ethics ch1

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Copyright 2011 by The McGraw-Hi ll Companies, I nc. All ri ghts reserved.McGraw-Hill/Irwin

AN INTRODUCTION TO

BUSINESS ETHICS

CHAPTER ONE: WHY STUDY

ETHICS?


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Discussion Case: Madoff

Madoff pleads guilty to 11 counts of financialfraud and theft in March 2009

Is sentenced to 150 years in prison

A Ponzi scheme is a fraud that attracts investorswith a promise of high returns

The perpetrator benefits either by disappearingwith the money or living a wealthy lifestyle by

skimming Many would say this is a complete failure of

government regulations


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Discussion Questions Identify what ethical issues and questions are involved

in the Madoff case.

Identify all the people you think may have beenharmed, and how they were harmed, by the Madofffraud.

Do you think that a scandal such as this is the resultmostly of unethical individuals, or are thereorganizational issues that allowed, encouraged, orwere responsible for the harms? To what degree was

this case mostly a failure of individuals, ororganizational structure, or of government?

Can you imagine anything that would have preventedthe Madoff fraud?


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Why study Business Ethics?

Is it an oxymoron like jumbo-shrimp?

Is it a discipline of sentimentality and

personal opinion?

Whos to say what is right and what is

wrong?

Is there a place for ethics in business?


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The questions today are less about

why or should ethics be a part of

business, than about which ethicsshould guide business decisions

and how ethics can be integrated

within business.


7/37Copyright 2011 by The McGraw-Hi ll Companies, I nc. All ri ghts reserved.McGraw-Hill/Irwin

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Context: Who was harmed by the

collapse of Enron?

Stockholders

Employees

Consumers in California

Suppliers

Enrons accounting firm, Arthur Anderson

The Houston, TX community

Families of employees, investors andsuppliers



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Reasons to be concerned with

Ethics

The Law: In 2002, Congress passed the

Sarbanes-Oxley Act

Financial risks

Reputation and competitive advantage

Consumer boycotts

Efficiency and effectiveness Employee trust, loyalty, commitment and

initiative



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What do managers think?

2003: Deloitte polled 5000 directors of the top

4000 publicly traded companies and reported

that 98 percent believed ethics and compliance

programs are essential to corporate governance. 80% of those surveyed had developed codes of

ethics beyond those required by Sarbanes-

Oxley

90% included statements concerning the

companys obligation to its stakeholders.


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The need to study Business Ethics

If business managers see the need to

focus on ethical behavior, so should

business students

Preparation for career in contemporary

business

Consumers are affected by decisions

made by businesses


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Values and Ethics: Doing Good and

Doing Well

Bui l t to Last: Success ful Habits o f

Vis ionary Companiesby James Collins

and Jerry Porras

Key finding: Exceptional and enduring

companies place great emphasis on a set

of core values

These core values are essential andenduring tenets defining the company, and

not to be compromised for financial gain.


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What are values?

Those beliefs or standards that incline

us to act or to choose in one way rather

than another

A companys core values are those

beliefs and principles that provide the

ultimate guide in the companys

decision-making.


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Corporate Culture

Another way of saying a corporation

has a set of identifiable values.

But there is no right set of core

values.


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Values vs. Ethical Values

What are the ends that our core values

serve?

Financial values serve monetary ends.

Religious values serve spiritual ends.

Aesthetic values serve the end of

Beauty. What ends are served by ethics?


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Elements of Ethical Values

Ethical values serve the ends of human well-being.

The well-being promoted by ethical values isnot personal and selfish well-being.

No one persons well-being is to be countedas more worthy or valuable than any others.

Ethical values promote human well-being inan impartial way.


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Disagreements about Ethics

People disagree about what ethics

commits us to and what ends are

served by ethical values.

Ethical values can conflict, and may

result in serious illness and death to

others.

So how do you decide if a company is

an ethical company?


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Malden Mills

December 11, 1995A fire destroys most ofMalden Mills, the manufacturer of Polartec.

The last major textile manufacturer in town

with 2,400 employees; community lifesblood

Malden Mills provides fabric to L.L. Bean,Lands End, J. Crew and Eddie Bauer

Aaron Feuerstein, the owner pledged torebuild the plant, keep jobs in the communityand pay his employees until work resumes.


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Malden Mills continued

Factory was rebuilt and reopened inone year.

Employees came back to work.

The community seemed to recover.

Malden Mills filed for bankruptcyprotection.

Eventually controlled by creditors. Remaining employees voted to

authorize a strike in December 2004.


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The Nature & Goals of Business

Ethics

Business ethics refers to those values,

standards and principles that operate

within business.

Business ethics is also an academic

discipline that studies those standards,

values and principles while seeking to

articulate and defend the ones thatought or should operate in business.


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But

There is a growing body of literature in

business ethics about the right ways to

teach and learn business ethics.

There are a set of principles, standards,

concepts, and values common to

business ethics.


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Ethical Judgment vs. Behavior

From the time of Aristotle we have

noticed a discontinuity between

judging some act as right and behaving

rightly.

Knowing what is right is different from

doing what is right.

People vary in strength of character

and motivation and fortitude.


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The Goals of Business Ethics

To treat students as active learners

To engage students in an active process of

thinking and questioning

To allow students to think for themselves

To deal with the mess of relativistic

conclusions

The unexamined life is not worth living

(Socrates).


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Reasoning and Business Ethics

The process of ethical reasoning must

be emphasized.

Reasoning is distinct from answers.

Begin with an accurate and fair account

of the facts from all sides.

Be objective and open-minded.

Analyze each issue fully and

rigorously.


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Business Ethics and the Law

Compliance with the law will proveinsufficient for ethically responsiblebusinesses.

The Law is rife with ambiguity. Manyacts are not illegal until a court rulesthat they are.

Court cases demonstrate that youcannot always rely on the law to decidewhat is right or wrong.


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Whether we examineethical

questions explicitly or not, they areansweredby each of us every day in

the course of our lives.


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Ethics and Ethos

The word ethics is derived from the

Greek ethos, meaning customary or

conventional.

To be ethical in the sense of ethos is to

conform to what is typically done, to

obey the conventions and rules of

ones society and religion.


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Philosophical Ethics

Denies that simple conformity andobedience are the best guides to living

Rejects authority as the source of

ethics Defends the use of reason as the

foundation of ethics

Seeks a reasoned analysis of customand a reasoned defense of how weought to live


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Philosophical Ethics

Distinguishes what people dovaluefrom what people shou ldvalue

Requires we stand back, abstract

ourselves from what is typically doneand reflect upon whether or not what isdone, should be done.

The difference between what isvaluedand what ough tto be valued is thedifference between ethos and ethics.


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Business Ethics

A branch of philosophical ethics

Reflect: In what ways do the practicesand decisions made within business

promote or undermine human well-

being?

How ought we to live?


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Morality, Virtues and Social Ethics

Morality: How should I live my life?

How should I act? What should I do?

What kind of person should I become?

Virtues: character traits that constitute

a life worth living

Social Ethics: How ought society be

structured? How ought we livetogether?


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Business institutions are human

creations

Humans can not avoid responsibility forsomething they have created or contributedto.

Business institutions have a tremendousinfluence on human lives and the quality ofhuman life.

As business people we face particular

business decisions about our corporations,but as citizens we have to decide whether ornot to regulate those businesses for thepublic good.


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Ethical perspectives

Managerial ethics: What should abusiness manager do in varioussituations?

The types of questions asked will varyfrom perspective to perspective.

All decisions faced by business

managers, from finance to marketing toethics and human resources, exist in asocial and legal context.


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Reflections on the chapter

A wide range of people can be adverselyaffected by the decision made withincontemporary business.

There are many roles to play within theeconomic system to insure integrity of thatsystem and to prevent fraud and abuse.

Business operates within a social context

and has duties to a wide range of peoplebeyond those people who own a companysstock.


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Review Questions

Describe several reasons why ethics is

relevant to business? Can a good

business be an unethical business?

What are values? What is the difference

between ethical values and other types

of values? What is the difference

between value when used as a verb,and value when used as a noun?


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Review Questions continued

What is the difference between ethics

and ethos?

How is descriptive business ethics

different from normative business

ethics?

This chapter introduced a distinction

between morality, virtues, and socialethics. How would you describe each?


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Review Questions continued

How would you answer someone whoasked: Why should I study ethics if I

want to be an accountant?

Other than business managers and

owners, which other constituenciesmight have a stake in businessdecisions?

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