When adopting duty-based ethics, corporations often demonstrate the duties they owe

Business Ethics, An Introduction�

Chapter 40

Ethics: Moral principles and values applied to social behavior.� A reasoned set of principles of conduct.� Usually has a religious underpinning, which is logical.

Business Ethics:� Moral principles and values applied to situations arising in a business setting.

In other words, the fairness, rightness, or wrongness, if you will, of an action.

If you have ever seen the movie �Wall Street� with Michael Douglass, you probably recall his character Gordon Gekko, who basically espoused that �Greed is Good.��

You might question his approach to ethics.

Than again, maybe you wouldn�t!

Unfortunately, companies have conflicting duties: to make a profit, to work efficiently, and still stay within the law or suffer dramatic consequences.� As you might imagine, it is sometimes like putting a square peg into a round circle.

For example, a company can make a higher profit if it uses overseas labor or raw materials, but what about the legality and ethics of such a decision?

It would seem in recent years there has been an emphasis on the bottom line, rightly or wrongly.

Legal versus Ethical

Questions generally asked by companies:

Is the proposed action: ��

profitable? If so, is it:

��������������������������������������������������������� Legal?

��������������������������������������������������������� Ethical?

Notice the ordering.

Legal Behavior:� many actions are clearly legal or illegal, but many items also fall into a gray area.

While legal compliance is achieved, i.e., a minimum accepted standard, what about

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Advertising- how far can we stretch the truth and get away with it and attract new customers?

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Product Misuse?�� Are we responsible for the foolishness of consumers?

How can a company defend itself when pushing the limits?

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General �rule�: if the company can demonstrate that it has acted in good faith and responsibly, it has a good opportunity to defend its actions.

So,� following the law makes many ethical decisions for us.

�This is often called the �moral minimum�

Well, just because it is legal, does it make it ethical? Lets see:

Ethical behavior: even when a contemplated action is legal (or even illegal), business decision makers must also consider whether the action is ethical.�

Certain guides are available to meet or exceed the moral minimum (usually legal compliance).

General Guides for such compliance:

�        Corporate or professional codes of ethics.

�        Optimizing� (making the best) versus maximizing (making the most) behavior (more on this later)

�        Public opinion and sentiment- i.e, the general public, what does it want or perceive?; and

�        Personal Morality ( Gordon Gekko??)

Let�s get back to the conflicting �duties� of the company previously noted above.

So, just what are the priorities among the various folks involved?

�        Shareholders:����� Their concern is profits and return on their investment.� And, they want a �good� company.

Versus:

�        Employees:� they are concerned about their wages, jobs and benefits. They want to work for a �good� company.

Versus:

�        Consumers (advocates): those vocal groups who are upset when products are introduced that hurt the user, environment or other similar such situation.� Recall the boycotts of Exxon during Exxon-Valdez mess in Alaska.

Query:

What if a toy company produced a product that might have dangerous fluid in a teething ring, but yet no one had ever complained or been injured?� Should they stop, fix, recall or remove the product?� Or should they wait?

What about the book�s example of selling glue � as you might recall, some users were misusing the product and causing injury to themselves.� That isn�t the intent of the product.� Are they responsible?

�        Under utilitarian approaches, all that matters is what is the best for the most matters.� Here the item wasn�t illegal.

�        Contrast: under the duty based Kantian approach, it is hard to defend any product that hurts people, even if due to misuse by the persons using it.�

Business Ethics- Duty versus Outcome

Duty based Ethics:� based on underlying concept of duty regardless of consequences of action taken.� Usually arise from religious belief and/or philosophic reasoning, i.e., compassion, basic rights.

�        Recall� Kantian:� moral- each of us is unique.� If treated as a means to an end, people become objects.� Therefore, if even one person is/could be hurt, there needs to be corrective action.

Compare:� Outcome based ethics:� Ethics based on the consequences of action taken or foresworn, without regard to any underlying concept of duty or morality- situational ethics.

Outcome based ethics = Utilitarianism dictates that a decision to act or not act should be directed towards producing the greatest good for the greatest number of people.� Occasional �injury� to individuals is therefore an acceptable risk.

This, of course, is a cost benefit analysis.�� In other words, who will be affected by the action; the cost/benefit of such an action, and a choice among alternative actions that produces the greatest return or social utility.

Is it right to allow (non-voluntary or without the subject�s knowledge) drug testing on people if it helps many people?�

Doesn�t this fly in the face of human individuality and rights?� Similar to the Nazi�s in the concentration camp?�

So, how does a business consider the issues from a more common perspective- its profits?

Maximum vs. Optimum Profits

Maximum profits implies maximum return without considering other factors, such as legality and morality.

Optimum profits �implies the maximum return you can achieve within legal and moral constraints

Example:� you could make huge (maximum) profits selling a controlled substance illegally. �You would make optimum profits selling the same controlled substance following all rules and ethical considerations.

Thus in summary:

Is it �� Profitable?

��������� Legal?

��������� Ethical?� Really, it depends on the first two questions.

Employment Relationships- Ethical Behavior

Some common elements, forgetting a moment about the Legality of the situation:

�        Sexual harassment- who has the responsibility- the company or the individual? More on this in the labor section.

�        Downsizing (laying off) of persons- is your severance notice via e-mail or voice mail ethical? What about giving you 10 minutes or less to pick up your personal effects before you are escorted out of the building?

�        Consumer Welfare (Sales activities)

o       Product misuse� (change of the buyer beware to seller beware)

o       Duty to warn (except where open and obvious- like a knife)

So, what is ethical?� All I can say is that the standard is constantly evolving, and you will be part of that changing target!

Other �ethical issues�/laws

Foreign Corrupt Practices Act:� A law to prevent the paying of bribes to foreign government officials, a practice that was once common.� Established in 1977.� Sometimes called the Internal auditors job enhancement act.

Foreign Suppliers employment issues (recall Nike?)

What is a corporate responsibility based ethics code?

Where are duty based ethical standards derived from?

What are the 7 business ethics?

When making ethical decisions a business should evaluate the financial implications quizlet?