AN INTRODUCTION TO

BUSINESS ETHICS
CHAPTER ONE: WHY STUDY
ETHICS?

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 1-2

This chapter seeks to

Identify reasons why the study of ethics is important

Explain the nature and meaning of business ethics

Explain the difference between ethical values and other

values

Clarify the difference between ethics and the law

Describe the distinction between ethics and ethos

Introduce the distinction between personal morality,

virtues and social ethics
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 1-3

Discussion Case: Madof

Madoff pleads guilty to 11 counts of financial
fraud and theft in March 2009
Is sentenced to 150 years in prison
A Ponzi scheme is a fraud that attracts investors
with a promise of high returns
The perpetrator benefits either by disappearing
with 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
1-4

Identify what ethical issues and questions are involved

in the Madoff case.
Identify all the people you think may have been
harmed, and how they were harmed, by the Madoff
fraud.
Do you think that a scandal such as this is the result
mostly of unethical individuals, or are there
organizational issues that allowed, encouraged, or
were responsible for the harms? To what degree was
this case mostly a failure of individuals, or
organizational structure, or of government?
Can you imagine anything that would have prevented
the Madoff fraud?
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 1-5

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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 1-6

The questions today are less about

why or should ethics be a part of
business, than about which ethics
should guide business decisions
and how ethics can be integrated
within business.

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 Context: Who was harmed by the 1-7

collapse of Enron?
Stockholders
Employees
Consumers in California
Suppliers
Enrons accounting firm, Arthur Anderson
The Houston, TX community
Families of employees, investors and
suppliers

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 Reasons to be concerned with 1-8

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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 1-9

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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 1-10

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 1-11

Doing Well
Built to Last: Successful Habits of
Visionary Companies by 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 and
enduring tenets defining the company, and
not to be compromised for financial gain.

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 Companies cited by Collins & 1-12

Porras
IBM
Johnson & Johnson
Hewlett Packard
Procter and Gamble
Wal-Mart
Merck
Motorola
Sony
General Electric

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 1-13

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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 1-14

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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 1-15

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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 1-16

Elements of Ethical Values

Ethical values serve the ends of human well-
being.

The well-being promoted by ethical values is

not personal and selfish well-being.

No one persons well-being is to be counted

as more worthy or valuable than any others.

Ethical values promote human well-being in

an impartial way.

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 1-17

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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 1-18

Malden Mills
December 11, 1995 A fire destroys most of
Malden Mills, the manufacturer of Polartec.
The last major textile manufacturer in town
with 2,400 employees; community lifes blood
Malden Mills provides fabric to L.L. Bean,
Lands End, J. Crew and Eddie Bauer
Aaron Feuerstein, the owner pledged to
rebuild the plant, keep jobs in the community
and pay his employees until work resumes.

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 1-19

Malden Mills continued

Factory was rebuilt and reopened in
one year.
Employees came back to work.
The community seemed to recover.
Malden Mills filed for bankruptcy
protection.
Eventually controlled by creditors.
Remaining employees voted to
authorize a strike in December 2004.
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 The Nature & Goals of Business 1-20

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 that
ought or should operate in business.

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 1-21

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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 1-22

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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 1-23

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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 1-24

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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 1-25

Business Ethics and the Law

Compliance with the law will prove
insufficient for ethically responsible
businesses.
The Law is rife with ambiguity. Many
acts are not illegal until a court rules
that they are.
Court cases demonstrate that you
cannot always rely on the law to decide
what is right or wrong.

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 1-26

Whether we examine ethical

questions explicitly or not, they
are answered by each of us every
day in the course of our lives.

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 1-27

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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 1-28

Philosophical Ethics
Denies that simple conformity and
obedience 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 custom
and a reasoned defense of how we
ought to live

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 1-29

Philosophical Ethics
Distinguishes what people do value
from what people should value
Requires we stand back, abstract
ourselves from what is typically done
and reflect upon whether or not what is
done, should be done.
The difference between what is valued
and what ought to be valued is the
difference between ethos and ethics.

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 1-30

Business Ethics
A branch of philosophical ethics

Reflect: In what ways do the practices

and decisions made within business
promote or undermine human well-
being?

How ought we to live?

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 1-31

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 live
together?

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 Business institutions are human 1-32

creations
Humans can not avoid responsibility for
something they have created or contributed
to.
Business institutions have a tremendous
influence on human lives and the quality of
human life.
As business people we face particular
business decisions about our corporations,
but as citizens we have to decide whether or
not to regulate those businesses for the
public good.
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 1-33

Ethical perspectives
Managerial ethics: What should a
business manager do in various
situations?
The types of questions asked will vary
from perspective to perspective.
All decisions faced by business
managers, from finance to marketing to
ethics and human resources, exist in a
social and legal context.

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 1-34

Reflections on the chapter

A wide range of people can be adversely
affected by the decision made within
contemporary business.
There are many roles to play within the
economic system to insure integrity of that
system and to prevent fraud and abuse.
Business operates within a social context
and has duties to a wide range of people
beyond those people who own a companys
stock.

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 1-35

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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 1-36

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 social
ethics. How would you describe each?

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 1-37

Review Questions continued

How would you answer someone who

asked: Why should I study ethics if I
want to be an accountant?

Other than business managers and

owners, which other constituencies
might have a stake in business
decisions?

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