Business EthicsChapter 4I. Business Ethicsa. Ethics: the study of what constitutes right and wrong behavior; focuses on morality and the application of moral principles in everyday life. Includes:i. Fairnessii. Justnessiii. Rightness/wrongness of an actionb. The Study of Business Ethics: looks at decisions businesses make or have to make and whether those decisions are right or wrongi. Profit maximization: theory whereby resources go to where they are most needed; ideally, leads to the most efficient allocation of scarce resourcesii. Rise of Corporate Citizenship: corporation is looked at as a person,and is expected to participate in bettering communicates and societyiii. When making business decisions, businesses should evaluate: 1. Legal implication of each decision2. Public relations impact3. Safety risks for consumers and employees4. Financial implicationsc. Importance of Ethics in Decision Makingi. 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 profitsd. The Relationship of Law and Ethics: what is legal is not always ethicali. Moral Minimum: compliance with the law is the minimal acceptable standard for ethical business behaviorii. Ethics and Private Code of Ethics: many companies or industries have internal ethical codesiii. 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 actionII. Business Ethics and Social Mediaa. Hiring Procedures: prospective employers will conduct Internet searches to determine a job candidate’s online presence, or lack thereofb. 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 interferencec. Employee Ethics: what are the consequences of employee negativity on social media?III. Ethical Principles and Philosophiesa. Duty Based- Ethics: focuses on the obligations of the corporation, deals with standards for behavior that come from religious authorities or philosophical reasoningi. Religious Ethical Principles: provide that when an act is prohibitedby religious teachings it is unethical; also involve compassionii. Principles of Rights: idea that people have certain rights that must be balancediii. Kantian Ethical Principles: referencing Immanuel Kant, based on idea that people should be respected because they are qualitiativelydifferent from other physical objects; individuals should evaluate their actions in light of what would happen if everyone acted the same wayb. 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 individualsi. Determination of who will be affectedii. Cost-Benefit Analysis: an assessment of the negative and positive effects of alternatives on those affectediii. Choice among alternatives that will produce maximum societal utilityc. 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 regardi. 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 beweighed against the duty to a firm’s ownersii. Corporate Citizenship: corporations are sometimes urged to actively promote social goalsIV. Making Ethical Business Decisionsa. A Systematic Approach: can help a business person eliminate various alternatives and identify the strengths and weaknesses of the remaining alternatives; involves 5 stepsi. Inquiry: what is the problem?ii. Discussion: what are the possible actions?iii. Decisioniv. 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 employeesi. Attitude of Top Management: management behavior sets the tone for ethical employees; employees take their cues from managementii. Behavior of Owners and Managers: can negatively impact businessiii. 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 practicesV. Global Business Ethicsa. 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 firmsb. 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 unethicali. Prohibition against the Bribery of Foreign Officials: FCPA prohibits US businesspersons from bribing foreign officials to secure advantageous contractsii. Accounting Requirements: accountants may be subject to penaltiesfor making false statements in records or accountsiii. 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