Why Business Ethics

1
Why Business Ethics?

• Ethical errors can end careers
• Framework for business operations
• Profitability
• Lower costs
• Personal well-being
• Good will/reputation

2
Executives Comments on Reputation

• A reputation good or bad, is tough to shake.
• - Richard Teerlink (CEO, Harley-Davison)
• If we were making that decision now in light of
  the press scrutiny we have been receiving, we
  probably would not have taken that risk.
• - Robert C. Winters (Chairman, Prudential
  Ins.)
• A bad reputation is like a hangover. It takes a
  while to get rid of, and it makes everything else
  hurt.
• - James Preston (CEO, Avon)

3
Why Poor Ethical Conduct?

• Employers over look it
• Belief it wont be discovered
• Hard to place blame
• Lack of clear ethical culture
• Personal gain
• Corporate/supervisor pressure
• Corporate gain

4
Types of Ethical Dilemmas

• Individual Values and the Business
• Business and Employee Rights
• Business Operations
• Business and Its Competition
• Business and Its Product
• Business and Its Stakeholders

5
Sources of the Business Ethos
BUSINESSETHICS
RELIGION
LAW
PHILOSOPHY
CULTURE
6
Aristotles Theory of Responsibility

• You are responsible for your actions unless they
  are involuntary. The two factors that create
  involuntariness are
• 1. IGNORANCE of facts or consequences of
  an act
• 2. INCAPACITY to perform an action due
  to
• a. high costs
• b. no power
• c. no alternative
• d. external force
• CAUTION There are some things such that a man
  cannot be compelled to do themthat he must
  sooner die than do, though he suffer the most
  dreadful fate.
• Aristotle in The Nicomachean Ethics

7
Factors that Shape Business Ethicsin Other
Countries

• HISTORICAL EXPERIENCE
• CULTURAL
• PHILOSOPHY and RELIGION
• STAGE OF ECONOMIC DEVELOPMENT

8
Moral Guidelines for Multinational Companies

• No intentional direct harm
• Produce more good than bad for host
• Contribute to hosts development
• Respect human rights
• Pay fair share of taxes
• Respect local culture
• Cooperate with the local government

9
Factors Influencing Managerial Ethical

• Leadership
• Strategy and performance
• Corporate culture
• Individual characteristics
• Interrelatedness

10
How to Build in Ethics

• TOP MANAGEMENT COMMITMENT
• MISSION STATEMENT
• ETHICS CODE
• POLICIES/PROCEDURES
• TRAINING
• WHISTLE-BLOWERS HOTLINE
• ETHICS OFFICER
• INDEPENDENT AUDIT
• DISCIPLINARY ACTION

11
Principles of Ethical Conduct

• Categorical Imperative
• Conventionalist Ethic
• Disclosure Rule
• Doctrine of the Mean
• Ends-Means Ethic
• Golden Rule
• Intuition Ethic
• Might-Equals-Right Ethic

• Organization Ethic
• Principle of Equal Freedom
• Proportionality Ethic
• Rights Ethic
• Theory of Justice
• Utilitarian Ethic
• Virtues and Character Development

12
The Principle of Double Effect

• When both good and evil consequences result from
  an action, it is ethical if three conditions are
  met
• 1. Good effects outweigh evil
• 2. Intentions are good
• 3. No better alternative exists

13
The Rights Ethic

• REFERS TO ENTITLEMENTS THAT PEOPLE HAVE, FOR
  EXAMPLE, TO LIFE, LIBERTY, SPEECH, HAPPINESS,
  PRIVACY,RELIGION, FREE CONSCIENCE
• CONFERRED AS NATURAL RIGHTS or
• CONFERRED AS CIVIL RIGHTS CONSTITUTIONS STATUTES
  COMMON LAW
• CORRELATED WITH DUTIES
• NOT ABSOLUTE

14
Three Spheres of Justice

• Distributive Justice
• Laws and rules apply consistently
• Discrimination only for fair/relevant reasons
• Rewards proportionate to efforts and achievements
• Retributive Justice
• Fairly impose blame
• Punishment proportional to crime
• Compensatory Justice

15
John Rawls Theory of Justice

• Each person is to have an equal right to the most
  extensive basic liberty compatible with a similar
  liberty for others.
• Social and economic inequalities are to be
  arranged so that they are both
• Reasonably expected to be to everyones advantage
  (and no action should be taken that does not
  improve the lot of the least advantaged), and
• Attached to positions and offices open to all

16
Utilitarianism

• Obligation/duty is to perform the action that
  will result in the greatest possible balance of
  good over evil
• Objections
• Hard to measure happiness or utility
• Confuses good of community with good of
  individual(s)
• Consequences cannot be predicted
• What is a benefit? What is a cost?

17
Suggestions for Making Ethical Decisions

• Use Rational Terms
• Use Decision Making Tactics
• Set Ethical Priorities
• Commit Publicly
• Be a Role Model
• Act, Follow Through
• Develop Sympathy and Charity
• Others

18
Valasquesz 7 Step Model

• What are relevant facts?
• What are ethical issues?
• Who are primary stakeholders?
• What are the possible alternatives?
• What are the ethics of the alternatives?
• What are the practical constraints?
• What actions should be taken?

19
Valasquesz 7 Step Model (cont.)

• Ask 5 questions
• What are benefits and harms of each alternative
  which leads to best overall consequences?
• What moral rights do affected parties have
  which action best respects those rights?
• Which action treats all the same, except where
  morally justifiable?
• Which course advances the common good?
• Which course develops moral virtues?

20
Why Ethical Decisions Are Difficult

• Facts do not dictate values
• Good and evil are interlocked
• Knowledge of consequences is limited
• Multiple stakeholders make competing claims
• Competing interests use incompatible ethical
  arguments
• Standards vary with time and place
• Humans are imperfect
• Current realities pose new novel conflicts
• Large organizations are ethically complex