9/11 Chapter 2 Notes – EthicsBusiness Ethics-Ethics is the study of right and wrong behavior; whether an action is fair, right or just-In business, ethical decisions are the application of moral and ethical principles to the marketplace and workplaceWhy is business ethics important?

-Directors and Officers owe a complex set of ethical duties to their stakeholders (internal and external)-When these duties conflict, ethical dilemmas are created-An unethical individual can make a major impact on business, economy ect-If Officers or board members are not following ethical standards to a key then issues will arise

-The Moral Minimum-The law is the lowest common denominator

-If it is illegal, you cannot do it-Normally considered as mere compliance with the law

-Gray Areas in the law-Make it difficult for companies to navigate and forecast

-There is not Black and White – everything is gray-Short-Run Profit Maximization

-Some argue businesses only goal should be to maximize profit. But executives need to distinguish between short-term and long-term maximization

-Importance of Ethical Leadership-Attitude of Top Management-Behavior of Owners and Manager

-Ultimately effects the rest of the company and employees-Good moral code should be produced and published

-Creating Ethical Code of Conduct-One of the most effective ways to promote ethical behavior in an organization. Ethics Training for Employees

-Ethical input from stakeholders-The Sarbanes-Oxley Act and web-based reporting systems (EthicsPoints)

-Act created after the early 2000’s in response to the huge business meltdowns

-Tightens up accounting and number reporting-Corporate Stock Buybacks

-Rationale: Corporate management believes stock is undervalued, so instead of issuing dividends it buys stock in the market, thus boosting share value

-Can easily get out of hand with artificial inflation of stock pricesApproaches to Ethical Reasoning-Duty Based Ethics – Derived from religious and philosophical principles

-Religious Ethical Standards-Kantian Ethics-The Principles of Rights

-Certain unalienable rights reserved by the individual-Duty-Based Ethics

-Religious Ethical Standards-The rightness or wrongness of an action is usually judged according

to its conformity to an absolute rule-Kantian Ethics

-Premised on the belief that general guiding principles from moral behavior can be derived form human nature

-Rightness or wrongness of an action is judged by estimating the consequences that would follow if everyone on a society

performed the act under consideration-Principle of Rights

-Belief that every duty gives rise to a corresponding right, deeply embedded in Western culture

-Ethically of a action is judged by how the consequences of the action will affect the rights of others

-Outcome Based Ethics: Utilitarianism-Action is ethical based on whether it produces the greatest good for the greatest number of people-If it affects the majority adversely, it is morally wrong-More of a Cost-Benefit -Applying the utilitarian theory requires:

-Determination of individuals affected;-Cost-Benefit analysis, and-Choice among alternative actions

-Corporate Social Responsibility-Those who manage corporations should be accountable to society for their actions

-Stakeholder Approach: corporations have a duty not only to shareholders but other groups affected but he corporate

actions-Stakeholders have more power in this day and age because of the

level of accountability the Internet has brought to the table-Corporate Citizenship – Promote goals that society considers worthwhile and take positive steps towards solving problems

-A way of doing business. Poll found that 70% of executives polled agreed that corporate citizenship should be a priority

-Employee Recruiting and Retention. Younger employees look for firms that are committed to socially responsible goal and

community projectsBusiness Ethics on a Global Level-American companies must be trained in cross-cultural business practices-Monitoring of employment practices of foreign suppliers

-Corporate Watch groups can hold corporations accountable -Foreign Corrupt Practices Act

-Prohibition Against Bribery of Foreign Officials. But FCPA does not permit “grease” payment to minor officials

-Nor does FCPA prohibit payments to foreign officials which are lawful in the country

-Bribery by Foreign Companies

The Cover Method-First I Ask Some Questions to COVER my basesF - FactsI - IssuesA – Alternatives S – Stakeholder

C - CodesO – OutcomesV - ValuesE - EditorialR – Rules

-Due Diligence-Prior to philosophical analysis of a situation, it is important to conduct due diligence-Steps

1. Determine the Facts2. Identify the ethical issues3. Consider alternatives4. Identify the Stakeholders

-Philosophical Analysis-C – Code – Look to legalistic documents to see if the action is legal

-Look into laws and regulations in your area of business or industry-O – Outcomes – Outcome is based in a philosophy known as Utilitarianism

-Actions are right in the proportion to their tendency to promote happiness or absence or pain, and wrong insofar as they tend

to produce pain or displeasure -Is the Benefit greater than the cost

-V – Value – Duty Based philosophical theories-Divine Command theory of ethics is based in religion and looking to a higher being to determine what is right and wrong-Rights-based theory address fundamental rights that we believe

should be supported such as basic human, unalienable rights-E – Editorial – Combines some aspects of the outcome analysis with come

aspects of the values analysis. There may be a mention of the publicity effect in the outcome analysis – there probably should be for any major decision.

This analysis what is the most “newsworthy” aspect of each alternative.-R – Rule – Based in the “categorical imperative” philosophy of Immanuel Kant. Asks the decision maker to evaluate each alternative as if that alternative were to become the rule for all others to follow.

-Conclusion – Typically listed as preliminary because quite often students finish the exercise wanting more information.

Appendix AUtilitarianism – John Stuart Mill (1806-1873) stated that “actions are right in proportion to their tendency to promote happiness or absence of pain, and wrong insofar as they tend to produce pain or displeasure.” -“Committed to the maximization of the good and the minimization of hard and evil”-Consists of a cost-benefit analysis for each alternative -Utilitarianism will choose an alternative that creates the “greatest good for the greatest number.”Deontological Ethics – Duty based ethics. The Divine Command theory of ethics such as the teachings of religion. -Corporate Social Responsibility is the idea that corporations should go beyond obeying the law, profit and minimal ethical standards to affirmatively reach out and promote philanthropy. -Immanuel Kant’s (1724-1804) “categorical imperative” at its basest level, asks a decision-maker to envision alternate worlds where choosing each alternative is the rule followed by all similarly situated persons or entities. Then the decision-maker must evaluate each alternative world to determine which world the decision-maker feels is the “best” world.