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What is Business Ethics ?

Business Ethics
The application of general ethical concepts to the unique situations confronted in business. It asks what is right or wrong behavior in business and what principles or rules can be used as guidance in business situations.

Two Characteristics
Tells people what they ought to do
Set of principles or rules

Why Study Ethics?
Will not make you more ethical
Help in trying to do the right thing

What is Ethics?
Ethics and Religion
Ethics and Social Responsibility Ethics - two levels of concern individual organizational
Soc. Responsibility - Win -Win
Ethics - Don’t do things that may be in your own self interest

Relativism Egoism Utilitarianism Deontologism The 4 Concepts of Ethics

Concepts of Ethics
Developed by moral philosophers over generations
Used to distinguish ethical from unethical behavior
Each has problems

Relativism
There is no universal standard by which morality can be judged
What is correct for one society may be wrong for another
Ethics and morality are relative
What do you think of this?

Relativism - Problems
There are no absolutes - murder, slavery, torture, rape OK
What is meant by a society? Sub-societies
Leads to conclusion - each person’s opinion is correct
Nothing that anyone does is morally wrong

Egoism
One ought to act in his or her own self interest
Ethical behavior is that which promotes one’s own self interest
Does not mean should not obey laws - only do so if in self interest

Egoism
What do you think of this concept?
Problem - Externalities associated with private actions - OK to dump toxic wastes as long as don’t get caught

Utilitarianism
The morality of an action can be determined by its consequences
An action is ethical if it promotes the greatest good for the greatest number

Benefits and Costs of an Action to Whomsoever They Accrue
B 1 + B 2 + B 3 + . .+B n > C 1 + C 2 + C 3 + . . .+C n
Then the Action is Ethical
B 1 + B 2 + B 3 + . .+B n < C 1 + C 2 + C 3 + . . .+C n
Then the Action is Unethical

Utilitarianism Example
Harry Truman and Decision to Drop Bomb on Japan

What do you think of this concept?
How do you quantify benefits and costs?
How do you value benefits and costs?
Can lead to unjust consequences
Restrictions against the majority to protect a minority is not utilitarian

Deontologism
Derived from the Greek word for Duty
Actions are not justified by their consequences. Factors other than good outcomes determine the rightness of actions

Utilitarianism Vs. Deontologism
Utilitarianism - The ends justify the means
Deontologism - It is the means which are important

Catagorical Imperative
Developed by Immuel Kant
“I ought never to act except in such a way that I can also will that my maxim should become a universal law”
Are you willing to permit everyone to adopt the action?
Yes - Moral No - Immoral

Guidance in Dealing with People
People should never be treated as a means to an end, but as ends in themselves
To treat people as ends requires respect for persons
Reject slavery
Deals with murder, rape, etc
How to deal with employees

General Ethical Behavior
Builds security, friendliness, cooperation and trust in a society
These are public goods created by generally ethical behavior

What are Characteristics of Public Goods?
Not subject to exclusion - cannot exclude people from consumption even if they do not contribute
Joint Supply - Provide for one individual, provide for all
Free Rider Problem

Catagorical Imperative and Public Goods
Security, Friendliness, Cooperation and Trust
Not Subject to Exclusion
Joint Supply
Free Rider Problem

Examples
Is it Ethical to Rob Banks?
Is it Ethical to Give Everyone in this Class an A?

What Do You Think of Deontologism?
Conflicts between duties
Utilitarians argue that secretly appeal to consequences to demonstrate the rightness of actions

Ethical Tests

Is It Legal Test? Quadrant II Ethical and Illegal Quadrant IV Unethical and Illegal Quadrant I Ethical and Legal Quadrant III Unethical and Legal Ethical Unethical Legal Illegal Corporate Decisions Codification Manifestation

Ethical Tests
1. Is It Legal? I Ethical - Legal II Ethical - Illegal III Unethical - Legal IV Unethical - Illegal
I and IV Easy
II and III Difficult

Ethical Tests
2. Benefit Cost Test Do the benefits exceed the costs to whomsoever they accrue?
3. Categorical Imperative Are you willing to allow everyone to practice the proposed action or do you want to be a special case?

Ethical Tests
4. Light of Day Test What would be your reaction if the action were brought out into the open for public scrutiny?
5. Do Unto Others Test Golden Rule - If you would like others to do the same to you - passes the test

Ethical Tests
6. Ventilation Test Seek out others views. Discuss the 5 tests with them. If others feel it is OK - passes the test

Examples
Robbing a Bank
Driving Above the Speed Limit
Cheating on an Exam
Having Sex with an Intern

Ethical Dilemmas in Business
Conflict of Interest Have two interests - cannot purse one without having negative impact on other
Two Types Private Interest Conflicts with Corporate Business Interest Conflicts with Public

Conflict of Interest Mini Case
Personnel Director
Brother - in - law out of work
Lackluster performer
Unemployment about to run out - will loose house
Sister asks you to recommend him for job
What would you do?

Whistleblowing
Act of disclosing wrongdoing in an organization
Like blowing a whistle to call attention to a thief
Types Internal External

Can Cause Bitterness in Organization
Dissent - Must speak out against others in organization
Breach of Loyalty - Perceived as one who violates confidentiality and loyalty
Accusation - Singles out specific individuals as threats to organization or the public

Possible Retaliation
Fired
Blacklisted
Transferred to undesirable locations
Lifestyles, sex lives and mental stability questioned
Physical abuse and murder possible

Failure to Reveal Wrongdoing
Severe problems for society or organization
Can be implicated as an accessory before or after the fact

Ethics of Whistleblowing
When is it ethical to reveal wrongdoing ?
When is it ethical to remain silent?

Whistleblowing Example
In charge of Quality Control
Company makes parts for automobile brakes
Find defect in brake part
Could cause failure in brakes
Failure not certain
May take many years to develop

Whistleblowing Example (cont.)
Go to VP of Production, your boss
He tells you to overlook defect - company may loose too much money
What would you do?

Challenger Disaster
Morton-Thiokol
“O” rings
Cold in Florida
Engineers warned “O” Rings could fail
NASA management made decision to launch Space Shuttle anyway

Cautious Approach to Whistleblowing
1. Make sure situation involves an imminent threat to society or to the business
2. Document all allegations
3. Examine internal whistleblowing first
4. Should you remain anonymous?
5. Get another job first!!!

Bribery
A payment, usually to a public official, to induce that person to either do something improper or to influence decisions or actions
Extortion - same as bribery - recipient of payment initiates transaction

Case
International consulting firm - designs and supervises construction of hydroelectric power generating systems
Your proposal is far superior to any other technically lowest bid
To get job, must deposit $250,000 in official’s personal Swiss bank account

Should you pay the money?
Foreign Corrupt Practices Act of 1997
Grease payment allowed
Standard Practice in most foreign countries
Results in lost business opportunities for US companies
American tax dollars may be used to pay bribe

Bluffing and Deception
Negotiating a labor contract
Plant has experienced losses over past several years - not clear why
Want concessions from labor
Tell labor that plant will be closed if no concessions are made. In reality , no such plans contemplated
Is This Ethical ?

Managerial Implications
Top Management Leadership Organizational Culture
Realistic Goal Setting
Ethics Audit
Code of Ethics
Ethics Committee

Managerial Implications
Ethics Advocate
Whistleblowing Mechanism
Ethics Training

Polaroid in and Out of South Africa
Apartheid System
17% White 70% African
Whites only could be in government, possess firearms
Enforced segregation of races
Blacks relegated to “native reserves”

Apartheid (cont.)
Blacks allowed to own 13% of land
Whites - 87%
Black workers paid less than Whites

US Involvement in South Africa
320 American companies there
American companies controlled 43% of petroleum market 23% of auto sales 70 percent of computer business

Polaroid
Rumors that products used in Pass Book System
Commission to South Africa No sales to government Improve salaries for Blacks for local distributors and suppliers Training program so Blacks could take better jobs Some profits for Black education

Success of Program
Improvements in Black salaries, advancement and benefits
Principle of same pay for same job accepted
Ban on direct sales successful
Ban on indirect sales not successful

Sales to Government through Frank and Hirsch
Secretly selling Polaroid products to government
Billed as shipments through drugstore in Johannesburg
Polaroid terminated its involvement in South Africa

Ethical Questions
What is the ethics of American companies doing business in a country with human rights abuses?
Was Polaroid responsible for the use of its products?
Are companies responsible for the use of their products?

Ethical Questions
Was Polaroid’s presence a positive or negative influence on Blacks?
What is happening in South Africa today?

Be 1

by Sonu Sharma

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Be 1

by Sonu Sharma

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