Chapter 4 Business Ethics

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Chapter 4Business Ethics
OXYMORON?
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ACCOUNTING SCANDAL 1
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ACCOUNTING SCANDAL 2
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ACCOUNTING SCANDAL 3
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CEO GREED 1
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CEO GREED 2
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INSIDER TRADING
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Is business ethics an oxymoron?
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Todays Plan

• Profit-motive and greed
• Wall Street
• Philosophy of Ethics
• Why ethics is particularly challenging in
  business
• Class Exercise Selling Cigarettes

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Is business ethics an oxymoron?

• profit-motive / self-interest / greed
• some say no difference
• business inherently wrong
• greed is good

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Is business ethics an oxymoron?

• Milton Friedman
• moral obligation
• make as much money as possible
• obey the law
• the business of business is business
• governments responsibility
• race to the bottom

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Is business ethics an oxymoron?

• Critique Milton Friedmans view. What are the
  problems with the view that the business of
  business is business?
• After considering a summary of Friedmans
  position and some critiques of it, what do you
  think? Does a business have any obligation
  beyond making money and obeying the law? If so,
  give some examples.

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Philosophy of Ethics

• Two most commonly held schools of thought
• Consequentialism
• Deontology
• (There are others)
• No wide spread agreement on which approach to
  ethics is most valid

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Consequentialism

• the belief that what ultimately matters in
  evaluating actions or policies of action are the
  consequences that result from choosing one action
  or policy rather than the alternative.
• consequences of all affected persons
• e.g. why should Enron have disclosed its true
  liabilities?
• e.g. lying to Nazi prison guards

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Questions for Consequentialism

• What is a good consequence and what is a bad
  consequence? Pleasure and pain?
• Experience machine?
• How should we rank good consequences and bad
  consequences when we face a trade-off?
• e.g. forestry practices
• Is morality determined by actual consequences or
  expected consequences?
• e.g. drunk driving

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Questions for Consequentialism (contd)

• What about personal rights?
• Is it right to kill one person if that killing
  saves 4 other people?
• Consequences to whom?
• How heavily should one consider the consequences
  to oneself, or to ones friends?
• What about animals, the environment, fetuses,
  etc.

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Consequentialism (contd)

• Utilitarianism
• One form of consequentialism
• greatest good for the greatest number

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Consequentialism (contd)

• Some people have criticized consequentialism
  because it implies that child labour practices in
  extremely poor countries might be a good thing.
  What do you think about this criticism?

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Deontology

• Ethical rules
• dont lie
• do for others as you would have them do for you
• Ends dont justify the means
• Nazi prison guard example
• Holding on to political power
• Keeping company alive and thus saving jobs

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Deontology - Kant

• Kantian theory
• Duty to treat people with respect
• Duty to not treat people as a means to your own
  ends
• Implies people have rights
• Problems
• What are those rights? (What are some rights
  that people claim that are open to question?)
• Which rights over-ride others? (e.g. nurses
  right to strike versus peoples right to
  healthcare)

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Deontology Kant (contd)

• Kant criticizes consequentialism by arguing that
  only our own actions are under our control the
  consequences of our actions are often out of our
  control. What do you think of this criticism?

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Ethics and Religion

• Many people get at least some of their ethics
  from religious teachings
• Problem Cant persuade a non-believer with God
  says so.

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Ethics in Business

• Problem 1 Competing Demands
• Opposing interests
• E.g. shareholder interests versus employee
  interests
• Are primary obligations towards those who hired
  you?
• E.g. Coke managers

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Ethics in Business (contd)

• Problem 2 Strong Temptation
• Primarily evaluated based on financial results
• Great results great rewards
• Poor results tough consequences
• E.g. Kenneth Lay positive image kept share
  value up for him
• E.g. Andersen partner in charge of Enron account
  (David Duncan)

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Ethics in Business (contd)

• Problem 3 Group Ethics
• Business activities involves numerous people
• People differ in
• Approaches to ethics
• Views on what is ethical and what is not
• Level of commitment to ethical behaviour
• Hard to get adherence
• Need to be able to persuade

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Ethics in Business (contd)

• Problem 4 Employer Authority
• employee acts on employers behalf
• when disagreement arises, employer may expect
  employee to defer to the employer

Some Advice from Dons Soapbox Dont ever let a
boss or anyone else presume to have the authority
to make your moral decisions for you.
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Selling cigarettes

• Is it ethical to sell cigarettes? Why or why
  not? Try to come up with as many arguments as
  you can for both sides of the issue. But
  formulate a conclusion.
• What types of arguments did you use? Did you use
  either consequentialist or deontological
  arguments? Or perhaps other types of arguments?
  What arguments do you think would be most
  persuasive if you were a middle manager trying to
  change your supervisors mind?

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Is business ethics an oxymoron?
NO!