Ethical Business Discussion

What do you believe is the most important step a company can take toward achieving a good ethical business organization? Provide support for your answer.

Chapter 2: Business Ethics and the
Social Responsibility of Business
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Topics Covered in this Chapter
2-1 Law versus Ethics
2-2
Ethical Theories
2-3
Ethical Standards in
Business
2-4
Ethical Responsibilities of
Business
2-5
Corporate Governance
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Law versus Ethics
• The law is strongly affected by
moral concepts, but law and
morality are not the same.
• Just as it is possible for legal acts
to be immoral, it is equally possible
for illegal acts to seem morally
preferable to following the law.
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Law versus Ethics
• Ethics – study of what is right or
good for human beings.
• Business Ethics – study of what is
right and good in a business
setting.
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Ethical Theories
• Ethical Fundamentalism –
individuals look to a central
authority or set of rules to guide
them in ethical decision making.
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Ethical Theories
• Ethical Relativism – actions must
be judged by what individuals
subjectively feel is right or wrong
for themselves.
–Situational Ethics – one must judge
a person’s actions by first putting
oneself in the actor’s situation
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Ethical Theories
• Utilitarianism – moral actions are
those that produce the greatest net
pleasure compared with net pain.
– Act Utilitarianism – assesses each separate act
according to whether it maximizes pleasure over pain.
– Rule Utilitarianism – supports rules that on balance
produce the greatest pleasure for society.
– Cost-Benefit Analysis – quantifies the benefits and
costs of alternatives
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Ethical Theories
• Deontology – actions must be judged
by their motives and means as well
as their results.
– Best-known deontological theory was proffered by 18th
century philosopher Immanuel Kant who asserted
what he called the categorical imperative.
• Act only according to that maxim by which you can, at the same
time, will that it should become a universal law.
• Act as never to treat another human being merely as a means to an
end.
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Ethical Theories
• Social Ethics Theories – focus is on
a person’s obligations to other
members in society and also on the
individual’s right and obligations
within society.
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Ethical Theories
• Other Theories –
– Institutionalism – a rational person
possesses inherent power to assess the
correctness of actions.
– Good Person – individuals should seek out
and emulate good role models.
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Ethical Standards in Business
• Choosing an Ethical System –
Kohlberg’s stages of moral
development is a widely accepted
model.
Levels
Perspective
Justification
Preconventional (Childhood)
Self
Punishment/Reward
Conventional (Adolescent)
Group
Group Norms
Postconventional (Adult)
Universal
Moral Principles
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Ethical Standards in Business
• Corporations as Moral Agents –
because a corporation is a
statutorily created entity, it is not
clear whether it should be held
morally responsible.
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Ethical Responsibilities of
Business
• Regulation of Business –
governmental regulation has
been necessary because all the
conditions for perfect competition
have not been satisfied and free
competition cannot by itself
achieve other societal objectives.
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Corporate Governance
• Definition of Corporate
Governance – vast amounts of
wealth and power have become
concentrated in a small number
of corporations, which in turn are
controlled by a small group of
corporate officers.
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Corporate Governance
• Arguments against Social
Responsibility –
– Profitability – because corporations
are artificial entities established for
profit-making activities, their only social
obligation should be to return as much
money as possible to shareholders.
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Corporate Governance
• Arguments against Social
Responsibility (cont’d) –
– Unfairness – whenever corporations
engage in social activities such as
supporting the arts or education, they
divert funds rightfully belonging to
shareholders and/or employees to
unrelated third parties.
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Corporate Governance
• Arguments against Social
Responsibility (cont’d) –
– Accountability – a corporation is
subject to less public accountability
than public bodies are.
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Corporate Governance
• Arguments against Social
Responsibility (cont’d) –
– Expertise – although a corporation may
have a high level of expertise in selling its
goods and services, there is absolutely no
guarantee that any promotion of social
activities will be carried on with the same
degree of competence.
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Corporate Governance
• Arguments in Favor of Social
Responsibility –
– The Social Contract – because
society allows for the creation of
corporations and gives them special
rights, including a grant of limited
liability, corporations owe a
responsibility to our society.
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Corporate Governance
• Arguments in Favor of Social
Responsibility (cont’d) –
• The Stakeholder Model – a derivative of
the social contract theory where a
corporation has fiduciary responsibility to
all of its stakeholders, not just its
stockholders.
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The Stakeholder Model
Managers
Employees
Suppliers
Corporation
Community
Customers
Stockholders
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Corporate Governance
• Arguments in Favor of Social
Responsibility (cont’d) –
– Less Government Regulation – by
taking a more proactive role in
addressing society’s problems,
corporations create a climate of trust
and respect that has the effect of
reducing government regulation.
© 2018 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
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Corporate Governance
• Arguments in Favor of Social
Responsibility (cont’d) –
– Long-Run Profits – corporate
involvement in social causes creates
goodwill, which simply makes good
business sense.
© 2018 Cengage Learning. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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