Chapter 4 – BUSI 2371

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Ethics
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the study of right and wrong behavior; whether an action is fair, right or just
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Ethical Decisions
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the application of moral and ethical principles to the marketplace and workplace
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Business Ethics
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the decisions businesses make or have to make and whether those decisions are right or wrong directors and officers owe a complex set of ethical duties to their stakeholders; when these duties conflict, ethical dilemmas are created
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The Moral Minimum
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compliance with the law
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\”Gray Areas\” (in the law)
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these make it difficult for companies to navigate and forecast
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Short-Run Profit Maximization
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a company may increase its profits by continuing to sell a product, even though it knows that the product is defective
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Long-Run Profit Maximization
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because of lawsuits, large settlements, and bad publicity, such unethical conduct will cause profits to suffer business ethics is consistent ONLY with long-term profit maximization
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Triple Bottom Line
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a corporation’s profits, its impact on people, and its impact on the plant
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United States v. Skilling (2009)
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– OxyContin was said to not lead to drug addiction or abuse – Internal documents showed that the manufacturer know that the drug could be addictive but kept it secret to boost sales and maximize short-term profits – $600 million in fines and other payments The company’s focus on maximizing profits in the short run led to unethical conduct that hurt profits in the long run***
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Ethical Leadership
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managers must apply the same standards to themselves as they do to the company’s employees; required for ethical decision making to function attitude of top management; behavior of owners and managers affect the behavior`
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May v. Chrysler Group, LLC
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– Man was the target of racist, homophobic, and anti-Semitic harassment – The director of plaintiff’s workplace, Chrysler, did not show much authority when addressing employees about these occurrences implementing an unethical workplace
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Krasner v. HSH Nordbank Ag
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– Krasner alleges that he is working in an environment were sexual harassment towards women runs rampant – An investigation was conducted and no violation was found – He was then fired and he appealed; a lawsuit then commenced. For a person to claim sexual harassment, he/she must be a victim of the sexual harassment he claim was dismissed because Krasner could not show the he was an actual victim of Sexual harassment
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Ethical Codes of Conduct
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one of the most effective ways to promote ethical behavior in an organization – ethics training for employees – Sarbanes-Oxley Act – web based reporting systems
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Sarbanes-Oxley Act
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law passed in 2002 that requires CEOs and CFOs to personally vouch for the truthfulness and fairness of their firms’ financial disclosure
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Corporate Stock Buybacks
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corporate management believes stock is undervalued, so instead of issuing dividends it buys stock in the market, thus boosting share value
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Duty Based Ethics
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rooted in the idea that every person has certain duties to others, including both humans and the planet; derived from religious and philosophical principles – religious ethical standards – Kantian ethics – the principle of rights
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Religious Ethical Standards
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nearly every religious has principles or beliefs about how one should treat others; can be unifying or problematic in a business
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Principle of Rights
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belief that every duty gives rise to a corresponding right, deeply embedded in Western culture ethicality of an action is judged by how consequences of the nation will affect the right of others
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Kantian Ethics
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the belief that general guiding principles for moral behavior can be derived from human nature rightness/wrongness of an action is judged by estimating the consequences that would follow if everyone in a society perform the act under consideration
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Categorial Imperative
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a central part of Kantian Ethics; a person should evaluate their actions in terms of what would happen if everybody else in the same situation acted the same way
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Outcome-Based Ethics
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focuses on the impacts of a decision on a society or key stakeholders; whether it produces the greatest good for the greatest number of people if it affects the majority adversely, it is morally wrong
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Utilitarianism
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\”The greatest good for the greatest number\” – determination of individual affected – cost benefit analysis – choice among alternative actions
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Cost-Benefit Analysis
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an assessment of the negative and positive effects of alternative actions on individual
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Corporate Social Responsibility (CSR)
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those who manage corporations should be accountable to society for their actions combines a commitment to good citizenship with a commitment to making ethical decisions, improving society, and minimizing environmental impact
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Stakeholder Approach
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corporations have a duty not only to shareholders but other groups (stakeholders) affected by corporate actions
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Corporate Citizenship
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promote goals that society considers worthwhile and take positive steps towards solving problems
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Employee Recruiting/Retention
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younger employees look for firms that are committed to socially responsible goals and community projects
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6 Guidelines to Making Ethical Decisions (George S. May)
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1) The Law 2) Rules & Procedures 3) Values 4) Conscience 5) Promises 6) Heroes (Role Models)
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Systematic Approach to Making Ethical Business Decisions
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1) Inquiry 2) Discussion 3) Decision 4) Justification 5) Evaluation
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Inquiry – Step 1
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identify parties involved and collect facts; list legal/ethical principles
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Discussion – Step 2
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possible actions listed, goals for decision determined, options are evaluated using laws and ethical principles
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Decision – Step 3
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consensus decision or plan of action is crafted
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Justification – Step 4
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reasons for proposed action or series of actions is articulated; sharing documentation
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Evaluation – Step 5
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solution analyzed to determined if it was effective
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Foreign Corrupt Practices Act
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– prohibition against bribery of foreign officials – allows for \”grease\” payments to minor official – allows payments to foreign officials which are lawful in THAT country – allowed payments to private companies, unless the American firm knowns the payments will go to an official
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Foreign Corrupt Practices Act – Violation
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– companies, up to $2 million in fines – individuals, up to $100,000 in fines; 5 years in prison bribery by foreign companies
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Obstructionist Stance
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an approach to social responsibility in which firms do as little as possible to solve social or environmental problems
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Defensive Stance
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a social responsibility stance in which an organization does everything that is required of it legally, nut nothing more
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Proactive Stance
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a social responsibility stance in which an organization views itself as a citizen in a society and proactively seeks opportunities to contribute
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Accommodative Stance
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a social responsibility stance in which an organization meets its legal and ethical obligations but will also go beyond these obligations in selected cases
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Direct Regulation
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government’s attempt to influence business by establishing laws and rules that dictate what businesses can and cannot do – Environmental Protection Agency (EPA)
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Lobbying
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the use of persons or groups to formally represent an organization or group of organizations before political bodies to influence the government
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Political Action Committee (PAC)
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an organization created to solicit and distribute money to political candidates
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Common Approaches Businesses use to Influence Government
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– personal contacts – lobbyists – donations – favors – political action committees – cultural influence – social pressure
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Social Responsibility
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– legal compliance – ethical compliance – philanthropic giving – ethics committee
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Legal Compliance
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the extent to which an organization complies with local, state, federal, and international laws managed by usually delegating to the appropriate managers
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Ethical Compliance
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the extent to which an organization and its members follow basic ethical standards of behavior
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Ethics Committee
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asked to review proposals for new projects, help evaluate new hiring strategies, or assess a new environmental protection plan
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Philanthropic Giving
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awarding funds or gifts to charities or other worthy causes
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Informal Social Responsibility
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– whistle-blowing procedures – leadership practices – the organization culture – treatment of whistleblowers
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Whistle-Blowing
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the disclosure by an employee of illegal or unethical conduct on the part of others within the organization; informal organizational dimension
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Corporate Social Audit
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a formal and thorough analysis of the effectiveness of a firm’s social performance

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