Business Ethics Chapter 4 I Business Ethics a Ethics the study of what constitutes right and wrong behavior focuses on morality and the application of moral principles in everyday life Includes i Fairness ii Justness iii Rightness wrongness of an action b The Study of Business Ethics looks at decisions businesses make or have to make and whether those decisions are right or wrong i Profit maximization theory whereby resources go to where they are most needed ideally leads to the most efficient allocation of scarce resources ii Rise of Corporate Citizenship corporation is looked at as a person and is expected to participate in bettering communicates and society iii When making business decisions businesses should evaluate 1 Legal implication of each decision 2 Public relations impact 3 Safety risks for consumers and employees 4 Financial implications c Importance of Ethics in Decision Making i Long Run Profit Maximization balancing short term gains with potential long term problems ex OxyContin ii Internet Reputations derogatory online postings about a company are usually legal but can damage company profits d The Relationship of Law and Ethics what is legal is not always ethical i Moral Minimum compliance with the law is the minimal acceptable standard for ethical business behavior ii Ethics and Private Code of Ethics many companies or industries have internal ethical codes iii Ethical Uncertainty refers to grey areas in the law that make it difficult to predict how a court will apply a given law to a particular action II Business Ethics and Social Media a Hiring Procedures prospective employers will conduct Internet searches to determine a job candidate s online presence or lack thereof b Using Social Media to Discuss Work Related Issues NLRB has rules that employees can freely associate with each other and have conversations about common workplace issues without employer interference c Employee Ethics what are the consequences of employee negativity on social media III Ethical Principles and Philosophies a Duty Based Ethics focuses on the obligations of the corporation deals with standards for behavior that come from religious authorities or philosophical reasoning i Religious Ethical Principles provide that when an act is prohibited by religious teachings it is unethical also involve compassion ii Principles of Rights idea that people have certain rights that must be balanced iii Kantian Ethical Principles referencing Immanuel Kant based on idea that people should be respected because they are qualitiatively different from other physical objects individuals should evaluate their actions in light of what would happen if everyone acted the same way b Outcome Based Ethics Utilitarianism theory that focuses on the consequences of an action an action is right when it produces the greatest amount of good for the greatest number of individuals i Determination of who will be affected ii Cost Benefit Analysis an assessment of the negative and positive effects of alternatives on those affected iii Choice among alternatives that will produce maximum societal utility c Corporate Social Responsibility the question of corporate social responsibility concerns the extent to which a corporation should act ethically and be accountable to society in that regard i Stakeholder Approach stakeholders include employees customers creditors suppliers and the community within which a business operates It is sometimes said that duties to these groups should be weighed against the duty to a firm s owners ii Corporate Citizenship corporations are sometimes urged to actively promote social goals IV Making Ethical Business Decisions a A Systematic Approach can help a business person eliminate various alternatives and identify the strengths and weaknesses of the remaining alternatives involves 5 steps i Inquiry what is the problem ii Discussion what are the possible actions iii Decision iv Justification what is the reason for the proposed action v Evaluation was the solution effective b Other guidelines to making ethical decisions i The law is the action legal ii Business Rules and procedures is the action consistent with the company policies and procedures iii Social values is the proposed action consistent with the spirit of the law even if not specifically prohibited iv Your conscience How does your conscience regard your plan Can your plan survive the glare of publicity v Promises to others Will your action satisfy your commitments to others inside and outside the firm vi Heroes How would your hero regard your action c The Importance of Ethical Leadership managers must apply the same standards to themselves as they do the company s employees i Attitude of Top Management management behavior sets the tone for ethical employees employees take their cues from management ii Behavior of Owners and Managers can negatively impact business iii Sarbanes Oxley Act requires companies to set up confidential systems to that employees and others can raise red flags about suspected illegal or unethical auditing and accounting practices V Global Business Ethics a Monitoring the Employment Practices of Foreign Suppliers concerns include the rights and the treatment of foreign workers who make goods imported and sold in the US by US firms b Foreign Corrupt Practices Act FCPA side payments to government officials in exchange for favorable business contracts are not unusual in some countries nor are they considered to be unethical i Prohibition against the Bribery of Foreign Officials FCPA prohibits US businesspersons from bribing foreign officials to secure advantageous contracts ii Accounting Requirements accountants may be subject to penalties for making false statements in records or accounts iii Penalties for Violations business firms may be fined up to 2 Million individuals may be fined up to 100K and imprisoned for up to 5 years