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?)