Ethics & Social Responsibility

Fundamentals of Ethics and Morality

Definition of Ethics: Ethics is defined as a specific branch of philosophy that pertains to morals, moral principles, and moral judgments. It is characterized as the comprehensive study of what constitutes right versus wrong behavior.
Definition of Morality: Morality refers to the quality of being virtuous or the practice of right conduct.
The Concept of Business Ethics:
    * The principle is established that just because an action is legal, it does not necessarily mean the action is ethical.
    * The importance of business ethics is emphasized because unethical corporate decision-making has the potential to result in widespread negative impacts across society.
    * Specific examples of ethical issues arise frequently within the context of business operations.

Legislative Frameworks and Corporate Responsibility

Sarbanes-Oxley Act ($2002$):
    * This act mandates that companies establish confidential reporting systems.
    * The purpose of these systems is to allow individuals to report suspected illegal or unethical practices or behaviors without fear of retaliation.
    * Reportable issues include subjects such as accounting irregularities, sexual harassment, and other unethical conducts.
Corporate Social Responsibility (CSR):
* This is the fundamental idea that those in charge of corporations can and should act ethically and remain accountable to society for the consequences of their actions.
The Stakeholder Approach:
* This theory posits that corporations possess a duty that extends beyond just their shareholders.
* They are also responsible to other groups affected by corporate decisions, collectively known as "stakeholders."
Corporate Citizenship:
* Corporations are encouraged to behave as "good citizens" by taking proactive steps to solve social problems.
* Examples of such behaviors include corporate donations, addressing environmental concerns, implementing anti-discrimination policies, and supporting human rights.

Theoretical Categories of Ethics

Utilitarianism:
    * This theory is based on the principle of achieving the "greatest good for the greatest number of people."
    * The determination of the "rightness" or "wrongness" of an act is based solely upon its consequences.
    * It utilizes a Cost/Benefit Analysis to determine the appropriate course of action.
    * Weakness: It is considered a hard-line approach that fails to consider "need variables" or individual circumstances.
Rights-Based Ethics:
    * Also referred to as the "natural rights ethical theory."
    * It places primary emphasis on the individual rights of a person.
    * Rights are believed to belong to individuals purely by virtue of their status as human beings.
    * Under this theory, everyone is entitled to the same fundamental rights.
Duty-Based Ethics:
    * This theory focuses on the performance of one’s duty to various people and social institutions.
    * It promotes the idea of universal actions, meaning everyone should act the same way when faced with the same set of circumstances.
    * Problems: Challenges arise when an action is taken out of a sense of duty regardless of the ultimate consequences, or when different individuals have conflicting interpretations of what "duty" entails.
Justice-Based Ethics:
    * Rooted in a concept of moral restraint known as "the veil of ignorance."
    * John Rawls' Theory: Rawls suggested that social contracts (such as determining who should receive an organ donation) should be handled as if the decision-maker does not know the recipient's gender, age, race, health, number of children, income, wealth, or any other arbitrary personal data.
    * By removing knowledge of personal details, decisions become impartial; no one possesses an inherent advantage or disadvantage.
    * This theory infers that every citizen should have equal access to social programs.
Virtue-Based Ethics:
    * This is based on morally valued character traits, including integrity, trust, respect, empathy, and generosity.
    * The emphasis is placed on the people involved rather than the specific decisions or principles at play.
    * It does not take the consequences of an action into account.
    * Weakness: Individuals who are considered "too trusting" are often susceptible to being taken advantage of.

Ethical Decision-Making Models

The Six Basic Guidelines for Ethical Decision-Making:
    1. Is it Legal: Determining if the action complies with current laws.
    2. Follows Rules & Procedures: Adherence to internal organizational mandates.
    3. Adhere to Values: Ensuring consistency with core personal or corporate values.
    4. Personal Conscience: Consulting one's internal sense of right and wrong.
    5. Promises: Maintaining commitments made to others.
    6. Hero Action: Considering whether the action is what a "hero" or role model would do.
Business Process Pragmatism (Five Steps):
    1. Inquiry: Identifying the ethical issue and gathering facts.
    2. Discussion: Engaging with others to explore options.
    3. Decision: Choosing the most ethical course of action.
    4. Justification: Explaining the rationale behind the chosen decision.
    5. Evaluation: Reviewing the outcome to see if it achieved the intended ethical goal.

International Law and Global Business Regulation

Key International Doctrines:
    * Comity: A concept where one nation defers to the laws of another country, provided those laws are consistent with its own law and public policy.
    * State Doctrine: The judicial branch of one country will not examine the validity of public acts committed by another recognized government within that government’s own territory.
    * Sovereign Immunity: This doctrine exempts foreign nations from the jurisdiction of United States' Courts.
    * Foreign Sovereign Immunities Act (FSIA): A specific act that outlines the circumstances under which legal actions may be brought in the U.S. against a foreign nation.
Regulation of International Business Activities:
    * Business involves inherent investment risk.
    * Export Controls: The U.S. Congress has the authority to impose restrictions or set quotas on certain exported goods.
    * Import Controls: These include prohibitions (such as illegal drugs, specific publications, or certain agricultural products) under the Trading with the Enemy Act of $1917$.
    * Economic Tools: Regulation occurs through the use of Quotas/Limits, Tariffs, and Taxes.
    * Antidumping Statutes: Laws designed to prevent foreign companies from selling goods below market value.
    * Domestic Responsibilities: U.S. companies are responsible for monitoring the employment practices of their foreign suppliers.

The Foreign Corrupt Practices Act (FCPA)

Full Title and Citation: Known as the "FCPA," $15$ U.S.C. $\S\S 78dd-1$, et seq.
Primary Purpose: Enacted to prohibit the bribery of foreign officials. It specifically prohibits the use of interstate commerce in the furtherance of such bribery.
Scope and Ammendments:
    * Since $1977$, the Act has applied to all United States persons and entities, as well as certain foreign issuers of securities.
    * In $1998$, it was amended to include foreign persons and entities who cause an "act of furtherance" of bribery to take place within a territory of the United States.
    * The Act also requires companies with securities listed in the U.S. to meet rigorous accounting provisions.
FCPA Penalties:
    * The Department of Justice (DOJ) is responsible for prosecuting violations.
    * Individual Penalties: Fines of up to $100,000$ and imprisonment for up to $5\text{ years}$.
    * Corporate Penalties: Fines of up to $2,000,000$ per violation.
    * Accounting-related fines may be even higher than these amounts.

The Attorney-Client Relationship

Nature of the Relationship:
    * It is an express verbal or written agreement for legal representation.
    * It can also be formed through the exchange of legal advice, frequent contact, or past representation.
    * The relationship carries fiduciary duties and obligations on the part of the attorney.
    * Certain duties remain in effect even after the formal representation has concluded.
Attorney-Client Privilege:
    * Attorneys are prohibited from revealing information about a client's representation without explicit consent from the client.
    * This privilege covers admissions of guilt or details of past crimes.
    * Exclusion: The privilege does not include future plans to harm someone.
    * This privilege persists even when the attorney is under subpoena.
Conflicts of Interest:
    * Occurs when representation of one client is directly adverse to another.
    * Occurs when there is a significant risk that representing a client will materially or adversely limit the attorney’s duties to another current/former client, a third party, or the attorney’s personal interest.
    * Some conflicts are categorized as "consentable," while others are "not consentable."
Additional Professional Responsibilities:
    * Competence, Scope of representation, and Communication.
    * Fees and fee-splitting arrangements.
    * Confidentiality and avoiding imputations of conflicts to the entire firm.
    * Safeguarding client property, which requires the use of Trust Accounts.
    * Ensuring claims are meritorious.
    * Maintaining candor toward the tribunal and fairness to opposing parties.
    * Regulations regarding advertisements and solicitation.
    * Addressing the unauthorized practice of law, misconduct, and malpractice.

Washington Rules of Professional Conduct (RPC)

Title 1: Client-Lawyer Relationship
Title 2: Counselor
Title 3: Advocate
Title 4: Transactions With Persons Other Than Clients
Title 5: Law Firms and Associations
Title 6: Public Service
Title 7: Information About Legal Services
Title 8: Maintaining the Integrity of the Profession