Legal Environment of Business - Chapter 2

Law

how people must behave

Ethics

how people should behave

Milton Friedman

economist who argued that a corporate manager's primary responsibility is the shareholders

Ethical Balance

1. Makes people happier: having good relationships with family and friends creates long-term happiness

2. Financial benefits: people want to shop at places with the same values as they do.

3. Unethical behavior causes financial harm: companies caught in illegal activities suffer overall.

Utilitarian Ethics

John Stuart Mill

- To him, a correct decision is one that maximizes overall happiness and minimizes overall pain, thereby producing net benefit.

- cannot be measured

- Focus on outcome can justify some really terrible behavior.

Deontological Ethics

Obligation- Emmanual Kant

- Results of a decision are not as important as the reason behind it. It is always important to do the right thing, no matter the result.

Categorial Imperative

An act is only ethical if it would be accepted for everyone to do it.

Rawlsian Justice

John Rawls

- everyone has different Life Prospects: circumstances into which we are born.

Veil of Ignorance

rules of society that we would propose if we did not know how lucky we would be in life

- John rawls

Different Principle

Pay based on how much good you do. The unfortunate should have just as much opportunities as the wealthy.

Front Page Test

if you do something and knew it would be public would you do it?

Moral Relativism

Is it right to be tolerant of different views and customs.

Cultural: right or wrong depends on the norms of society

Individual: people must develop their own ethics rules.

Moral Universalism

Some acts are always right or always wrong

Ethic traps - Money

Money can lure people in to making unethical decisions

Ethic traps- compeitition

people compete to be better than one another

rationalization

convincing oneself that the unethical decision is valid

- slippery slope: "just this once"

- triviality: a little cheating does not even count as cheating

Optimism Bias

the outcome of an event will be better than the evidence warrants

Moral Licensing

After doing something ethical, many people have a tendency to act unethically.

Conflict of Interest

When a person goes after personal interests to perform unethically.

Conformity

"Everybody else is doing it"

Follow the Leader

Following Orders

someone of authority orders you to perform unethical behavior

Lost in the crowd

In a group of people it is easy to sit back and hope someone else will. If bystanders aren't doing anything then why should i?

Short- Term Perspective

Many people make bad decisions because they are only thinking of short-term benefits.

Blind Spots

We have a tendency to ignore blatant evidence that we would rather not know.

Avoiding Ethic traps

1. Slow down

2. Do not trust your first instinct

3. Remember your life principles

Kantian evasion

a truthful statement that is nonetheless misleading.

ex. Bill Clinton smoking weed

Reacting to Unethical Behavior

1. Loyalty: stick with the company

2. Exit: leave

3. Voice: bring up the issue

Corporate Social Responsibility

obligation to contribute positively to the world around it.

Environmental, Social, and Governance issues (ESG)

issue with the climate, change, waste management, workforce diversityity, pay equity etc.