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The Ethical Basis of Law and
Business Management
The Nature of Ethics
“However selfish man believes himself to be,
there is no doubt that there are some
elements in his nature which lead him to
concern himself about the fortune of others,
in such a way that their happiness is
necessary for him, although he obtains
nothing from it except the pleasure of seeing
it” (Adam Smith, 1759)
Morals
Rules relating to dealing with, or making a
distinction between right and wrong in conduct
Universal rules or guidelines that determine our
actions and character
ETHICS
Moral principles and values applied to social
behavior.
A systematic statement of right and wrong
together with a philosophical system that both
justifies and necessitates rules of conduct
Law and Ethics (Similarities)
Ethics and Law have similar or complemetary
purposes.
Both consist of rules to guide conduct and
foster social cooperation
Both deal with right and wrong
Law and Ethics
(Differences)
Motivation to observe moral rules comes from
Within.
Motivation to observe law comes from outside
the individual
Law sets only the minimum standards acceptable by
society. Ethical behavior a higher moral standard.
Ethics in Business (Business Ethics)
Many firms and individuals simply adopt a
standard of complying with positive law.
Is legal conduct ethical conduct?
Legal v. Ethical
East German border guards tried for
manslaughter for killing East Germans as they
attempted to escape into west Germany
defended their actions by arguing that they
were only following orders.
Sentencing judge noted that not all legal
activity is right.
Legal v. Ethical
Arizona passed state statute providing tax
credit for vehicles with alternative fuel tanks.
Many dealers added 2-gallon fuel tanks to
vehicles to qualify for credit.
State lost over $600 million in taxes
EHTICAL THEORIES
Duty Based: Deontology / Formalism
“Deontos” Greek meaning what must be done
Moral principles are generally universal and
absolute and followed regardless of the
consequences
–
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Religion-Ten Commandments
Philosophical- Immanual Kant
Categorical imperative
Deontology
Actions themselves are ethical in spite of consequences
Emanuel Kant
Categorical Imperative:
A. Act so that you can will the maxim of your action to
become a universal law. What would happen if
everyone acted as you decide to act?
B. Act so as never to treat another rational being as a
means
THEORIES CONTINUED
Out-come Based: Consequentialism
–
Utilitarianism (Jeremy Bentham, John Stuart Mill)
Focuses on the consequences of an action not
on the nature of the action itself or on any set of
preestablished moral values or religious beliefs.
– 1.Who will be affected
– 2.Compare negative and positive effects of
actions
– 3.Choose action providing maximum
benefit to greatest number.
Ethical Theory
Utilitarian (John Stewart Mill/Jeremy Benthem)
“Actions are right in proportion as they tend to
promote happiness, wrong as they tend to
produce the reverse of happiness”
Do that action which will bring about the
Greatest good for the greatest number of
people
Utilitarianism / Distribution Problem
“greatest good for greatest number”
Ends justify the means
Five pickles to distribute to five people.
2 people love pickles two don’t
A=1 pickle =1unit of happiness 2 pickles=2units
B=1 pickle =1unit of happiness 2 pickles=2units
C=1 pickle =1unit of happiness 1 pickle =1unit
D=1 pickle = 0unit of happiness 0 pickles= 0 units
E=1 pickle = 0unit of happiness 0 pickles =0 units
5 recipients 3 units
3 recipients 5 units
Recognizing Ethical Dilemmas
1. Everybody Else Does It
2. If we don't do it, Someone else will
3. That’s the way it has always been done.
4. We’ll wait until the lawyers tell us it’s wrong
5. It doesn’t really hurt anybody
6. The system is unfair
7. I was just following orders.
Business Ethics Stakeholder theory
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Duty to Shareholders
Duty to Employees
Duty to Consumers
Duty to Community
Duty to Society
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Global Ethics
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PENNSYLVANIA CONSOLIDATED STATUTES
15 Pa.C.S. 1715 (2004)
(a) GENERAL RULE.-- In discharging the duties of their
respective positions, the board of directors, committees of
the board and individual directors of a business corporation may,
in considering the best interests of the corporation, consider to the
extent they deem appropriate:
(1) The effects of any action upon any or all groups affected
by such action, including shareholders, employees,
suppliers, customers and creditors of the corporation, and
upon communities in which offices or other establishments
of the corporation are located.
OHIO REVISED CODE
ORC Ann. 1701.59 (2004)
(E) For purposes of this section, a director, in determining what the
director reasonably believes to be in the best interests of the
corporation, shall consider the interests of the corporation's
shareholders and, in the director's discretion, may consider any
of the following:
(1) The interests of the corporation's employees, suppliers,
creditors, and customers;
(2) The economy of the state and nation;
(3) Community and societal considerations