Download OBEY THE LAW

Chapter 2
Ethics and Social
Responsibility
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
Business Ethics
• Ethics can be defined as the study of what
constitutes right or wrong behavior.
• Business ethics focuses on how moral and
ethical principles are applied in the business
context.
• The law reflects society’s convictions on
what constitutes right or wrong behavior.
• Case 2.1 Time Warner Entertainment Co. v. Six
Flags Over Georgia, LLC (2002).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Setting the Right
Ethical Tone
• Ethical Leadership.
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Attitude of Management.
‘Looking the Other Way’.
Creating Realistic Goals.
Periodic Evaluation.
• Ethical Codes of Conduct.
– Costco as an example .
– Clear Communications.
– Johnson & Johnson – web training.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Code of Ethics
• Notice how PriceCostco’s code uses
compliance with the law as the baseline.
Compliance with ethical standards may take
more.
OBEY THE LAW
The law is irrefutable! Absent a moral imperative
to challenge a law, we must conduct our business
in total compliance with the laws of every
community where we do business.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
4
Corporate Compliance
Programs
• The Sarbanes-Oxley Act.
– Employers must set up confidential reporting
and auditing systems.
– Web-based system by Ethicspoint.
• Integrating Compliance Programs.
– Ethics programs must be disseminated and
coordinated among all departments.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
5
Conflicts and Trade-Offs
• Today’s corporate decision makers must balance
profitability against ethical responsibility when
making their decisions.
• Instead of maximum profits, corporations
increasingly aim for optimum profits—profits
that can be realized by the firm while pursuing
actions that are not only legal and profitable but
also ethical.
• Case 2.2 Remsburg v. Docusearch, Inc. (2003).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
6
Defying the Rules:
The Enron Case
• Growth of Enron.
• Accounting Issues.
– Fudging and ‘Anticipated’ Earnings.
– Bonuses based on whether earnings were met.
• Off-The-Book Transactions.
– Subsidiaries inflated net worth of Enron.
– Most transactions occurred in Cayman Islands.
• Self-Dealing.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
7
Business Ethics
and the Law
• Legal compliance is the moral minimum, but
simply obeying the law does not mean it is
ethical.
• Laws regulating business.
• “Gray” areas in the law.
• Technological Developments and Legal
Uncertainties.
• Case 2.3 Blakey v. Continental Airlines, Inc.
(2000).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
8
Sources of Ethical
Standards
Duty-based ethics:
• Ethics based on
religious beliefs and
philosophical reasoning,
such as that of
Immanuel Kant.
• Example: Ten
Commandments.
Miller • Cross 4th Ed.
Outcome-based ethics:
•Ethics based on
philosophical reasoning,
such as that of John Stuart
Mill.
• Example: utilitarianism.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
9
Corporate Social
Responsibility
• Assumes corporations should conduct their
affairs in a socially responsible manner, but
there is disagreement as to what constitutes
socially responsible behavior.
• Views on Corporate Social Responsibility.
– Profit Maximization.
– Stakeholder Approach.
– Corporate Citizenship.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
10
Corporate Social
Responsibility
Corporations are perceived to hold duties to the
following groups, duties that often come into
conflict:
Shareholders
Consumers
Employees
Community
Society
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
11
Measuring Corporate
Social Responsibility
• It is difficult to measure corporate social
responsibility because different yardsticks are
used.
• Traditionally, corporate philanthropy has been
used as a means of measuring corporate social
responsibility.
• Increasingly, corporate process, or how a
corporation conducts its business on a day-to-day
basis, is a key factor in determining whether a
corporation is socially responsible.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Ethics In The
Global Context
Despite the cultural and
religious differences among
nations, the most important
ethical precepts are
common to virtually all
countries.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
13
Ethics in the
Global Context
• Two notable differences
relate to:
– The role of women in
society.
– The practice of giving
side payments to
foreign officials to
secure favorable
contracts.
Miller • Cross 4th Ed.
• The Foreign Corrupt
Practices Act of 1977
(FCPA), prohibits the
bribery of foreign officials
through such side payments,
put U.S. businesspersons at
a relative disadvantage to
businesspersons from other
countries who are not
subject to such laws.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Ethics in the
Global Context
What is considered ethical in society may
change over time as social customs change
and new developments alter our social and
business environment.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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