*Discussion Case: EnronDecember 2, 2001 Enron declares bankruptcyDisclosure of significant debts concealed by complicated and fraudulent accounting practicesTop executives were involved and had received millions of dollarsArthur Anderson, a top five accounting firm, implicatedEmployees prevented from selling stock; retirement funds collapse

Are Ethics and Business Compatible?

Alan Wolfe, Professor of Political Science at Boston College, Washington and Lee Law Review, 1993:

[The corporation is] a device through which human beings, who have moral obligations, come together for the purpose of ridding themselves of their capacity to exercise their moral obligations.

mechanism of responsibility displacement

If chimpanzees could be trained to count, they would be just as good, if not better, managers than human beings.

Read to LearnDefine ethics and business ethics.Describe why ethical behavior is good for business.List the steps for dealing with an ethical dilemma.

The Main IdeaEthics are moral principles by which people conduct themselves personally, socially, and professionally. Business ethics are rules that guide the behavior of a business and its employees. Business ethics are generally based on moral principles. In business, good ethics is beneficial for long-term profitability and success.

Key Termsethicsbusiness ethicsmoral principles by which people conduct themselves personally, socially, or professionallyrules based on moral principles about how businesses and employees ought to conduct themselves

Key Termscode of ethicssweatshopa set of guidelines for maintaining ethics in the workplacea shop or factory in which workers are employed for long hours at low wages and under unhealthy conditions

Key Termsconflict of interesta conflict between self-interest and professional obligation

The Nature of Ethicsethicsmoral principles by which people conduct themselves personally, socially, or professionallyWhen you are guided by ethics, you do not cheat on a test or lie to friends or family.

The Nature of Ethicsbusiness ethicsrules based on moral principles about how businesses and employees ought to conduct themselvesMost businesses are guided by business ethics.Different cultures, businesses, and industries have different ethical standards

Business EthicsCreating safe productsCreating jobsFair treatment of employeesEnvironmental protectionTruthful about financial statusGraphic Organizer

Cultural EtiquetteIn Thailand, it is customary to exchange gifts during a second business meeting.In China, gift giving is considered a form of bribery and is illegal.

Law and EthicsIn business, people follow rules as well as a code of ethics.code of ethicsa set of guidelines for maintaining ethics in the workplace

Law and EthicsA sweatshop is an example of an unethical practice outlawed in the United States.sweatshopa shop or factory in which workers are employed for long hours at low wages and under unhealthy conditions

Law and EthicsThe Occupational Safety and Health Administration (OSHA) sets and enforces work-related health and safety rules.

Ethics as Good BusinessUnethical business practices include:LyingOffering merchandise known to be substandardTreating customers or employees unfairly

Ethics as Good BusinessIf a business violates government regulations, the owner can be fined or go to jail.

If an employee violates a company or professional code, the employee might be fired or lose his or her license.

Ethics as Good BusinessUnethical business practices can result in bad word of mouth and result in lost sales.

Unethical behavior toward employees can lead to legal action or a high rate of employees quitting.

Conflicts of InterestConflict of interest is a major ethical question that is generally not illegal.conflict of interesta conflict between self-interest and professional obligation

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Ethical QuestionsIs it against the law? Does it violate company or professional policies?Even if everyone is doing it, how would I feel if someone did this to me?Am I sacrificing long-term benefits for short-term gains?

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The Ethical Decision-Making ProcessIdentify the ethical dilemma.Discover alternative actions.Decide who might be affected.List the probable effects of the alternatives.Select the best alternative.

Ethical Observations by EmployeesFigure 4.1

What is the difference between personal and business ethics?Personal ethics: moral principles that guide an individual; business ethics: rules, based on moral principles, used by a business.

Describe some of the ways that unethical business practices can affect a business.Customers will not patronize the business.It is hard to retain employees. If the behavior is illegal, the business might be fined.

What is the relationship between illegal behaviors of business and unethical behaviors of business?Generally, illegal behaviors of business are also considered unethical but there are some unethical behaviors that are not illegal.

Chapter 4Business Ethics and Social ResponsibilitySection 4.1Business Ethics

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The Enron scandal was only one in a series of scandals that erupted in 2001-2002. WorldCom, Tyco, Aldelphia, Globcal Crossing, Qwest, Merrill Lynch, Citigroup Salomon Smith Barney, Marsh and McClennen, Credit Suisse First Boston, and even the New York Stock Exchange all came under investigation for illegal activity.***********************