Business Ethics: Ethical Decision Making and Cases

Comprehensive practice flashcards reviewing key business ethics concepts, decision-making models, stakeholder relationships, sustainability legislation, emerging ethical dilemmas, and moral philosophies from Business Ethics: Ethical Decision Making and Cases, 14th Edition.

Stakeholders

Customers, shareholders, employees, suppliers, government agencies, communities, and others who have a 'stake' or claim in some aspect of a business's products, operations, markets, industry, and outcomes.

Primary Stakeholders

Individuals or groups whose continued association and resources are critical to a firm's survival, including employees, customers, shareholders, governments, and communities.

Secondary Stakeholders

Parties that do not typically engage directly in transactions with a company and are not essential to its survival, such as the media, trade associations, and special interest groups.

Interactions Between a Company and Its Primary and Secondary Stakeholders

A relational framework illustrating a company's direct ties with primary stakeholders (customers, employees, shareholders, suppliers, community, government regulatory agencies) and surrounding connections to secondary stakeholders (special interest groups, mass media, trade associations, competitors).

Stakeholder Orientation

The degree to which a firm understands and addresses stakeholder demands, comprising organization-wide data generation, distribution of that information, and organization-wide responsiveness.

Corporate Social Responsibility (CSR)

An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact across economic, legal, ethical, and philanthropic levels.

Steps of Social Responsibility

A hierarchical pyramid of corporate social responsibilities consisting of Economic (maximizing stakeholder wealth and/or value), Legal (abiding by all laws and government regulations), Ethical (following standards of acceptable behavior judged by stakeholders), and Philanthropic ('giving back' to society).

Corporate Citizenship

The extent to which businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by various stakeholders.

Corporate Governance

The development of formal systems of accountability, oversight, and control to prevent misconduct and structure ethics and social responsibility in business.

Accountability (in Corporate Governance)

Refers to how closely workplace decisions align with a firm's stated strategic direction and its ethical and legal considerations.

Oversight

A system of checks and balances that limit employees' and managers' opportunities to deviate from policies and strategies aimed at preventing unethical and illegal activities.

Control (in Corporate Governance)

The process of auditing and improving organizational decisions and actions.

Shareholder Model of Corporate Governance

A model founded in classic economic precepts focused on maximizing wealth for investors and owners, where managers serve as agents for shareholders.

Stakeholder Model of Corporate Governance

A broader view of business purpose that considers stakeholder welfare in tandem with corporate needs and interests.

Duty of Care

The legal obligation (also called duty of diligence) of an individual or organization to make informed and prudent decisions and avoid behavior that could cause harm to others.

Duty of Loyalty

The legal and ethical obligation of board members and corporate officers to make decisions that are in the best interests of the corporation and its stakeholders.

Interlocking Directorate

The concept of board members being linked to more than one company by concurrently serving on multiple corporate boards of directors.

Internal Equity

A method of evaluating executive compensation based on how executive pay is related to general employee pay within the same company.

External Equity

A method of evaluating executive compensation by comparing and basing executive pay on what CEOs at other peer companies are paid.

Sustainability

The potential for the long-term well-being of the natural environment, including all biological entities and mutually beneficial interactions among nature, individuals, organizations, and business strategies.

Sustainable Development

Meeting the needs of the present without compromising the ability of future generations to meet their own needs, with an emphasis on the natural environment.

Kyoto Protocol (1977)

An international treaty meant to curb global greenhouse gas emissions by having countries voluntarily reduce national outputs.

Paris Agreement (2015)

An international treaty requiring virtually all nations to curb greenhouse gas emissions, set emission-reduction targets, and provide funding from wealthier nations to poorer nations to deal with climate change effects.

Cap-and-Trade Program

A regulatory program that sets carbon emissions limits (caps) for businesses, countries, or individuals and allows trading of emissions allowances.

Acid Rain

A corrosive environmental compound formed when nitrous oxides and sulfur dioxides emitted from manufacturing facilities are exposed to air and rain.

Environmental Protection Agency (EPA)

The most influential federal regulatory agency in the United States tasked with protecting human health and the environment by enforcing environmental legislation.

Clean Air Act (1970)

A comprehensive U.S. federal law that regulates atmospheric emissions from stationary, mobile, and natural sources.

Endangered Species Act (1973)

A federal law establishing a program to protect threatened and endangered species as well as the natural habitats in which they live.

Toxic Substances Control Act (1976)

A federal law passed by Congress that empowers the EPA to track, screen, and regulate industrial chemicals.

Clean Water Act (1977)

A federal statute granting the EPA authority to establish effluent standards on an industry-by-industry basis to eliminate toxic pollutants in waterways.

Pollution Prevention Act (1990)

Legislation focusing on reducing pollution at the source through cost-effective operational changes, production adjustments, and raw materials choices.

Leadership in Energy and Environmental Design (LEED)

A green building certification program developed by the USGBC that recognizes sustainable, energy-efficient building strategies and practices.

Green Marketing

A strategic process involving stakeholder assessment to build meaningful, long-term customer relationships while maintaining, supporting, and enhancing the natural environment.

Greenwashing

The act of misleading consumers into believing that a good or service is more environmentally friendly or sustainable than it actually is.

ISO 14000

A comprehensive set of global environmental management standards developed by the International Organization for Standardization to help firms track and improve environmental performance.

Environmental, Social, and Governance (ESG)

A framework comprising environmental, social, and governance factors that businesses utilize to evaluate risks, establish organizational priorities, and report impacts to stakeholders.

Ethical Issue

A problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical.

Ethical Dilemma

A problem, situation, or opportunity requiring an individual, group, or organization to choose among several actions that all result in negative outcomes.

Collusion

A secret agreement between two or more parties entered into for a fraudulent, illegal, or deceitful purpose.

Integrity

An element of virtue referring to being whole, sound, and in an unimpaired condition; demonstrated through product quality, open communication, and transparency.

Honesty

A foundational value referring to truthfulness or trustworthiness in communications and actions.

Fairness

The quality of being just, equitable, and impartial, grounded in elements of equality, reciprocity, and optimization.

Abusive or Intimidating Behavior

A common workplace ethical problem encompassing physical threats, false accusations, profanity, insults, yelling, ignoring someone, or unreasonable demands.

Bullying

Repeated behavior in which an individual or group considered a target is threatened, harassed, belittled, verbally abused, or overly criticized, creating a hostile work environment.

Conflict of Interest

A situation occurring when an individual must choose whether to advance their personal interests, those of the organization, or those of another external group.

Bribery

The practice of offering something of value (often money) to gain an illicit or unfair advantage from someone in a position of authority.

Active Bribery

A form of corruption where the offense is committed by the person who promises or pays the bribe.

Passive Bribery

A form of corruption where the offense is committed by the official or authority figure who receives the bribe.

Facilitation Payments

Small payments made to induce public officials to perform routine duties they are already bound to execute, often to obtain or retain business advantages.

Corporate Intelligence

The systematic collection and analysis of information on markets, technologies, customers, competitors, and socioeconomic or political trends.

Social Engineering

A method of corporate espionage that involves tricking individuals into revealing passwords, credentials, or other proprietary information.

Whacking

A form of corporate espionage that utilizes wireless hacking methods to break into computer networks and intercept unencrypted data.

Hostile Work Environment

A workplace where unwelcome, severe, and pervasive offensive behavior directed at protected classes disrupts work activities and is deemed hostile by a reasonable person.

Dual Relationship

A personal, loving, or sexual relationship between individuals who simultaneously share professional responsibilities, creating ethical hazards.

Fraud

Any purposeful communication that deceives, manipulates, or conceals facts in order to harm others or achieve illicit gain.

Initial Detection of Occupational Frauds

A bar chart ranking fraud detection methods showing that tips are by far the most frequent source of discovery at $43\%$, followed by internal audit at $14\%$ and management review at $13\%$.

Puffery

Exaggerated advertising, boasting, and bluster upon which no reasonable buyer would rely when making purchasing decisions.

Chargeback Fraud

A type of consumer fraud involving disputing a legitimate purchase transaction with a bank or credit card company after already receiving the purchased goods.

Price Arbitrage

A fraudulent consumer behavior that involves swapping differently priced but similar merchandise to receive an illegitimate higher return value.

Wardrobing

A practice of consumer fraud where a customer purchases clothing or items, wears or uses them temporarily, and subsequently returns them for a full refund.

Insider Trading

The buying or selling of stocks or other corporate securities by individuals who possess material information that is not accessible to the public.

Crisis Management

The process of handling high-impact, ambiguous events requiring swift action to evaluate and mitigate organizational damage.

Framework for Understanding Ethical Decision Making in Business

A comprehensive conceptual model illustrating how ethical issue intensity, individual factors, organizational factors, and opportunity interact to shape business ethics evaluations and intentions, ultimately driving ethical or unethical behavior.

Ethical Awareness

The ability to perceive and identify whether a given situation or decision possesses an ethical dimension.

Ethical Issue Intensity

The perceived relevance or importance of an ethical event or decision in the eyes of an individual, workgroup, or organization.

Moral Intensity

An individual's perception of the social pressure surrounding a decision and the degree of harm they believe their action will inflict on others.

Locus of Control

An individual's generalized belief concerning how they are affected by internal versus external forces or events.

External Locus of Control

The cognitive orientation of individuals who believe that events and outcomes in their lives occur primarily due to uncontrollable external forces or luck.

Internal Locus of Control

The cognitive orientation of individuals who believe that they master and dictate life events through their own personal effort and skill.

Corporate Culture

A set of shared values, norms, artifacts, and problem-solving mechanisms shared by members and employees of an organization.

Ethical Culture

A dimension of corporate culture reflecting decision integrity shaped by leadership, organizational policies, coworker influence, and opportunity.

Significant Others

Peers, coworkers, superiors, and subordinates who exert direct daily influence on an individual's ethical choices and work tasks within a group.

Obedience to Authority

A psychological tendency for employees to follow and comply with directives from superiors based on their perceived legitimate organizational power.

Opportunity

The conditions within an organization that limit or permit ethical or unethical behavior by offering rewards or failing to erect barriers and controls.

Immediate Job Context

The environment where an individual works, the coworkers they interact with, and the specific nature of the work being performed.

Normative Approaches

Prescriptive frameworks that analyze how organizational decision makers should approach ethical issues, based on standards and institutional norms.

Institutional Theory

A perspective stating that organizations operate according to deep-rooted rules and norms established by broader social institutions such as government, education, and religion.

Veil of Ignorance

A philosophical thought experiment that asks individuals to design social rules and principles without knowing their future socioeconomic standing in society.

Equality Principle

A justice concept stating that every individual has equal basic rights and liberties compatible with the liberties of all other members of society.

Difference Principle

A justice concept stating that economic and social inequalities must be structured to provide the maximum possible benefit to the least-advantaged members of society.

Principles versus Values

A comparative framework contrasting principles (which are widely accepted, establish pervasive boundaries for behavior, and remain valued across cultures) with values (which are subjective, related to choice, differ across cultures and firms, and provide guidance to develop organizational norms).

Moral Philosophy

Specific principles or values that individuals use to determine what is right and wrong when resolving conflicts of interest.

Economic Value Orientation

A philosophy evaluating actions and ethics strictly through monetary values, proposing that an act is ethical if it yields more economic value than effort invested.

Idealism

A moral philosophy placing special value on ideas and ideals as mental constructs, attributing a higher order of existence to them.

Realism

The view that an external physical world exists independent of human perception, assuming that human beings are inherently self-centered and competitive.

Hedonism

The moral philosophy asserting that pleasure is the ultimate good and that ethical behavior produces the greatest balance of pleasure over pain.

Quantitative Hedonists

Philosophical thinkers who argue that experiencing more pleasure is inherently better, regardless of its type.

Qualitative Hedonists

Philosophical thinkers who argue that different qualities of pleasure exist and that an individual can experience too much of a good thing.

Pluralists

Moral philosophers (also termed nonhedonists) who reject monism and maintain that no single entity or outcome is intrinsically good.

Instrumentalists

Thinkers who reject the premise that moral ends can be separated from the means used to achieve them, denying that ends are intrinsically good in themselves.

Goodness Theories

Moral theories focusing on the final outcomes or results of actions and the aggregate goodness or happiness generated.

Obligation Theories

Moral theories emphasizing the means and motives by which actions are justified, subdivided into teleology and deontology.

Teleology

Moral philosophies that determine the ethicalness of an act by whether it produces an intended, desired consequence such as pleasure, utility, or wealth.

Consequentialism

A branch of teleological philosophies that evaluates the morality of actions based solely on their resulting consequences.

Egoism

A consequentialist philosophy defining right action strictly in terms of desirable consequences for the individual decision maker.

Enlightened Egoism

A philosophy that adopts a long-range outlook allowing for the well-being of others while maintaining personal self-interest as paramount.

Utilitarianism

A consequentialist philosophy that seeks the greatest good or utility for the greatest number of people.

Rule Utilitarians

Individuals who adhere to established rules and principles formulated to produce the greatest long-term utility for the majority.

Act Utilitarians

Individuals who assess each specific action independently to determine if that particular act will create the greatest utility for the greatest number.

Deontology

Nonconsequentialist moral philosophies focusing on individual rights and the motives/intentions of an action rather than on its consequences.