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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Chapter 4: Ethics andBusiness Decision Making
Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
1: Business Ethics
• Ethics is the study of …
• In business, ethical decisions are the...
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Why is Business Ethics Important?
• Directors and Officers owe a complex set of ethical duties to the company, shareholders, customers, community, employees, and suppliers.
• When these duties conflict, ethical dilemmas are created.
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Importance of Ethical Leadership
• Attitude of Top Management.– “Looking the Other Way”.
• Creating Ethical Codes of Conduct.
• Behavior of Owners and Managers.
– Case 4.1 Baum v. Blue Moon Ventures, LLC(2008).
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
2: Approaches to Ethical Reasoning
• Duty-Based Ethics - derived from religious and philosophical principles.– .
– .
– .
• Outcome-Based Ethics - seek to ensure a given outcome.– .
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Religious Ethical Standards
• The rightness or wrongness of an action is usually judged according to its conformity to an absolute rule that commands a particular form of behavior.
• The motive of the actor is irrelevant in judging the rightness or the wrongness of the action.
• These rules often involve an element of compassion.
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Kantian Ethics
• Immanuel Kant: belief that general guiding principles for moral behavior can be derived from human nature.
• The categorical imperative is a central postulate of Kantian ethics.– The rightness or wrongness of an action is judged
by estimating the consequences that would follow if everyone in a society performed the act under consideration.
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Rights Principle
• This principle...
• The belief in fundamental rights is…
• The ethicality of an action is...
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Outcome-Based Ethics: Utilitarianism
• Jeremy Bentham: An action is ethical based on whether it produces the greatest good for the greatest number of people upon which it has an effect.
• A cost-benefit analysis must be performed to determine the effects of competing alternatives on the persons affected.
• The best alternative is the one that produces the greatest good for the greatest number.
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Corporate Social Responsibility
• CSR is the idea that 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 (stakeholders) affected by corporate actions.
– Corporate Citizenship: promote goals that society considers worthwhile and take positive steps towards solving problems.
– CASE 4.2 Fog Cutter Capital Group, Inc. v. Securities Exchange Commission (2007).
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
3: How the Law InfluencesBusiness Ethics
• Legal compliance is…
• Simply obeying the law does not...
• Backdating stock options (Apple Computer).
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
How the Law InfluencesBusiness Ethics
• Misleading Regulators – The Case of OxyContin.– Fraudulent marketing which lead to
abuse and addiction.– Company kept this information
secret.– May 2007, executives plead guilty to
criminal charges they misled regulators.
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
How the Law InfluencesBusiness Ethics
• “Gray” areas in the law.– Business leaders must contemplate the ethical
implications of a business decision.
– CASE 5.3 Guin v. Brazos Higher Education Service Corp. (2006).
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
4: Making Ethical Business Decisions
• George S. May company has provided six guidelines:– The law.
– Rules and procedures.
– Values.
– Conscience.
– Promises.
– Heroes (role models).
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Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
5: Business Ethics on a Global Level
• American companies must be trained in cross-cultural business practices.
• Monitoring the Employment Practices of Foreign Suppliers.– Corporate Watch groups can disseminate
information instantly around world.
• Foreign Corrupt Practices Act.– Bribes and Accounting Practices.
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