Ethics and Business Decision Making

Chapter 2

What does ethics have to do with the Law?

Ethics - Moral principles and values applied to social behavior. Law is the moral minimum.

Business Ethics – a consensus of what constitutes right and wrong behavior and the application of moral principles in a business setting.

Bad Faith and Punitive Damages

Ethical lapses result in judicial findings of bad faith and the award of punitive damages.

In re Exxon Valdez($5 billion punitive damages due to oil spill)

Business Ethics:Duty Vs. Outcome

• Duty-Based Ethics–Ethics based upon an underlying concept

of duty regardless of the consequences of action taken.

–Generally arise from religious belief and/or philosophical reasoning.

Business Ethics:Duty Vs. Outcome

• Outcome-Based Ethics–Ethics based upon the consequences of

action taken, without regard to any underlying concept of duty or morality.

–Sometimes referred to as “situational ethics” or “the end justifies the means.”

Business Ethics:Duty Vs. Outcome

• Utilitarianism –Form of outcome-based ethics based on

producing the greatest good for the greatest number of people.

–Requires a cost-benefit analysis of the negative and positive effects.

Corporate Social Responsibility• The concept that corporations and

businesses are citizens of the community should act ethically and be accountable to stakeholders for their actions.

Corporate Social Responsibility• Duties to Shareholders

–Corporate directors and officers have duty to act in shareholders’ best interest.

– the law holds directors and officers to a high standard of care in performing these “fiduciary duties.”

Corporate Social Responsibility• Duties to Employees - Employers are

required by law to provide their employees with a safe workplace, equal employment opportunity, minimum wage, etc.

Corporate Social Responsibility• Duties to Consumers - In marketing a

product, the law imposes a duty to warn consumers of the harms that can result from foreseeable misuses of the product.

Corporate Social Responsibility• Duties to the Community - Considering the

needs of the community when deciding whether to take or not take certain actions, such as relocating a plant or a large number of employees.

Corporate Social Responsibility• Duties to Society as a Whole - Considering

to what extent corporations should act to further societal interests at the expense of the corporation’s own profit-maximizing behavior.

Ethics in International Situations

Monitoring of Foreign Suppliers

Foreign Corrupt Practices Act

- prohibition of bribery of high-ranking foreign officials

-“grease” to ministerial employees is not illegal

Ethics and Social Responsibility

End of Chapter 2