What is Business Ethics?

Business Ethics
The application of general ethical concepts

to the unique situations confronted in business. It asks what is right or wrong behavior in business and what principles or rules can be used as guidance in business situations.

Two Characteristics
Tells people what they ought to do

Set of principles or rules

Why Study Ethics?

Will not make you more ethical

Help in trying to do the right thing

What is Ethics?
Ethics and Religion

Ethics and Social Responsibility

Ethics - two levels of concern individual organizational Soc. Responsibility - Win -Win Ethics - Dont do things that may be in your own self interest

Relativism

Egoism

The 4 Concepts of Ethics

Utilitarianism

Deontologism

Concepts of Ethics
Developed by moral philosophers over

generations
Used to distinguish ethical from unethical

behavior
Each has problems

Relativism
There is no universal standard by which

morality can be judged What is correct for one society may be wrong for another Ethics and morality are relative
What do you think of this?

Relativism - Problems
There are no absolutes - murder, slavery,

torture, rape OK What is meant by a society? Sub-societies Leads to conclusion - each persons opinion is correct Nothing that anyone does is morally wrong

Egoism
One ought to act in his or her own self

interest Ethical behavior is that which promotes ones own self interest Does not mean should not obey laws - only do so if in self interest

Egoism
What do you think of this concept? Problem - Externalities associated with

private actions - OK to dump toxic wastes as long as dont get caught

Utilitarianism
The morality of an action can be determined

by its consequences An action is ethical if it promotes the greatest good for the greatest number

Benefits and Costs of an Action to Whomsoever They Accrue

B1 + B2 + B3 + . .+Bn> C1 + C2 + C3 + . . .+Cn Then the Action is Ethical B1 + B2 + B3 + . .+Bn< C1 + C2 + C3 + . . .+Cn

Then the Action is Unethical

Utilitarianism Example

Harry Truman and Decision to Drop Bomb

on Japan

What do you think of this concept?

How do you quantify benefits and costs?

How do you value benefits and costs?

Can lead to unjust consequences

Restrictions against the majority to protect a

minority is not utilitarian

Deontologism
Derived from the Greek word for Duty

Actions are not justified by their

consequences. Factors other than good outcomes determine the rightness of actions

Utilitarianism Vs. Deontologism

Utilitarianism - The ends justify the means Deontologism - It is the means which are

important

Catagorical Imperative
Developed by Immuel Kant

I ought never to act except in such a way

that I can also will that my maxim should become a universal law Are you willing to permit everyone to adopt the action? Yes - Moral No - Immoral

Guidance in Dealing with People

People should never be treated as a means

to an end, but as ends in themselves To treat people as ends requires respect for persons Reject slavery Deals with murder, rape, etc How to deal with employees

General Ethical Behavior

Builds security, friendliness, cooperation

and trust in a society These are public goods created by generally ethical behavior

What are Characteristics of Public Goods?

Not subject to exclusion - cannot exclude

people from consumption even if they do not contribute Joint Supply - Provide for one individual, provide for all.

Catagorical Imperative and Public Goods

Security, Friendliness, Cooperation and

Trust Not Subject to Exclusion Joint Supply

Examples
Is it Ethical to Rob Banks? Is it Ethical to Give Everyone in this Class

an A?

What Do You Think of Deontologism?

Conflicts between duties

Utilitarians argue that secretly appeal to

consequences to demonstrate the rightness of actions

Ethical Tests

Is It Legal Test?
Ethical Quadrant II Ethical and Illegal
Codification Manifestation

Quadrant I Ethical and Legal

Illegal

Corporate Decisions

Legal

Quadrant IV Unethical and Illegal Unethical

Quadrant III Unethical and Legal

Ethical Tests
1. Is It Legal? I Ethical - Legal II Ethical - Illegal III Unethical - Legal IV Unethical - Illegal I and IV Easy II and III Difficult

Ethical Tests
2. Benefit Cost Test Do the benefits exceed the costs to whomsoever they accrue? 3. Categorical Imperative Are you willing to allow everyone to practice the proposed action or do you want to be a special case?

Ethical Tests
4. Light of Day Test What would be your reaction if the action were brought out into the open for public scrutiny? 5. Do Unto Others Test Golden Rule - If you would like others to do the same to you - passes the test

Ethical Tests
6. Ventilation Test Seek out others views. Discuss the 5 tests with them. If others feel it is OK passes the test

Examples
Robbing a Bank Driving Above the Speed Limit Cheating on an Exam Having Sex with an Intern

Ethical Dilemmas in Business

Conflict of Interest

Have two interests - cannot purse one without having negative impact on other Two Types Private Interest Conflicts with Corporate Business Interest Conflicts with Public

Conflict of Interest Mini Case

Personnel Director

Brother - in - law out of work

Lackluster performer

Unemployment about to run out - will loose

house Sister asks you to recommend him for job What would you do?

Whistleblowing
Act of disclosing wrongdoing in an

organization Like blowing a whistle to call attention to a thief Types Internal External

Can Cause Bitterness in Organization

Dissent - Must speak out against others in

organization Breach of Loyalty - Perceived as one who violates confidentiality and loyalty Accusation - Singles out specific individuals as threats to organization or the public

Possible Retaliation
Fired

Blacklisted
Transferred to undesirable locations

Lifestyles, sex lives and mental stability

questioned Physical abuse and murder possible

Failure to Reveal Wrongdoing

Severe problems for society or organization Can be implicated as an accessory before or

after the fact

Ethics of Whistleblowing
When is it ethical to reveal wrongdoing ? When is it ethical to remain silent?

Whistleblowing Example
In charge of Quality Control

Company makes parts for automobile

brakes Find defect in brake part Could cause failure in brakes Failure not certain May take many years to develop

Whistleblowing Example (cont.)

Go to VP of Production, your boss

He tells you to overlook defect - company

may loose too much money

What would you do?

Cautious Approach to Whistleblowing

1. Make sure situation involves an imminent threat to society or to the business 2. Document all allegations 3. Examine internal whistleblowing first 4. Should you remain anonymous? 5. Get another job first!!!

Bribery
A payment, usually to a public official, to

induce that person to either do something improper or to influence decisions or actions

Extortion - same as bribery - recipient of

payment initiates transaction

Case
International consulting firm - designs and

supervises construction of hydroelectric power generating systems Your proposal is far superior to any other technically lowest bid To get job, must deposit $250,000 in officials personal Swiss bank account

Should you pay the money?

Foreign Corrupt Practices Act of 1997

Grease payment allowed

Standard Practice in most foreign countries

Results in lost business opportunities for US

companies American tax dollars may be used to pay bribe

Bluffing and Deception

Negotiating a labor contract

Plant has experienced losses over past

several years - not clear why Want concessions from labor Tell labor that plant will be closed if no concessions are made. In reality , no such plans contemplated Is This Ethical?

Managerial Implications
Top Management Leadership

Organizational Culture Realistic Goal Setting Ethics Audit Code of Ethics Ethics Committee

Managerial Implications
Ethics Advocate

Whistleblowing Mechanism
Ethics Training