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Business ethics
Start off with choices
Video--What would you NOT do.
Definition
 Managerial Ethics the study of standards of
morality (what is good/bad right or wrong
with one’s conduct) of business conduct.
 Beyond legal issues.
 Often confronted as a manager with making
ethical choices.
Related to corporate social
responsibility
 Obligations corporations owe to constituencies



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(stakeholders).
With Right to earn more comes responsibilities to society.
Free enterprise system will continue to operate as long as it
serves the needs of society. How should business help the
needs of society?
Is it only economic? If so, is it OK to blatantly
discriminate if firm is profitable?
Even in the economic sphere, is it OK to bribe or get
kickbacks if provide a good product or service?
Purpose of this part of the course.
 Assumptions.
 Ethics is relative. People act according to both
wisdom and social pressure.
 A course in Ethics let alone one class in ethics
does not make someone more or less ethical.
 “Preaching to the Choir”. Many of you have
integrity. I encourage you to act with the courage
of your convictions. You have to live with
yourself all of your life. Speak up or refuse to act
when you here or see inappropriate behavior.
Examples come later.
Ethics covers all aspect of decision
and business. Daily interactions
 Honesty vs white lies with others
 Conflicts of interest
 Environmental issues
 Product safety and reliability
 Accounting and stockholders
 Information technology and privacy
(cookies).
New problem.
 Single parent. Excessively late. Talked
once and warned. Got better for one month
but then back to old patterns. What do you
do?
How do you determine what is right?
 Utilitarianism and individualism. Act in self interest and
greatest good. If everyone is free to do so (major
assumption), the good of society is served. Consequences
of decisions and who gets what?
 Examples: Its OK to drill in the Artic National wildlife
preserve or
 Eliminate all laws that restrict business activity and
restricts pursuit of self interest.
 Wall street

Moral rights perspective
 Moral rights: Actions not consequences should be
correct. The way you do business is more
important than the product or service.
 How do you treat your employees, customers, etc.
 Wal-mart and return policy in Europe.
 Is it OK to lie to people as long as its not breaking
a law.
 Justice view—impartial and fair treatment for all.
Treat all similarly. Define rules and follow rules
(distributive justice) or processes (procedural
justice).
 Example, how should be people be paid?
 How do we create a level playing field in business.
 Or Decision process need to be fair. Managers
make decisions affecting customers, employees,
community. Decision process needs to be fair.
Different perspectives on one topic
 The proposed new mall in Ames.
 Utilitarian perspective.
 Moral rights perspective.
 Distributive justice (who benefits from this
and how are those resources allocated?).
 Procedural Justice (inputs into decision
process fair?).
Or initial case!
Different perspective different
concerns
 That is why we study these. Business in the
US is heavily influenced by Utilitarian
perspective. Give people freedom to act.
 Business in Europe is more balanced
between Utilitarian and Moral rights.
 Justice is not very important in the private
sector unless unionized. Then very
important.
Important to
 Identify ethical perspectives in discussions.
 No one has a monopoly on ethics.
 When one perspective goes to excess, there
are social problems.
 As future business leaders, accept that
utilitarian perspective needs to have some
constraints. Greed is not always good as the
movie demonstrates.
Do Businesses really care?
 Evidence for caring.
 Evidence for not caring.
Evidence for Caring
 Companies engage in codes of ethics.
 Ethical standards for dealing with different
issues.
 A number of companies put ethics in their
mission statements.
 Some companies of ethics officers (usually
internally auditors).
Most importantly
 Most companies (not all) operate fairly and
honestly with customers and other external
groups such as suppliers and bankers
Evidence for not caring
 Bottom line is to make money at any
reasonable cost.
 Bottom line is for me to get ahead of others
in my career at any reasonable cost.
Do employees care
 Survey of 2000 secretaries
 58% of secretaries lie about their
supervisors whereabouts
 27% have shared confidential information
 17% have notarized a document without
witnessing a signature
 12% have changed or been involved with
changing the minutes of a meeting
 10% have destroyed damaging information
 What will you do if asked?
 What will you ask others to do?
Why Unethical/ethical
 Bottom line question.
personal
 Not really illegal
 Convincing yourself its in everyone’s self
interest
 No one will ever know
 The organization will protect you.
Situational/moral intensity
 Magnitude of the consequences.
 Social consensus
 Probability of effect or social consequences
 Temporal immediacy (the temporal
relationship between the action and effect).
 Proximity (social connectedness of decision
maker to those influenced by the decision).
 Concentration of effect or the number of
people influenced by a decision.
 So for example, telling a lie to an employee
about being out of an office, to one person
building on a flood plain (target store in
Ames), to misreprensentation of accounting
records.
Before I conclude
 Responsible for pp 172-179 on Social
responsibility. On the exam.
Examples
 Racially offensive joke?
 My brother?
 Janetta
 Encourage you to act with the courage of
your convictions.
Most of us have relativistic ethics
 Moral dilemmas are complex. We are forced to
make lots of choices. Often act in self interest.
 Examples with pollution. An owner and an
employee.
 Both were “good” people.
 No difference than the current batch of
accountants. Arthur Anderson—Leader in Ethics.
Summary ethics is often Short term
vs Long term
 Your reputation and relationships vs
immediate financial gain.
 Most firms who take ethics seriously are
concerned about long term relationships.
People want to do business with ethical
firms.
 Career success (both financial and personal)
is based on ethical relationships with others.