MGMT 320 Quiz 3

Ethics

A conception of right and wrong conduct. It tells us whether our behavior is moral or immoral and deals with fundamental human relationships - how we think and behave toward others and how we want them to think and behave towards us.

-generally stand alone things

Ethical principles

Guides to moral behavior. In most societies an example is lying, stealing, deceiving, and harming others are considered to be unethical and immoral. Honesty, keeping promises, helping others, and respecting the rights of others are considered to be ethically and morally desirable behavior.

Ethics in relation to religion and core values

-Religious beliefs are a major source of ethical guidance for many.

-The core ethical beliefs that acts as a moral compass that helps guide a person when ethical puzzles arise

Ethical relativism

idea that there are no fixed, static ethical rules, but that ethics rules depend upon the time, place and circumstances.

-Meaning given to ethics would be relative to time, place, circumstance, and the person involved

-Logical conclusion would be that there would be no universal ethical standards on which people around the globe can agree on

ex. "what happens in Vegas stays in Vegas" consequence could be that by not being aware of the practices being done in foreign countries by your company there could be some really unethical/illegal things occurring ex. Nike having pakistinian boys stitch soccer balls for very little money and for super long hours

Laws

Are society's formal written rules about what constitutes right and wrong conduct in various spheres of life. ex. Hydraulic fracturing in oil drilling operations is legal in many communities but some argue it is unethical due to its potential for destroying the environment.

How are laws similar to ethics?

both define proper and improper behavior. Yet ethical concepts like the people who believe in them are more complex than written rules of law. Ethics deal with human dilemmas that frequently go beyond the formal language of law and the meanings given to legal rules.

Business ethics

The application of general ethical ideas to business behavior. It is not a special set of ethical ideas different from ethics in general and applicable only to business.

-application of existing rules to specific settings

-focuses on what constitutes right and wrong behavior in the business world

Why should business be ethical?

-To enhance business performance: there is a positive link to being perceived as an ethical company (good reputation)

-To comply with legal requirements: encourage internal compliance and that companies take prophylactic steps to prevent problems from occurring

-To prevent or minimize harm

-To meet demands of business stakeholders: customers who prefer to buy from ethical firms (and vice a versa)

-To promote personal morality: an ethical company aligns with individuals' desires to act ethically

-How do you value of "trust"

U.S. Corporate Sentencing Guidelines

Provide a strong incentive for businesses to promote ethics at work. They come into play when a firm has been found guilty of criminal wrongdoing and is facing sentencing for the criminal act.

The judge computes a culpability (degree of blame) score using these guidelines. Has the company:

1. Established standards and procedures to reduce criminal conduct

2. Assigned high-level officer(s) responsibility for compliance

3. Not assigned discretionary authority to "risky" individuals

4. Effectively communicated standards and procedures through training

5. Taken reasonable steps to ensure compliance - monitor and audit systems, maintain and publicize reporting system

6. Enforced standards and procedures through disciplinary mechanisms

7. Following detection of offense, responded appropriately and prevented occurrence

Sarbanes-Oxley Act of 2002

Law seeks to ensure that firms maintain high ethical standards in how they conduct and monitor business operations. This act requires executives to vouch for the accuracy of a firm's financial reports and do clawbacks

Clawbacks

equires them to pay back bonuses based on earnings that are later proved fraudulent

What is one of the strongest ethical principles?

Do not harm

Most common types of misconduct reported included:

-Misconduct reported included misuse of confidential information

-Giving or accepting bribes or kickbacks

-Stealing company property

-Sexual harassment

Ethical egoist

A manager or employee who puts his or her own self-interest above all other considerations. Traits associated with an ethical egoist are self-promotion, a focus on self-interest to the point of selfishness, and greed. They tend to ignore ethical principles accepted by others since they believe those rules are made for others. "Looking out for number 1"

Altruism

Acting for the self benefit of others when self-interest is sacrificed is seen to be sentimental or even irrational

Conflict of interest

Occurs when an individual's self-interest conflicts with acting in the best interest of another; when the individual has an obligation to do so

who are the key to whether a company and its employees will act ethically or not

Managers, the values held by top managers especially high level managers serve as models for others who work at the company

Spirituality

A personal belief in a supreme being, religious organization, or the power of nature or some other external, life-guiding force has always been a part of the human makeup.

Generally accepted values

do no harm, be compassionate, fair, and just, and honest, respect others, do your duty/act responsibly

Virtue ethics

Focuses on character traits that a good person should possess, theorizing that moral values will direct the person toward good behavior. (coined by ancient greeks, Plato and Aristotle)

-Scholars posit that virtue ethics emphasizes how a person lives

Utilitarian reasoning

Referred to as cost-benefit analysis because it compares the costs and benefits of a decision, a policy, or an action. They can be economic (dollar amount), social (effects on society at large), or human (usually a psychological or emotional impact)

-used widely by business

-best outcome for the most amount of people

Human rights

Means that a person or group is entitled to something or is entitled to be treated in a certain way. Most basic rights are life, safety, free speech, freedom, being informed, due process, and property. Unethical to deny people of these rights.

Justice

Is it fair or just? Exists when benefits and burdens are distributed equitably and according to some accepted rule.

The reason you can't always be sure if something is ethical or not is because:

1. May honestly and genuinely use different sources of information

2. May rely on different values or definitions of what is a virtuous character

3. May measure costs and benefits differently

4. May not share the same meaning of justice

5. May rank various rights in different ways

Moral intensity

Refers to a person's perception of how morally severe an ethical issue is. Generally issues that have high moral intensity evoke greater ethical attention and consideration from the decision maker than issues with low moral intensity.

Several factors contribute to the moral intensity of an issue

1. Magnitude of consequences

2. Proximity

3. Social consensus

4. Probability

5. Temporal immediacy

Magnitude of consequences

Life or death situations have a higher moral intensity than a minor economic harm

Proximity

how close the decision maker feels to the affected people

Social consensus

the degree of social agreement that is a proposed act is either acceptable or unacceptable. ex. Sexual harrassment is widely seen as unacceptable

probability

That a decision maker's action will lead to the consequences predicted

Temporal immediacy

length of time that the predicted consequences will occur from the present moment of the decision (immediate consequences = higher moral intensity and vice a versa)

who is typically responsible for managing the firm's assets and raising capital?

the finance department

what does marketing ethics include?

deceptive advertising, firm liability for consumer injury, and a firm's responsibility for the unethical use of products by buyers

-american marketing association (AMA) code advocates professional conduct guided by ethics

what are some ethical challenges in the field of information technology?

include invasions of privacy, the collection and storage of, and access to, personal and business information, especially through e-commerce transactions; confidentiality of electronic mail communication; copyright protection regarding software, music, and intellectual property; cyberbullying

What are the steps companies can take to build ethical safeguards?

1. Ethics Reporting Mechanisms

2. Ethics Training Programs

3. Top Management Commitment

4. Ethical policies or codes

5. Compliance offers

Ethics Reporting Mechanisms

Call a "helpline" or send an email expressing their concerns, anonymously if they wish.

what are the 3 issues ethics reporting systems tend to have?

1. To provide interpretations of proper ethical behavior involving conflicts of interest and the appropriateness of gift giving

2. To create an avenue to make known to the proper authorities allegations of unethical conduct

3. To give employees and other corporate stakeholders a way to discover general information about a wide range of work-related topics

Who tends to use the helpline the most?

executives

Who is less likely to use the helpline?

middle managers

where is usage of the helpline lower?

in foreign-owned companies

what is the key to success with the helpline

technology

who promotes and spreads compliance and ethics messages throughout the organization?

ethical ambassadors/liasons

employee ethics training

Generally the most expensive and time-consuming element of an ethics program.

-In general larger and more mature organizations are more inclined to believe that a culture of ethics encourages employees to speak up; whereas small-and medium-size organizations are more likely to define training as an alignment with regulatory guidelines.

-These trainings focus on making sure employees know what the law requires and the company expects

-"Giving voice to values"

Bribery

A questionable or unjust payment often to a government official to ensure or facilitate a business transaction.

-Has significant economic, as well as ethical consequences

what is an example of the harmful effects of bribery

Rolls-Royce, the luxury automobile, jet and marine engine manufacturer, settled a long-term corruption investigation by agreeing to pay U.S. and British government authorities more than $800 million in penalties. The company admitted in 2017 to engaging in corrupt business dealings overseas years earlier.

U.S. Foreign Corrupt Practices Act (FCPA)

Prohibits executives of U.S. based companies or businesses operating in the U.S. from paying bribes to government officials, political parties, or political candidates.

United Kingdom's Bribery Act

-Prohibits the bribery of another person and receiving or accepting a bribe, whereas the FCPA only prohibits bribery of government officials. Bribery of a private business executive would be illegal under British, but not U.S. anti corruption law.

-Does not require that the improper offer, promise, or payment be made "corruptly" as the FCPA does require evidence of the intent to corrupt.

-Does not provide exemptions for "facilitating payments" or the defense that there are reasonable and bona fide contractual or promotional expenses, as the FCPA does.

-Contains a strict liability offense for failure to prevent bribery by commercial organizations; the FCPA does not

Equifax Data Breach Discussion Case

The failure of Equifax's internal reporting and control measures led to a widespread violation of peoples' rights to the privacy of their personal information and became a huge public relations crisis for the company.

Blames the issue on passive complicity: implies that executives were guilty of wrongdoing by not actively preventing it

Insider Trading

Occurs when a person gains access to confidential information about a company's financial condition and then uses that information, before it becomes public knowledge, to buy or sell the company's stock. (regulated by the SEC)

-Illegal to trade stock (or stock options) based on material, nonpublic information

-The tipper can also be found guilty

-Best known kind of insider trading occurs when people improperly acquire confidential information about forthcoming mergers and acquisitions before these are announced to the public

Front-running

Traders place buy and sell orders for stock in advance of the moves of big institutional investors.

Who protects investors against fraud?

SEC

Upper Big Branch Mine Disaster

-Massey had a reward based program which allowed workers to gain more money for good work

-Annual checks of the mine were required but MSHS (the ones inspecting) had little authority to shut down the mine if there were serious problems

-The unionization of the mining industry had also given workers a greater voice and the right to elect safety representatives in many workplaces

-Safety was not a primary concern at Upper Big Branch Mine and many miners testified that they were intimidated or disciplined if they complained about safety

-Also had a system in place to alert if an inspector was coming which is against the law

-They also began to contest penalties and fines rather than just paying them

-In short a series of interrelated safety violations had combined to produce a preventable tragedy. United Mine Workers called the disaster "industrial homicide" and called for criminal prosecution

what were the problems cited in the Upper Big Branch Mine investigation?

-Rock dust (too much caused a build up and in the air which fueled the explosion)

-Ventilation: didn't have sufficient ventilation to provide miners with fresh, breathable air, and to remove coal dust as well as methane (allowed methane to build up near the longwall shearer providing fuel for the initial fireball)

-Equipment Maintenance: water sprays along the wall weren't functioning properly and as a result were unable to extinguish the initial spark

why were people doping who were participating in the Tour du France

self-interest overwhelmed ethics

theory of amorality

the belief that business should be conducted without reference to the full range or ethical standards, restraints and ideals in society

conventionist ethic

business is a game, where special, lower ethics are permissible

ex. teen doing jello shots since their parents said don't drink any alcohol and jello isn't a liquid

-if businesses follow this, they are free to act in their best interest, even in morally questionable ways, provided they don't violate the law

what is the story of backpage.com

-was a platform for prostitution

-used to be a lucrative business about how section 230 works

-230 means that companies like Facebook can't get in trouble for what 3rd party people say on the platform

-this incident was not what section 230 intended

Theory of Moral Unity

holds that businesses should be judged by the same moral/ethical considerations that apply throughout society

-same ethics for work and society

what consequences does having poor ethics cause?

the financial costs of repetitional damage often exceeds the financial costs of fines

ex. volkswagen total costs exceeded 35 billion and the company is no longer on the list of the most admired companies

what state requires compliance plans?

deleware

are there added frictions (that increase costs) when the counterparts is untrustworthy? explain

going to charge a higher premium if I don't trust the business and their reputation will be damaged

-lack of trust affects business

what is Ronald Reagans mantra

"trust but verify"

-verification is never free

Kohlberg's 6 stages of development (psychology)

1. To avoid punishment (around kids aged 3-8)

2. To satisfy self-centered needs and elicit a positive external response (around kids aged 3-8)

3. To conform to the group interest to please others in the group (teens/young people)

4. To accept legal restrictions as being in the best interest of society (elders)

5. To accept legal restrictions balanced with individual rights as being in the best interests of society and the individual (middle aged)

6. To find satisfaction in being ethical and moral for personal reasons (later years)

what level of kohlberg stages should we want to operate within?

4th, 5th, and 6th

Pre-conventional Kohlberg stages

1st and 2nd level

Conventional Kohlberg stages

3rd and 4th level

Post conventional Kohlberg stages

5th and 6th level

Why do ethical problems occur in business?

1. personal gain and selfish interest

2. competitive pressure

3. conflicts of interest

4. cross-cultural contradictions

5. rationalization

culture

how we do things around here, plays a significant role in whether people act ethically/morally

ex. handicapped parking (would you park there)

corruption in relation to ethics

depending on the corruption level in a country was related to how likely you are to break the rules when it came to parking illegally (more corrupt nations = more illegal parking)

-cultural or social norms related to corruption are apparently deeply ingrained, and factors other than legal enforcement are important determinants of corruption behavior

2 dangers with pressure

1. the first group of people are crossing lines

2. the second group of people see the first group, and think they have to cross the lines, too, to keep up (rationalization unethical conduct by using the first group as their benchmark, or norm, rather than looking to the standard)

personal gain and selfish interest

people act in their own self-interests, sometimes at the expense of other entities that they owe a greater legal or ethical obligation

-greed compromises our ethics

-"my own narrow ambitions" = the pursuit of money

competitive pressure

when companies are squeezed for profits (or simply want) they sometimes engage in unethical behavior

-ex. when first world businesses subcontract with companies in developing economies, and the sub-contractors knowingly hire children and have them work in unsafe conditions and for too many hours

conflicts of interest

exist whenever a person or organization is incentivized (by personal, or organizational self-interest) in a way that compromises that person's or organization's loyalty or objectivity in relation to another party

ex. asking a waiter what they recommend on the menu and they might end up suggesting something super expensive or something that would help them get a bonus from their manager

ex. meeting with a finance person to get a loan, they want to sell a loan because they get to keep the difference on the higher interest rates (financial compensation)

cross-cultural contradictions

frequently, businesspeople, companies and corporations are unaware of cultural norms - and laws - in foreign countries, and this can lead to unethical conduct

-when businesses are operating abroad - core cultural differences between multinational businesses, and host countries, may make doing business difficult, and lead to ethical issues

rationalization

ethical failures can also be "justified" rationalization

ex. if I cheat in a class where there is no curve nobody will be hurt an day grade will be higher

-the ends justify the means

The UW test

multiple discrete steps are required to resolve ethical problems

steps of the UW test

1. identify the important facts and ethical issue e.g "what is going on here"

2. who are the key stakeholders and how ill they be affected? how do things subjectively appear from their perspectives

3. what are the utilitarian trade-offs among the affected parties e.g. who are the winners and losers

4. articulate how different moral principles apply, and recognize how various justice/fairness models might yield different results (the model you choose may result in a different result (use multiple models)

5. Recognizes and articulates personal biases that can influence your evaluation (conflicts of interest)

2 ways models can be classified

1. duty based (deontological)

2. result oriented (consequentialist)

duty based

rules are set up and exist prior to the ethical issue arising: the pre-existing rules guide you to determine what is ethical, not the consequence but the approach example: I won't kill or steal anything, Ten Commandments are the most well known example as well as the golden rule

result oriented/consequentialism

has a number of permutations but all essentially look to the results in determining what is ethical (how things end up (is the result appropriate))

-don't care about the route, but instead the result of the choice

-utilitarianism (finding the course of action that provides the greatest good to the greatest number of people)

strategic defaults

walking away from something/take a hit rather than dealing with the consequence/situation

-justify/rationalize it, ethical egoists do this and ownership theory of the firm comes into play (firms maximize shareholder value, but shareholders hold stakes in competitors)

ex. walking away from a building that you can pay a mortgage on but don't want to since the property is devaluing

what is the ethics model of strategic defaults

virtue ethics/values based (integrity)

Golden Rule

Immanuel Kant took the golden rule and combined elements of consequentialism

-should only go the direction you are comfortable in and you are ok that everyone else does this act and the causes the consequences associated

categorical imperative

a person should not act unless he or she is willing to have the rule or conduct on which one acts become universal law

THIS IS THE DUTY BASED PART OF THE RULE

-the rational person will consider the consequences of their act being universalized and then act accordingly based on how society would be affected

-CONSEQUENTIALIST PART

-requires people to make some utilitarianism decisions

what would Imanuel Kant think of the teenager and jello shots?

he would not like it since it does hold true to the idea of the promise

7 signs of virtue ethics we should benefit from

1. Honesty/Truthfulness

2. Generosity&Charity

3. Humility/Modesty

4. Justice (knowing what is right)

5. Prudence (being cautious, careful)

6. Courage (ability to stand up for what you know is right, rather than fold under pressure)

7. Trust (honoring ones word)

How do Jeremy Bentham and John Stuart Mill feel about utilitarianism

bothered by it, they both contributed to the idea that utilitarianism is that the right thing to do is what gives the greatest number the greatest good

Problems with CBA (cost benefit analysis)

hard to place value on the consequences or virtues

ex. what price would you put on the typical American life, would you place a different value on someone abroad

what was the ford pinto case? (relates to CBA)

ford pintos poor car design caused a lot of deaths and instead of choosing to recall and fix the problem they decided the lawsuits for death and injury were overall cheaper than fixing the cars and this choice destroyed their reputation

-they chose to prioritize owner stakeholders

what do both business AND government use to make decisions

utilitarianism

how would a utilitarian argue that smoking even taking into consideration the significant health risks associated with it makes sense and ought to be regulated

argued that you are going to save more money as a government die early and you won't have to pay social security/medicare so they should keep people smoking

Utilitarianism is what?

OUTCOME DETERMINATIVE (in contrast to procedural justice, for instance, which does not really care what the outcome is, provided that the procedures that got you there were fair)

what are some of the shortcomings of utilitarianism

hard to factor in things like liberty and freedom since its hard to put a price on these things

-hard to know ahead of time what the actual consequences of a decision will be

-utilitarianism could justify violation of basic human rights in the service of the greater good

ex. Pearl Harbor bombing and sending the Japanese to internment camps

or the Paris terrorist attack

what does CBA often require managers to do

make decisions about short term vs. long-term ramifications of their decisions

what does CBA require the business person to do

asses how various stakeholders (with competing interests) might be affected by a decision the business takes