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Business Law: Chapter 5 Ethics and Business Decision Making

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Business Ethics
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Ethics in a business context; a consensus of what constitutes right or wrong behavior in the world of business and the application of moral principles to situations that arise in a business setting.
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Categorical Imperative
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A concept developed by the philosopher Immanuel Kant as an ethical guideline for behavior. In deciding whether an action is right or wrong, or desirable or undesirable, a person should evaluate the action in terms of what would happen if everybody else in the same situation, or category, acted the same way.
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Corporate Social Responsibility
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The concept that corporations can and should act ethically and be accountable to society for their actions.
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Cost-Benefit Analysis
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A decision-making technique that involves weighing the costs of a given actions against the benefits of the action.
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Ethical Reasoning
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A reasoning process in which an individual links his or her moral convictions or ethical standards to the particular situation at hand.
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Ethics
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Moral principles and values applied to social behavior.
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Moral Minimum
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The minimum degree of ethical behavior expected of a business firm, which is usually defined as compliance with the law.
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Principle of Rights
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The principle that human beings have certain fundamental rights (to life, freedom, and the pursuit of happiness, for example). Those who adhere to this “rights theory” believe that a key factor in determining whether a business decision is ethical is how that decision affects the rights of others. These others include the firm’s owners, its employees, the consumers of its products or services, its suppliers, the community in which it does business, and society as a whole.
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Stock Buyback
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Sometimes, publicly held companies use funds from their own treasuries to repurchase their own stock, with the result being that the price of the stock usually goes up.
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Stock Options (Stock Warrant)
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A certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period.
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Utilitarianism
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An approach to ethical reasoning in which ethically correct behavior is not related to any absolute ethical or moral values but to an evaluation of the consequences of a given action on those who will be affected by it. In utilitarian reasoning, a “good” decision is one that results in the greatest good for the greater number of people affected by the decision.
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Foreign Corrupt Practices Act (FCPA)
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This act prohibits US businesspersons from bribing foreign officials to secure beneficial contracts.
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Prohibition Against The Bribery of Foreign Officials
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The first part of the FCPA prohibits the bribery of most officials of foreign governments if the purpose of the payment is to get the official to act in his or her official capacity to provide business opportunities.
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Accounting Requirements
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All companies must keep detailed records that “accurately and fairly” reflect their financial activities. All companies must have accounting systems that provide “reasonable assurance” that all transactions entered into by the companies are account for and legal.