MGT. OF ETHICS6540

Moral Problems in Business Management

•What does “right” really mean?

•Why do people’s views on what is “right” and “wrong” differ?

•How do you know when something is truly “right” or truly “wrong”?

•Why would a local construction worker in Moab feel differently about allocation of additional land for development and expansion than a young environmentalist who enjoys hiking in the mountains?

•How do you attempt to convince people who disagree with you about what is “right”?

•What arguments should that unemployed construction worker make if he/she were at a meeting with the young environmentalist? What arguments should the environmentalist make?

Moral Standards

•Do moral standards in business differ in some ways from those of our personal life?

•Business managers do not know how to apply the beliefs and standards they hold to the ethical problems they encounter.

•The goal: Bring managers to think in a structured, orderly way about their obligations to other people.

How?

The course should be:

• Short

•Direct

•Focused

•Lively and move along quickly

•Convey a method of analysis - not a standard of behavior

Direct:

•Recognition of ethical problems

•Understanding of ethical analysis

•Reliance upon personal values

Focused:

•Ethical problems in management are complex

•Ethical problems in management are pervasive

•Ethical problems in management are personal

Specific Incidents That Demand Our Attention to Ethics of Management

•H.B. Fuller Company

•Beech-Nut Nutrition Company

•Dow Corning

•Sears Roebuck and Company

•Tobacco Industry

•The Enron Case

•Firestone Tire Failure on Ford SUVs. 60 minutes earlier film about failures in Venezuela

General issues also shape the business ethics relationship:

•Sexual harassment in the workplace

•Toxic waste disposal crisis

•Use of lie detectors

•Minority rights

•AIDS in the workplace

•Smoking in the workplace

•Drug testing

•Insider trading

•Whistle blowing

•Product liability

1. What groups will benefit?

2. What groups will be harmed?

3. Whose rights will be exercised?

4. Whose rights will be ignored?

5. Express the moral problem so that everyone will believe that his or her moral concerns have been recognized and included.

6. What are the economic benefits?

7. What are the legal requirements?

8. What are the ethical duties?

Method of analysis

Benefits Some

Harms to Others

Rights Exercised

Rights Denied

Moral Problems in a Business Firm

Complex Nature of Moral Problems in Business

Religious/Cultural traditions

Personal Goals Personal Norms Personal beliefs Personal Values

Subjective standards of moral behavior

Economic/social situations

}

Individual Determinants of Moral Standards

Understand all moral standards

Recognize all moral impacts:

Benefits to some Harms to others Rights exercised Rights denied

Evaluate the ethical duties

Consider the legal requirements

Determine the economic outcomes

Define complete moral problems

Propose convincing moral solution} }{

Analytical Process for the Resolution of Moral Problems

Building Trust, Commitment and Effort within an Organization

Recognition of Moral Problems

- What is “duty”? Corporate Mgt. Application of Moral Trust in Extended Reasoning Commitment Organizations -What is “right”? Effort Possession of Moral Character -What is “integrity”?

Extending Cooperation, Innovation and Unification

Organizational Values Corporate Goals Mission Statement Managerial Financial balancing: Supports Trust Cooperation -Economic benefits Commitment Innovation -Legal requirements Performance Effort Unification -Ethical Principles Measures Incentive Payments Prohibited Procedures Leadership Actions

Understand all moral standards

Recognize all moral impacts:

Benefits to some Harms to others Rights exercised Rights denied

Evaluate the ethical duties

Consider the legal requirements

Determine the economic outcomes

Define complete moral problems

Propose convincing moral solution} }{

Analytical Process for the Resolution of Moral Problems

Chapter TwoMoral Analysis and

Economic Outcomes

Microeconomic theory of best for society is:

Economic Theory

• Managers should optimize profits and

• Ensure that those markets are competitive

•Is it possible to rely totally on the economic concept of Pareto Optimality in making decisions?

•Increase in the well-being of some and decrease in the well-being of others. Any lasting harms should be remedied by political, not financial, procedures!

Pareto Optimality

“Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than make as

much money for their stockholders as possible.”

-Milton Friedman

Individual Demand

Units

Pri

cePersonal Demand Curve

Market Demand

Units

Pri

ceMarket Demand and Supply Curve

Market Supply

Marginal Revenues

Units

Dol

lars

Marginal Cost Curve

Marginal Costs

•The executives who happened to hold duplicate positions following a merger and consequently were to be victims of “downsizing”.

•The wholesalers who helped to successfully establish a new product but now represent a much more costly means of reaching the market.

•The dam, which is to be built on private land, but which will block a river used by local residents and summer vacationers for years.

• Since no one is perfect then legal requirements (decisions by full society) and observing ethical duties (principles for a good society) are needed.

Material Supply

Units

Dol

lars

Factor Supply Curves

Capital Supply

Labor Supply

Consumers, whose marginal utilities for a mix of goods and services can be expressed as individual demand curves

Political process, for a partial redistribution of income from owners and workers to individual consumers and public agencies within the society

Owners of land and capital, whose supplies are fixed over the short term, and workers, whose marginal utility for income limits the labor supply, also over the short term

Product markets for goods and services, with aggregate demand and supply curves that determine the prices to be charged

Producing firms, whose marginal costs determine a company supply curve for the goods and services and whose marginal productivity rates determine company demand curves for the various input factors

Factor markets for material, labor, and capital, with aggregate demand and supply curves that determine the prices to be charged

Microeconomic Theory