Unformatted text preview: THE LEGAL ENVIRONMENT OF BUSINESS CHAPTER 8 Ethics, Social Responsibility, and the Business Manager * " Overview
This chapter addresses the following questions: What is business ethics? What does social responsibility mean? What purposes do codes of ethics serve? Do people have different perspectives on what a business should do if it wants to be socially responsible? Ethics and the Law Law Ethics Introduction
Notorious Cases: Union Carbide Bhopal Disaster Union Bridgestone-Firestone & Ford Bridgestone Explorer Cases
Ethics is involved when decisions are made that affect the lives of others.
4 I. Business Ethics and Social I. Responsibility
Ethics: The study of what makes up good and bad conduct inclusive of related actions and values. q J W< 3 ( Business ethics: The study of what makes up good and bad conduct as related to business activities and values. q W< 3 ( The Social Responsibility of Business *
Definition: Concern of business entities about profit and nonprofit activities and their unintended impact on others directly or iindirectly involved. ndirectly J' ' æWcJ-.æW # ëc J 0 #
6 The Social Responsibility of Business (Cont.)
Factors: Complexity and interdependence of Complexity society Political influence that translated public Political outcry into government regulations Philosophical differences over the role Philosophical of business Social Responsibility Exxon Valdes
Facts: Jury awarded $5B in punitive damages against Exxon Valdes because their oil tanker, captained by a known alcoholic, carrying 53M gallons of crude oil, ran aground in Alaska, seeping 11M gallons which disrupted all the fisheries. Issue: Was the $5B excessive? Key factor: reprehensibility of the defendant’s conduct
8 II. Theories of Ethical Thought
Consequential or Utilitarian / () – focus on consequences Deontological duties * () – focus on – focus on Humanist 0 () improving human life 9 Consequential / Utilitarianism
Act Utilitarianism ( () :
Does the act bring net happiness? If not, don’t do it. Rule Utilitarianism ): ( If the act were a general rule, would it bring net happiness?
10 Deontologists * ()
Immanuel Kant: “Categorical Imperative” " Actions are judged on the basis of their universal application: good or bad? Everyone is rational, has free will, and is to be treated equally—never as a means to an end Actions are intrinsically good or bad, regardless of any consequences
Intelligence Wisdom Self-restraint 0 () Human Capacities: V %PV Even bribery can be considered ethical if it achieves these human capacities.
12 III. Code of Ethics
Individual Corporate Industry Professional
Accounting Insurance and Finance Law & 13 Corporate Codes 0 & Widely used Apply to management Include sanctions 14 Industry Codes
Adopted by associations Inspirational statements & Issue: Most associations are formed primarily to advance economic and political opportunities for their members, not to regulate themselves. 15 Professional Codes
Professionals defined: Educational requirements Educational Licensing requirements Licensing & Written and enforceable ethical standards Written Formal status as organization Formal Formally recognized as such by public Formally
16 Professional Codes
Professional codes may conflict with company or association codes. Management must recognize that conformity with professional code will have priority. 17 Examples of Professional Codes
AICPA Code of Professional Ethics and Interpretive Rules Insurance
ASCLU Guides to Professional Conduct Law
ABA Model Rules of Professional Responsibility and State Bar Associations 18 Schools of Social Responsibility *q
Profit-Oriented School í q Managerial School q Institutional School q Professional Obligation School )q Regulation School )Åq
19 Profit-Oriented School
The purpose of business is to increase value for shareholders. Managers who serve this goal are demonstrating social responsibility. Unintended negative consequences are external to the corporate financial picture. “Social costs” are matters for the government not corporations. See State Farm v. Campbell –must determine the “degree of reprehensibilty of defendant’s conduct” in awarding punitive damages. 20 Managerial School
Many large businesses have stakeholders as well as stockholders. Management should strive to serve both internal and external groups. Management should also strive to maximize long-term as well as short-term goals.
21 Institutional School
Business has responsibility to benefit all of society. Business should be held responsible for all actions, just as individuals presently are.
22 Professional Obligation School
Business managers should be ‘professionalized’ Licensing based on state/national test Codified responsibilities License revocation sanction for violations 23 Regulation School
Business is accountable to government regulators. Issue:
How much regulation is enough? Government seat on board of directors Government Independent audits Independent Increased reporting requirements Increased
24 Global Dimensions
U.N. Code of Conduct for Transnational Corporations Respect for sovereignty Adherence to sociocultural values Respect for human rights Anticorruption 25 Summary
Ethics Business ethics Ethical theories Schools of Social Responsibility Global dimensions and responses 26 ...
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