mgt high yield

Business ethics

Ethical standards applied to business conduct.

Code of ethics

Company rules for ethical conduct and boundaries.

Business model

How a company creates, delivers, and captures value.

Business case

Why a project is justified by costs, benefits, and risks.

Value proposition

Customer benefit explaining why to choose this product.

Competitive advantage

An edge that helps a firm outperform competitors.

Business model: WHY

Value proposition and problem being solved.

Business model: WHO

Target customers and market.

Product life cycle

Raw materials through making, use, and end of life.

Maslow's hierarchy (bottom to top)

Physiological, safety, belonging, esteem, self-actualization.

Morals

Personal beliefs about right and wrong.

Ethics

Applying moral principles to real-world behavior.

Ethical dilemma

Two moral values clash; either choice sacrifices one.

Virtue ethics

Judges character and virtues over outcomes.

Deontology

Follows moral duties regardless of results.

Utilitarianism

Maximizes happiness for the greatest number.

Law versus ethics

Law is a minimum; legal acts can be unethical.

Legal test

Does the action follow the law?

Stench test

Does the action feel ethically wrong?

Front-page test

Would you want this decision publicly reported?

Mom test

Would your family respect this decision?

Seven-step framework: step 1

Identify the conflicting ethical values.

Seven-step framework: step 2

Gather objective facts without judging.

Seven-step framework (order)

Dilemma, facts, stakeholders, options, evaluate, act, reflect.

Behavioral ethics

Why people actually make ethical or unethical choices.

Confirmation bias

Favoring evidence that supports existing beliefs.

Constructive ethical concern

Link facts to shared goals, values, and risks.

Rationalization

Justifying wrongdoing as acceptable or necessary.

Retaliation

Punishment for raising an ethical concern.

Escalation: first contact

Ask questions of the person involved.

Escalation: second contact

Tell your own supervisor.

Escalation: third contact

Go to HR or an ethics hotline.

White-collar crime: yearly losses

$300 billion–$1 trillion (lecture estimate).

Street crime: yearly losses

$15–20 billion (lecture estimate).

White-collar crime triangle

Motivation, rationalization, opportunity.

Psychological distance

Weakens a criminal's connection to victims.

Cheating: distance from cash (Ariely)

Greater distance increased cheating.

Cheating: moral reminders (Ariely)

Reminders reduced dishonest behavior.

Cheating: self-image balance

People cheat a little while feeling honest.

Corporate social responsibility (CSR)

Managing social and environmental impacts alongside business goals.

CSR: five common attributes

Economic, social, environmental, stakeholder, voluntary.

Stakeholder

Anyone affected by an organization's actions.

Shareholder primacy

Prioritize owner profits within fair competition rules.

Stakeholder-centric approach

Serve employees, customers, suppliers, communities, and owners.

Milton Friedman (1970)

Advocated shareholder primacy.

Business Roundtable (2019)

Promoted stakeholder-centered corporate purpose.

Triple bottom line

People, planet, profit.

Licandro's CSR approach

Minimize negative externalities; create positive ones.

ISO 26000

Guidance on organizational social responsibility.

ESG

Environmental, social, governance.

SASB standards

Disclose sustainability risks relevant to business finances.

Partnership

Two or more owners; unincorporated business.

Limited liability company (LLC)

Separate entity with liability protection and pass-through tax options.

Corporation

State-created legal entity separate from its owners.

Legal personality

Entity can own property, contract, sue, and be sued.

Limited liability

Owners risk their investment, not ordinary corporate debts.

Liquidity

Owners can sell shares to access cash.

Centralized management

Owners delegate operations to managers and directors.

Multiple equity classes (lecture table)

Corporations only among the four forms compared.

Four corporate advantages

Legal personality, limited liability, liquidity, centralized management.

Governance hierarchy

Shareholders → board → management.

Board of directors

Oversees executives, strategy, and governance.

Management

Runs daily operations and executes strategy.

Agency costs

Costs of monitoring and incentivizing agents acting for owners.

Direct agency costs

Executive pay, performance incentives, and audit fees.

Indirect agency costs

Conflicts, inefficiencies, and lost opportunities.

Corporate governance

Policies and oversight to control agency costs.

Duty of loyalty

Act in good faith for the corporation and stockholders.

Duty of care

Use the judgment of a reasonably prudent person.

Business Judgment Rule

Protects informed, loyal, good-faith business decisions.

Business Judgment Rule: burden

Plaintiff must show breach of fiduciary duty.

Bad outcome under Business Judgment Rule

Loss alone does not prove a board breach.

Externality

Third-party cost or benefit from an economic activity.

Negative externality

Cost imposed on others outside a transaction.

Positive externality

Benefit given to others outside a transaction.

Externalizing costs

Shifting business-caused costs to third parties.

Social cost

Private cost plus external cost.

Social benefit

Private benefit plus external benefit.

Net social benefit

Social benefits minus social costs.

Net social benefit (formula)

(Private + external benefits) − (private + external costs).

CSR link to externalities

Reduce negative impacts; encourage positive benefits.

Life cycle assessment (LCA)

Measures environmental impacts across an entire life cycle.

Life cycle inventory (LCI)

Measure and record all relevant inputs and outputs.

Life cycle impact assessment (LCIA)

Translate inventory quantities into environmental effects.

Four LCA phases

Goal/scope, inventory, impact assessment, interpretation.

ISO 14040

Principles and framework for life cycle assessments.

ISO 14044

Requirements and guidelines for life cycle assessments.

Linear model

Take, make, use, dispose; cradle-to-grave.

Circular model

Reuse or recycle resources; cradle-to-cradle.

Hotspot

Life-cycle stage causing substantial environmental impact.

PIL case-study environmental savings

Digital had 89–98% fewer impacts.

PIL case-study climate difference

Paper had about 20× digital's impact.

PIL case-study recommendation

Use digital; otherwise smaller/recycled paper.