignity

-Could the principle behind my action be accepted as a universal rule, and am I respecting every person’s dignity?