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Unformatted text preview: Chapter 3
BUSINESS ETHICS, SOCIAL FORCES & THE LAW Business Ethics, Social Forces & Law
4 Components to Analyze Chapter 3
1. What is the role of ethics in business and in law? 2. What are methods for recognizing ethical dilemmas ? 3. What are the questions to address when resolving ethical dilemmas? 4. How do e-commerce and ethics affect each other? 2 What is Business Ethics?
Business ethics - the application of values and
standards to business conduct and decisions. When a business upholds basic ethical standards, it will enjoy the competitive advantage of a good reputation and, over the long term, better earnings. When a business violates ethical standards, social forces are set into motion, sometimes leading to changes in the law. 3 What is Business Ethics? Morality v. Legality not always in agreement;
there are different standards for evaluation Law as the Standard for Business Ethics. Positive Law: if an act is legal it is `moral.' Natural Law: higher standards for ethics. A law can be legal but unethical. Universal Standards for Business Ethics. Situational Business Ethics/Moral Relativism Flexible standard that allows examination of circumstance and motivation. Business Stakeholder Standard of Behavior (see figure 31 in text). Takes into account the position of the party and the goals that they have under the circumstances 4 Why is Business Ethics Important? Importance of Trust "Carrot rather than the stick" clich; one
of the underpinnings of capitalism; investors, customers, businesses all have to believe in each other and the system for it to work; there has to be more than just positive law and mandatory behavior; in order to attract people and business, you have to be trustworthy; Relationship to Financial Performance poor value choices have an impact Enron stock price fell $83 to $.15 per share Worldcom multiple convictions; company bought out; Arthur Anderson accounting firm for Enron & Worldcom; company was liquidated; Columbia Health Care shares dropped 58%; 93% drop in earnings; sold off hospitals and paid fines;
5 Why is Business Ethics Important? Good Reputation breach of ethics can hurt the
reputation of a company and destroy trust; no one will want to work with you or for you; WalMart banning certain products for sale; some people more likely to shop now; Sears Roebuck Auto Centers settled fraud claim; people less likely to have cars repaired; Beech Nut apple juice with no apple juice in it; happened in 1986 sales still have not recovered;
6 Cycle of Social Interaction Social Forces
Social Environment Ethics Law 7 Public Policy, Law, & Ethics
Legislation & governmental regulation response to abusive and unfair business activities Procter & Gamble laws used to change the company's high-risk investment behavior; Countrywide Mortgage with foreclosures on the rise, there is a push to protect consumers who will be subject to foreclosures Car leases now regulated by the Federal reserve; nature of credit rather than purchase
8 Public Policy, Law, & Ethics
Protection: of the state, the person, public health, safety and morals. of property and personal rights. from exploitation, fraud, and oppression. of creditors and rehabilitation of debtors. Enforcement of individual intent. Furtherance of trade. Stability and flexibility.
9 Public Policy, Law, & Ethics STUDY HINTS: Look for balancing of interested where needs of the state/society and the needs of the individuals are in conflict One act can be both a crime and a tort (criminal wrong & civil wrong) at the same time "Property" can be personal property, real property (land/ real estate), intangible property (bank accounts), and intellectual property (books, music, software) There is no such thing as "debtor's prison"; not a crime to not pay debts 10 Public Policy, Law, & Ethics
STUDY HINTS: Law making - Courts making decisions on cases that have no clear law or prior decisions will extend reasoning from similar cases (predictability and stability) Law making Constitutions are more difficult to change than statutes In order for there to be flexibility in interpreting law Create exceptions to the rule of law Apply general terms to duties 11 Categories of Ethical Behavior Integrity and Truthfulness adhering to one's values
despite costs & consequences ("stay the course"; "stick to your guns") Promise-Keeping reputation can be affected; ex Maulden Mills textile company & employees; promised to rebuild and keep employees Loyalty - Avoiding conflicts of interest; accepting personal gifts from customers Fairness evaluated from different parties' perspectives Doing No Harm basic rule of business Maintaining Confidentiality duty of confidentiality to employer 12 How to Analyze Ethical Dilemmas
Define the problem. Identify who could be injured. Define the problem from opposing viewpoint. Would you be willing to tell your family about your decision? Would you be willing to tell the community? Reach a decision.
13 Resolving Ethical Dilemmas Blanchard and Peale Test. Is it legal? Is it balanced? How does it make me feel? Would I want my decision published? Front-Page-of-the-Newspaper Test. Laura Nash Test. Requires examination from all perspectives. Is my conduct compliant with the law? What contribution does this action make to others? What are the consequences?
14 Wall Street Journal Model (3 C's model). ...
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This note was uploaded on 05/03/2008 for the course BMRT 21000 taught by Professor Jonathandpoliti during the Fall '07 term at Kent State.
- Fall '07