BLaw Chap 2 (Ethics & Morals)

Business roundtable committed to:

1. Delivering value to customers.

2. Investing in employees.

3. Dealing fairly and ethically with suppliers.

4. Supporting local communities.

5. Generating long-term value for shareholders.

Formalism

Definition: Approach to ethics that affirms an absolute morality. No gray area, an act in itself is right or wrong, always and in every situation.

• Ex: lying is wrong no matter what.

• To be ethical, you have to have a duty or moral obligation to not do wrong.

• Individuals have rights and said rights should not be violated even if it is for the sake of society as a whole.

• Must have ethical consistency (categorical imperative).

• Can not be selective when something (like lying) is right or wrong, lying is always wrong.

Social contract theory

Definition: Concerns itself with how to construct a just society given the many unfair and differences within society (wealth, knowledge, inequalities).

• Rawls suggested we assume we do not know our age, gender, race, intelligence, etc.

• Everyone is entitled to certain equal basic rights.

• Inequalities must be based on what a person does and not who they are as a person.

• Everyone must have equal opportunity for achievement. (equal place at the starting line).

Consequentialism

Definition: Concerns itself with the moral consequences of actions rather than with the morality of the actions themselves.

• Ex: lying itself is not unethical. The consequences or end results of lying are what is evaluated for their ethical implication. (loss of trust or harm that is done).

• Focuses on common good. (how does something affect society rather than the individual only).

• Utilitarianism = judges actions by usefulness (increase or decrease common good). The ends justified the means.

• Consider alternative courses of actions used for judgment.

• Values-based management = teaches ethical values to employees that enhance the profitability of the company. (ex: unethical to use company computers for personal things during work hours).

The protestant ethic

Emphasis on the importance of the individual?

• People had the means to address God personally instead of just through churches.

• Rooted in honesty and keeping promises.

• Comparison between Formalists and Consequentialists:

• A different evaluation process is used even when the results are the same.

• Ex: formalist thinks monitoring people’s productivity is wrong because it is violating employee’s privacy. Consequentialists think it's wrong because the consequence would be that the rest of the employees now know their privacy is being monitored and that would lower employees’ motivation when that could be prevented if another route was taken for the solution.

4 ethics values:

• Legal regulation

• Professional codes of ethics.

• Codes of ethics from business organizations.

• Individual values.

Morality vs Ethics

Morality = values of right or wrong.

Ethics = systematic statement of right and wrong together with a philosophical system that both justifies and necessitates rules of conduct. Formal system for deciding what is right and wrong and for justifying decisions that involve competing or conflicting values. (Look at the “why do we think this is right or wrong”).

Laws are the bare minimum acceptables in society while ethics are more and focus on things that laws may miss.

Shared moral values allow us to trust each other and improve business and business products. This could also make it hard for different moral value businesses to work with each other.

• Businesses must be sensitive to differences in moral values to be successful.

The government has rules and laws that force companies to be ethical and that consequences makes businesses self regulate with policies to be ethical.

Government can step in when businesses fail to make ethical decisions or fail to

Corporate leaders are not real owners of the corporations, shareholders are. Causes a problem where leaders could make decisions that benefit them and not the shareholders.

Increase interdependence (relying on each other/ others), promotes concerns about business ethics. Everyone needs to rely on other businesses or industries for something.

When one does not share common values with society, the entire business organization is affected.

Many ethical values are not enforced by the state (laws) and many laws do not address ethical concerns.

At least 4 sources of values for business ethics:

Legal regulation= laws

Professional codes of ethics = codes of ethics (pages of rules).

Organizational codes of ethics.

Individual values.

Legal regulation

Laws

• Society ethical values are often law and those laws often reflect what society values as ethical or not. Ex: no discrimination.

• Laws themselves can influence what society thinks as ethical.

• Ethical rules involve:

• Respect for the liberty and rights of others.

~ Ex: rights of privacy, equal employment opportunities, freedom of expression, and more.

• The importance of acting in good faith.

~ Ex: Honesty in intent and in fact. Be honest. Bad faith = dishonest.

• The importance of exercising due care/ due diligence.

~ Promotes the common good.

~ Give reasonable care

• The importance of honoring confidentiality.

• Avoidance of conflicts of interest.

~ Working for 2 companies (“for 2 masters”) whose interests conflict. 

~ Ex: someone working for companies who are competitors.

~ Ex: judges or administrative regulators can not make decisions when they have a relation to one side (being biased).

Professional codes of ethics

Codes of ethics (pages of rules).

Ex: American Institute of Certified Public Accountants Code of Professional Conduct.

Organizational codes of ethics.

• Organizations having their own ethical codes (codes of conduct).

• There is a general list of codes of conduct businesses should cover (page 23).

• Values of codes vary since some companies do not put any emphasis on their codes and only have them as a mask to satisfy the government and public.

Individual values.

• Others can tell you things but only you can make the decisions for yourself.

• 5 questions to ask oneself to help them make ethical decisions in both personal and business decisions.

• Have I thought about whether the action I may take is right or wrong?

• Will I be proud to tell my actions to family, employer, news media, etc.?

• Am I willing for everyone to act as I am thinking of acting? (is it okay for others to act the same way as I am acting).

• Will my decision cause harm to others or the environment?

• Will my actions violate the law?

Companies have different ways of going about their codes of conduct (some short, some long, etc, etc).

Obstacles of being ethical:

• Emphasis on profit

• The effect of the group

• Control of resources by nonowners.

Emphasis on profit

The main goal of organizations is to make a profit.

The effect of the group

• When people are in a group, they feel less responsible for what happens v.s if it were in their individual lives.

• People may act differently in an ethical sense when it's individual v.s groups.

• People are more likely to do unethical things when in groups.

Control of resources by nonowners.

• Owners or stockholders do not do the day to day things that ensure the company is operating ethically.

• Managers are the ones who do things that would determine if the business is operating ethically or not and managers can operate in a way that benefits them instead of the leaders.

Steps taken to promote business ethics in corporate life:

• Involvement of top management.

• Openness in communication.

• Consideration of all stakeholders.

Involvement of top management.

• Top management acting as role models and following the codes of conduct.

• Top management’s values filter down quite effectively to lower-level employees.

Openness in communication.

• Corporate employees must be willing to talk with each other about ethical issues.

• Deemed a fundamental.

• Helps evaluate the ethical implications on decisions being made (sharing information).

• Consideration of all stakeholders.

• Stakeholder theory = business must take into consideration not only making profit but also how the decisions will impact the business and all of its stakeholders.

• Consider concerns of all proper stakeholders.

• Allows stakeholders to communicate with decision makers.

• Adopts communication methods.

• Realize the interdependence of all stakeholders and demonstrate fairness towards all stakeholders.

• Work actively and cooperatively to reduce the risk of corporate harm to all stakeholders and to compensate them when harm occurs.

• Avoids risks to stakeholders which, if explained, would be clearly unacceptable.

• Acknowledges the potential conflict between managerial self-interest and the ethical responsibility of managers to other stakeholders.

The rewards:

• Profits and business ethics are not contradictory. Some of the most profitable businesses have also been the most ethical.

• Unethical behavior is a business liability. Ethical behavior is an asset.

• Ongoing reevaluation. Businesses need to be ethically adaptable.

• Business ethics reflect business leadership.

Businesses have the right to express their political and other standpoints (freedom of speech)