Welcome

Business Law
Lecture Topic:
Business Ethics
 Course Instructor
• Dr. Bruce Weeks
• Email: ajaanbruce@gmail.com
• Line ID: bruceweeks
• MS Team link
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 COURSE ASSESMENT
Quizzes (4): 40%
Self- Directed Research Paper: 20%
Final Exam: 40%
 Topics to Be Covered
• Business Ethics
• Litigation
• Torts
• Contracts
• Intellectual Property
• Real Property
• Agency
• Business Organization Principles
– Sole Proprietor
– Partnerships
– Limited Partnerships
– LLC
– Corporations
• Securities Law
• Insurance
• Credit and Secured Transactions
• Bankruptcy
 Self – Directed Research Paper
• Chosen topic relevant to this class
• The topic MUST be approved by the instructor BEFORE
writing the paper
• Minimum of 5 pages
• Minimum of 5 sources
• APA writing and citation style
• Work that is not original or copying from other sources (i.e
plagiarized) will result in ZERO MARKS
• 3 components make up the paper grade:
• Quality of the topic chosen
• Depth of research (including proper use of sources and
footnotes)
• Presentation of ideas
 Business Ethics?
• Do ethics and pursuit of profit go together?
• How can additional ethical responsibilities be
consistently defined?
• Technological change brings new issues:
– genetically modified organisms
– industrial espionage
– privacy on the Internet
– use of consumer information for commercial
gain
• Globalization lessens effect of laws
– Exacerbates harm
– Drives demand for ethical standards in business
 Defining Business Ethics
• No single set of ethical principles
–Ethical principles often too vague to
be of help in specific instances
• Everyday decisions companies face
rarely present themselves as ethics
versus economics
 Why Study Ethics
• ETHICS ARE NOT LAWS
–Ethics are principles to guide
business for a better society
• Economic growth is based on trust in
society
–Ethics create trust
Four Principle Ethical Theories
1.Maximization of Profits
2.Stakeholder Theory
3.Corporate Good Citizen
4.Porter’s Shared Value
 Maximization of Profits
• Business only has a social responsibility to make money
– Profit should be returned to company owners
• Only constraint on behavior is to observe relevant laws,
engage in open and fair competition without deception
or fraud
• If society wishes business to engage in more socially
constructive methods new laws should address this issue
• Milton Friedman, (University of Chicago) Nobel Prize for
Economics winner is often associated with this theory
– Laissez faire economics
 Theory Behind Profit Maximization
• Laissez faire economics: "let things alone“
– Postulated by Adam Smith, in modern times
by “Chicago School of Economics”
• Capitalism is best left to its own devices
– Resources are limited, resources should best
be used in productive fashion
– Law of Supply and Demand will dispense
with inefficiencies
• Profit motive provides best allocation of
resources in society
 Dodge v. Ford Motor Company (1919)
• Henry Ford: “My ambition is to employ still more men, to
spread the benefits of this industrial system to the greatest
possible number, to help them build up their lives and their
homes. To do this we are putting the greatest share of our
profits back in the business."
• Court finding: Maximizing shareholder wealth is the
corporation's only concern
– Devoted corporate officers and directors should direct
all their efforts toward this goal
• Ford owed duty to operate business to profit shareholders,
rather than wider community or employees
 Criticism of Profit Maximization
• Who makes the laws? Business through the
influence of money in the political system
The fox guards the henhouse
– Ex: Lobbying, campaign contributions
• Legal change is to slow, consumers and other actors
in society therefore suffer
 Criticism of Profit Maximization
• Deregulation: belief that markets adequately regulate
themselves
– Erosion in moral business operations (belief in the
justness of the marketplace)
• Emphasis on short-term performance
– Often executive pay is in stock
• Individual gain (management) triumphing over wider
community
Ethical Perspective of Global Corporations
• Global corporations, are subject to even less ethical
accountability than purely domestic companies
• Most powerful non-governmental entities?
• More power is involved & more people are
affected
• Are global corporations “backed” by global
government organizations: WTO?
• Global companies can sometimes place economic
self-interest over needs of entire nations/citizens
 The US Business Roundtable
• Represents chief executives of 192 of nation’s largest
companies
• Most members signed statement that making profits for
shareholders is not corporation’s sole responsibility
• Companies have a broader mission to serve:
– Customers
– Employees
– Suppliers
– Communities
https://www.washingtonpost.com/business/2019/08/19/top-ceos-are-
reclaiming-legitimacy-by-advancing-vision-whats-good-
america/?noredirect=on
https://www.washingtonpost.com/opinions/even-the-business-moguls-know-
its-time-to-reform-capitalism/2019/08/20/95e4de74-c388-11e9-9986-
1fb3e4397be4_story.html
 Stakeholder Theory
• Corporate decisions effect many
• Business decisions impact:
– Workers: unemployment causes hardship
– Suppliers: dependent on sales
– Communities: pollution damages health of local
people
– Governments: closed facilities lowers local tax
revenues
– Consumers: effected by decisions on product price,
safety
• Stakeholder theory of corporate governance looks
beyond owners value, considers those groups,
individuals that are impacted by corporate decisions
 Implementing a Stakeholder
Perspective
• Assessing organizational commitment to social
responsibility
– Assessing corporate culture
• Identifying stakeholder groups
• Identifying stakeholder issues
• Identifying resources and determining urgency
• Gaining stakeholder feedback
Criticism of Stakeholder Theory
• Rarely are decisions easy to define in
terms of who the stakeholders are
• Different stakeholders have different
needs
–How do you balance these needs?
 Corporate Good Citizen
• Society chooses to demand certain
values among citizens
–Corporations should reflect these
ideals
• As a "person" in society business
entities should understand and follow
standards of conduct society demands
of all citizens
 Corporate Good Citizen
• Branding - developing and maintaining a
corporate identity based on a trade name
– Reputation is one of an organization’s
greatest intangible assets with tangible value
– Positive brand makes business look better in
the marketplace
• Sales correspondingly rise, it must be good
for society
–Society has ratified the socially
responsible behavior by purchasing
products
4 Dimensions of Corporate Good Citizen
• Strong economic performance
• Strict compliance with laws, regulations
• Ethical actions beyond what is legally required
• Voluntary contributions to advance business
reputation/benefit wider society
 Criticism of
Corporate Good Citizen
• Business should make profit, that is their
strength
– Business has little skill in philanthropy
• Government, Non-profit organizations or
NGO’s should do charitable work as they
have the skills
 Michael Porter’s Shared Value
• Creating Shared Value, (2011) Harvard
Business Review
– by Michael Porter, Mark Kramer
“The purpose of the corporation must be
redefined as creating shared value, not just
profit….”
• Capitalism meets human needs, improves
efficiency, creates jobs, builds wealth
• Business is viewed as major cause of social,
environmental, economic problems,
prospering at expense of broader community
 Michael Porter’s Shared Value
• Companies look too short-term
• Economists wrongfully legitimized idea that to
provide societal benefits, companies must
temper economic success
• Shared Value: management strategy,
companies find business opportunities in
social problems
– Take off “the blinders” and see wider profit
opportunities

• www.sharedvalue.org/about-shared-value
 Personal Factors,
Ethical Differences
• Moral excesses of business leaders often
springs from a developed sense of
entitlement, loss of reality
• Situational, particularly organizational
culture
• Person’s character contributes to ethical
differences
 Personal Ethics
• Questions to evaluate the ethics of a specific
decision:
– Is it right?
– Is it fair?
– Who gets hurt or benefits?
– What if the details were made public?
– What would you tell a child do?
– How does it smell?
 Final Business Ethics Thoughts
• ETHICS ARE NOT LAWS, ethics are principles to
guide business for a better society
• Business people are opinion leaders in society
– There is a responsibility
• No one model can dictate all circumstances
• Factors
– Type of decision
– Type, size of business
THANK YOU
FOR YOUR
ATTENTION