What is Business Ethics?

Business Ethics

The application of general ethical concepts

to the unique situations confronted in
business. It asks what is right or wrong
behavior in business and what principles or
rules can be used as guidance in business
situations.

Two Characteristics

Tells people what they ought to do

Set of principles or rules

Why Study Ethics?

Will not ake you ore ethical

!elp in trying to do the right thing

What is Ethics?

Ethics and "eligion

Ethics and Social "esponsibility

Ethics # two levels of concern
individual
organi$ational

Soc. "esponsibility # Win #Win

Ethics # %on&t do things that ay be in your

own self interest

Relativism
Egoism
Utilitarianism Deontologism
The
The
4
4

Concepts
Concepts
of
of

Ethics
Ethics

'oncepts of Ethics

%eveloped by oral philosophers over

generations

(sed to distinguish ethical fro unethical

behavior

Each has probles

"elativis

There is no universal standard by which

orality can be )udged

What is correct for one society ay be

wrong for another

Ethics and orality are relative

What do you think of this?

"elativis # *robles

There are no absolutes # urder+ slavery+

torture+ rape ,-

What is eant by a society?

Sub#societies

.eads to conclusion # each person&s opinion

is correct

/othing that anyone does is orally wrong

Egois

,ne ought to act in his or her own self

interest

Ethical behavior is that which prootes

one&s own self interest

%oes not ean should not obey laws # only

do so if in self interest

Egois

What do you think of this concept?

*roble # E0ternalities associated with

private actions # ,- to dup to0ic wastes
as long as don&t get caught

(tilitarianis

The orality of an action can be deterined

by its consequences

1n action is ethical if it prootes the

greatest good for the greatest nuber

Benefits and 'osts of an 1ction
to Whosoever They 1ccrue
B
2
3 B
4
3 B
5
3 . .3B
n
6 '
2
3 '
4
3 '
5
3 . . .3'
n
Then the 1ction is Ethical
B
2
3 B
4
3 B
5
3 . .3B
n
7 '
2
3 '
4
3 '
5
3 . . .3'
n
Then the 1ction is (nethical

(tilitarianis E0aple

!arry Truan and %ecision to %rop Bob

on 8apan

What do you think of this
concept?

!ow do you quantify benefits and costs?

!ow do you value benefits and costs?

'an lead to un)ust consequences

"estrictions against the a)ority to protect a

inority is not utilitarian

%eontologis

%erived fro the 9reek word for %uty

1ctions are not )ustified by their

consequences. :actors other than good
outcoes deterine the rightness of actions

(tilitarianis ;s. %eontologis

(tilitarianis # The ends )ustify the eans

%eontologis # It is the eans which are

iportant

'atagorical Iperative

%eveloped by Iuel -ant

<I ought never to act e0cept in such a way

that I can also will that y a0i should
becoe a universal law=

1re you willing to perit everyone to adopt

the action?

>es # ?oral /o # Ioral

9uidance in %ealing with *eople

*eople should never be treated as a eans

to an end+ but as ends in theselves

To treat people as ends requires respect for

persons

"e)ect slavery

%eals with urder+ rape+ etc

!ow to deal with eployees

9eneral Ethical Behavior

Builds security+ friendliness+ cooperation

and trust in a society

These are public goods created by generally

ethical behavior

What are 'haracteristics of
*ublic 9oods?

/ot sub)ect to e0clusion # cannot e0clude

people fro consuption even if they do
not contribute

8oint Supply # *rovide for one individual+

provide for all

:ree "ider *roble

'atagorical Iperative and
*ublic 9oods

Security+ :riendliness+ 'ooperation and

Trust

/ot Sub)ect to E0clusion

8oint Supply

:ree "ider *roble

E0aples

Is it Ethical to "ob Banks?

Is it Ethical to 9ive Everyone in this 'lass

an 1?

What %o >ou Think of
%eontologis?

'onflicts between duties

(tilitarians argue that secretly appeal to

consequences to deonstrate the rightness
of actions

Ethical Tests

Is It Legal Test?

Quadrant II
Ethical and Illegal
Quadrant IV
Unethical and Illegal
Quadrant I
Ethical and Legal
Quadrant III
Unethical and Legal
Ethical
(nethical
.egal Illegal
'orporate
%ecisions
'odification
?anifestation

Ethical Tests
2. Is It .egal?
I Ethical # .egal
II Ethical # Illegal
III (nethical # .egal
I; (nethical # Illegal
I and I; Easy
II and III %ifficult

Ethical Tests
4. Benefit 'ost Test
%o the benefits e0ceed the costs to
whosoever they accrue?
5. 'ategorical Iperative
1re you willing to allow everyone to
practice the proposed action or do you want
to be a special case?

Ethical Tests
@. .ight of %ay Test
What would be your reaction if the
action were brought out into the open
for public scrutiny?
A. %o (nto ,thers Test
9olden "ule # If you would like others
to do the sae to you # passes the test

Ethical Tests
B. ;entilation Test
Seek out others views. %iscuss the A
tests with the. If others feel it is ,- #
passes the test

E0aples

"obbing a Bank

%riving 1bove the Speed .iit

'heating on an E0a

!aving Se0 with an Intern

Ethical %ileas in Business

'onflict of Interest
!ave two interests # cannot purse one
without having negative ipact on other

Two Types
*rivate Interest 'onflicts with 'orporate
Business Interest 'onflicts with *ublic

'onflict of Interest ?ini 'ase

*ersonnel %irector

Brother # in # law out of work

.ackluster perforer

(neployent about to run out # will loose

house

Sister asks you to recoend hi for )ob

What would you do?

Whistleblowing

1ct of disclosing wrongdoing in an

organi$ation

.ike blowing a whistle to call attention to a

thief

Types
Internal
E0ternal

'an 'ause Bitterness in
,rgani$ation

Dissent # ?ust speak out against others in

organi$ation

Breach of Loyalty # *erceived as one who

violates confidentiality and loyalty

Accusation - Singles out specific

individuals as threats to organi$ation or the
public

*ossible "etaliation

:ired

Blacklisted

Transferred to undesirable locations

.ifestyles+ se0 lives and ental stability

questioned

*hysical abuse and urder possible

:ailure to "eveal Wrongdoing

Severe probles for society or organi$ation

'an be iplicated as an accessory before or

after the fact

Ethics of Whistleblowing

When is it ethical to reveal wrongdoing ?

When is it ethical to reain silent?

Whistleblowing E0aple

In charge of Cuality 'ontrol

'opany akes parts for autoobile

brakes

:ind defect in brake part

'ould cause failure in brakes

:ailure not certain

?ay take any years to develop

Whistleblowing E0aple Dcont.E

9o to ;* of *roduction+ your boss

!e tells you to overlook defect # copany

ay loose too uch oney

What would you do?

'hallenger %isaster

?orton#Thiokol

<,= rings

'old in :lorida

Engineers warned <,= "ings could fail

/1S1 anageent ade decision to

launch Space Shuttle anyway

'autious 1pproach to
Whistleblowing
2. ?ake sure situation involves an iinent
threat to society or to the business
4. %ocuent all allegations
5. E0aine internal whistleblowing first
@. Should you reain anonyous?
A. 9et another )ob firstFFF

Bribery

1 payent+ usually to a public official+ to

induce that person to either do soething
iproper or to influence decisions or
actions

E0tortion # sae as bribery # recipient of

payent initiates transaction

'ase

International consulting fir # designs and

supervises construction of hydroelectric
power generating systes

>our proposal is far superior to any other

technically
lowest bid

To get )ob+ ust deposit G4AH+HHH in

official&s personal Swiss bank account

Should you pay the oney?

:oreign 'orrupt *ractices 1ct of 2IIJ

9rease payent allowed

Standard *ractice in ost foreign countries

"esults in lost business opportunities for (S

copanies

1erican ta0 dollars ay be used to pay

bribe

Bluffing and %eception

/egotiating a labor contract

*lant has e0perienced losses over past

several years # not clear why

Want concessions fro labor

Tell labor that plant will be closed if no

concessions are ade. In reality + no such
plans conteplated

Is This Ethical?

?anagerial Iplications

Top ?anageent .eadership

,rgani$ational 'ulture

"ealistic 9oal Setting

Ethics 1udit

'ode of Ethics

Ethics 'oittee

?anagerial Iplications

Ethics 1dvocate

Whistleblowing ?echanis

Ethics Training

*olaroid in and ,ut of South
1frica

1partheid Syste

2JK White JHK 1frican

Whites only could be in governent+

possess firears

Enforced segregation of races

Blacks relegated to <native reserves=

1partheid Dcont.E

Blacks allowed to own 25K of land

Whites # LJK

Black workers paid less than Whites

(S Involveent in South 1frica

54H 1erican copanies there

1erican copanies controlled

@5K of petroleu arket
45K of auto sales
JH percent of coputer business

*olaroid

"uors that products used in Pass Book

System

'oission to South 1frica

/o sales to governent
Iprove salaries for Blacks for local
distributors and suppliers
Training progra so Blacks could take
better )obs
Soe profits for Black education

Success of *rogra

Iproveents in Black salaries+

advanceent and benefits

*rinciple of sae pay for sae )ob accepted

Ban on direct sales successful

Ban on indirect sales not successful

Sales to 9overnent through
:rank and !irsch

Secretly selling *olaroid products to

governent

Billed as shipents through drugstore in

8ohannesburg

*olaroid terinated its involveent in

South 1frica

Ethical Cuestions

What is the ethics of 1erican copanies

doing business in a country with huan
rights abuses?

Was *olaroid responsible for the use of its

products?

1re copanies responsible for the use of

their products?

Ethical Cuestions

Was *olaroid&s presence a positive or

negative influence on Blacks?

What is happening in South 1frica today?