Chapter 2 Ethics and Business Decision Making Ethics Moral Principles and values applied to social behavior Business ethics What constitutes right or wrong behavior and the application of moral principles in a business context Profit Maximization Attempt to maximize profits Long Term Profits are caused to suffer due to lawsuits large settlements and bad publicity Short Term The more common reason that ethical problem occur in business Moral Minimum The minimum degree of ethical behavior expected of a businessperson which is usually defined as compliance with the law Stock Buyback The purchase of shares of a company s own stock by that company on the open market Stock Option An agreement that grants the owner the option to buy a given number of shares of stock at a set price usually within a specific time period Sarbanes Oxley Act Legislation enacted in response to the high profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise The act is administered by the Securities and Exchange Commission SEC which sets deadlines for compliance and publishes rules on requirements Sarbanes Oxley is not a set of business practices and does not specify how a business should store records rather it defines which records are to be stored and for how long Ethical Reasoning A reasoning process in which an individual links his or her moral convictions or ethical standards to the particular situation at hand Categorical Imperative An ethical guideline developed by Immanuel Kant under which an action is evaluated in terms of what would happen if everybody else in the same situation or category acted the same way Principle of Rights The belief that human beings have certain fundamental rights Whether a business action or decision is ethical depends on how it affects the rights of carious groups such as owners employees consumers suppliers the community and society Conflicting Rights Resolving Conflicts Utilitarianism An approach to ethical reasoning in which an action is evaluated in terms of its consequences for those whom it will affect A good action is one that results in the greatest good for the greatest number of people Cost Benefit Analysis A decision making technique that involves weighing the costs of a given action against the benefits of that action Corporate Social Responsibility The idea that corporations can and should act ethically and be accountable society for their actions Stakeholder Approach A corporation would consider the impact of its decision on the firm s employees customers creditors suppliers and the community in which the corporation operates Corporate Citizenship Making Ethical Business Decisions 1 The law 2 Rules and procedures 3 Values 4 Conscience 5 Promises 6 Heroes Practical Solutions to Corporate Ethics Questions Inquiry 1 2 Discussion 3 Decision 4 5 Evaluation Justification
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