Download Clarkson, Business Law, 11th Ed 2009

BUSINESS LAW: Text & Cases —
Legal, Ethical, International, and
E-Commerce Environment 11th Ed.
Chapter 5: Ethics and
Decision Making
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
§1: Business Ethics
 Ethics is the study of right and wrong
behavior; whether an action is fair, right or
just.
 In business, ethical decisions are the
application of moral and ethical principles
to the marketplace and workplace.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Why is Business Ethics
Important?
 Directors and Officers owe a complex set
of ethical duties to the company,
shareholders, customers, community,
employees, and suppliers.
 When these duties conflict, ethical
dilemmas are created.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Setting the Right Ethical Tone
 Importance of Ethical Leadership.
– Attitude of Top Management.
– Looking the Other Way.
– CASE 5.1 In Re The Exxon Valdez (2004).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§ 2: Approaches to
Ethical Reasoning
 Duty Based Ethics - derived from religious
and philosophical principles.
– Religious Ethical Standards.
– Kantian Ethics.
– Rights Principles.
 Outcome-Based Ethics: Utilitarianism.
– Seeks to ensure a given outcome.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Religious Ethical Standards
 The rightness or wrongness of an action is
usually judged according to its conformity to
an absolute rule that commands a particular
form of behavior.
 The motive of the actor is irrelevant in
judging the rightness or the wrongness of
the action.
 These rules often involve an element of
compassion.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Kantian Ethics
 Premised on the belief that general
guiding principles for moral behavior
can be derived from human nature.
 The categorical imperative is a central
postulate of Kantian ethics.
– The rightness or wrongness of an action
is judged by estimating the
consequences that would follow if
everyone in a society performed the act
under consideration.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Principle of Rights
 This principle derives from the belief that
every duty gives rise to a corresponding
right.
 The belief in fundamental rights is a
deeply embedded feature of Western
culture.
 The ethicality of an action is judged by
how the consequences of the action will
affect the rights of others.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Outcome-based Ethics:
Utilitarianism
 An action is ethical based on whether it
produces the greatest good for the greatest
number of people upon which it has an
effect.
 A cost-benefit analysis must be performed
to determine the effects of competing
alternatives on the persons affected.
 The best alternative is the one that
produces the greatest good for the greatest
number.
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Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
Corporate Social Responsibility
 CSR is the idea that those who manage
corporations should be accountable to
society for their actions.
– Stakeholder Approach: corporations have a
duty not only to shareholders but other groups
(stakeholders) affected by corporate actions.
– Corporate Citizenship: promote goals that
society considers worthwhile and take positive
steps towards solving problems.
– CASE 5.2 Fog Cutter Capital Group, Inc. v.
Securities Exchange Commission (2007).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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Creating Ethical Codes
 Creating Ethical Codes of Conduct.
– Providing Employee Ethics Training.
– Johnson and Johnson: web-based ethical
training.
 Sarbanes-Oxley and web-based reporting
systems.
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a part of South-Western Cengage Learning.
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§ 3: How the Law Influences
Business Ethics
 Legal compliance is the ‘moral minimum.’
 Simply obeying the law does not
necessarily make the business practice
ethical.
 Backdating stock options (Apple
Computer).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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How the Law Influences
Business Ethics
 Misleading Regulators – The Case of
OxyContin.
– Fraudulent marketing which lead to abuse and
addiction.
– Company kept this information secret.
– May 2007, executives plead guilty to criminal charges
they misled regulators.
 “Gray” areas in the law.
– Business leaders must contemplate the ethical
implications of a business decision.
– CASE 5.3 Guin v. Brazos Higher Education
Service Corp. (2006).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§ 4: Making Ethical
Business Decisions
 George S. May company has provided six
guidelines:
– The law.
– Rules and procedures.
– Values.
– Conscience.
– Promises.
– Heroes (role models).
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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§5: Business Ethics on
a Global Level
 American companies must be trained in
cross-cultural business practices.
 Monitoring the Employment Practices of
Foreign Suppliers.
– Corporate Watch groups can disseminate
information instantly around world.
 Foreign Corrupt Practices Act.
– Bribes and Accounting Practices.
Copyright © 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
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