Business Legal Ch. 3

Ethics

study of right and wrong behavior 

a. Morality 

B. fairness 

c. How a person should conduct himself in life

Business ethics

Is right or wrong behavior in business

a. How Businesspersons apply moral and ethical principles in making business decisions

Profit Maximization vs. Corporate Citizenship

(Business Ethics) 

1. Do corporations have a social responsibility? 

a. Outsourcing jobs 

b. Tax loopholes 

c. Health insurance for employees 

d. Living wage 

Profits vs. Impact on people- impact on the world (TBLine) 

Short Line

( business ethics) 

a. Short term increase in profits
1. High pressure
2. Unethical sales tactics
3. Product recalls (defective products)
4. Resulting in lawsuits and bad publicity

Profits vs. Impact on people- impact on the world (TBLine) 

Long Term Profits

(Business ethics)

1. Positive consumer reports
2. Better recruitment
3. Employee motivation
4. Improve brand awareness and corporate image

Law and Ethics

1. Law is not sufficient to determine “right” behavior
2. Law is not always clear and can be uncertain
3. Law cannot make into law all ethical requirements

Morale Minimum

a. Comply with the law-lowest ethical behavior
b. Never break law even if requested by employer
c. An action that is legal is not necessarily ethical
ie. Force litigation (Expensive and discourages claims)

Setting the ethical Tone

1. Managers must set standards-commit to ethical conduct
2. Managers must comply with those standards
3. Apply those standards to employees-Not look the other way
4. Create an ethical code
5. Communicate code to employees
6. Set realistic production goals
7. Sarbanes Oxley Act

Sarbanes Oxley Act

a. Requires companies to set up confidential employee reporting
systems about illegal or unethical business practices:
1. Accounting practices
2. Auditing practices

Ethical Reasoning

A reasoning process examining a situation in light of an individual’s convictions or ethical standards

Ethical Reasoning 

1. How to determine if a business decision is right or wrong 

2. What ethical standards should be applied to a business decision 

Duty Based ethics

Ethical behavior defined in terms of DUTY to others because people have certain rights- every person has duties regarding conduct to others

What obligations do corporations have to society and its customers?

1. Corporate Policy evaluated by Religious based ethics

2. Principle of Rights Based ethics

3. Kantian Ethics

4. Utilitarian or outcome- Based ethics 

Religious Based Ethics 

a. Corps treat others by its religious convictions
b. Most religions have principles on how to treat others
b. Can be problematic-when owners/suppliers/customers/
employees have different religions
c. Are generally absolute moral principles

Principle of Rights Based Ethics

a. How does the business affect the rights of others
b. There must be a corresponding right affected by the business
decision (Life, Freedom, Happiness)
c. People have certain basic rights and if conflict with decision
which right or interest is strongest
d. Strongest right prevails in decision making when there is a
conflict

Kantian Ethics

Ethical standards derived Solely from Philosophical Reasoning

a. People are different from other physical objects
b. People are rational, moral, capacity to reason
c. Therefore they should be treated differently
d. Kant Imperative- individuals should evaluate their actions

in light of the consequences that would follow if everyone
acted the same way (Cheating on an exam/Not polluting)

Utilitarian or Outcome- Based Ethics

a. The greatest good for the greatest number
b. An action is morally correct when it produces the greatest
good for the greatest number-Consequences of the action/Cost
benefit analysis
c. Outcome oriented/if it affects the majority adversely-Immoral
d. Focuses on the consequences of the action not on the nature
of the action itself
e. Maximize benefits and minimize harms
f. Can be problematic (May not seem to be the most ethical)

Corporate Social Responsibility 

1. Corporations commit to good citizenship, improving society,
making ethical decisions, and minimizing environmental impact
2. Corporations should act ethically and be accountable to society
3. How and to whom should corporations be responsible
4. Maximizing profits acts in shareholders interest only
5. Business has a responsibility to use wealth and power in
Socially beneficial ways
6. Are there other interests besides shareholders interests to be
considered by corporations before making business decisions
Environmental Issues
Ethical labor practices
Charitable donations
Volunteer work

Stakeholders

1. Others to which corporations owe a duty when making
business decisions- Competing interests
a. Employees
b. Customers

c. supplies

d. Communities

e. Advocacy Groups (Environmental/ Animal)