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Chapter 3
BUSINESS ETHICS,
SOCIAL FORCES &
THE LAW
What is Business Ethics?
 Business ethics is the application of values and
standards to business conduct and decisions.
 When a business upholds basic ethical standards, it
will enjoy the competitive advantage of a good
reputation and, over the long term, better earnings.
 When a business violates ethical standards, social
forces are set into motion, sometimes leading to
changes in the law.
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What is Business Ethics?
Law as the Standard for Business Ethics.
 Positive Law: if an act is legal it is ‘moral.’
Universal Standards for Business Ethics.
 Natural Law: higher standards for ethics.
 A law can be legal but unethical.
Situational Business Ethics/Moral Relativism.
Business Stakeholder Standard of Behavior.
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Why is Business Ethics Important?
Importance of Trust.
Relationship to Financial Performance.
 Ford and Firestone.
 Johns-Manville.
Good Reputation.
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Cycle of Social Interaction
Social Forces
Social
Environment
Ethics
Law
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Public Policy, Law, & Ethics
Protection:
 of the state, the person, public health, safety and
morals.
 of property and personal rights.
 from exploitation, fraud, and oppression.
 of creditors and rehabilitation of debtors.
Enforcement of individual intent.
Furtherance of trade.
Stability and flexibility.
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Categories of Ethical Behavior
Integrity and Truthfulness.
Promise-Keeping.
Loyalty: Avoiding Conflicts of Interest.
Fairness.
Doing No Harm.
Maintaining Confidentiality.
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How to Analyze Ethical Dilemmas
Define the problem.
Identify who could be injured.
Define the problem from opposing
viewpoint.
Would you be willing to tell your family
about your decision?
Would you be willing to tell the community?
Reach a decision.
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Resolving Ethical Dilemmas
 Blanchard and Peale Test.
 Is it legal?
 Is it balanced?
 How does it make me feel?
 Front-Page-of-the-Newspaper Test.
 Would I want my decision published?
 Laura Nash Test.
 Requires examination from all perspectives.
 Wall Street Journal Model (3 C’s model).
 Is my conduct compliant with the law?
 What contribution does this action make to others?
 What are the consequences?
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