Chapter One: Ethics and Business Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Business Ethics For business students, ethics is an important field of study. Business ethics is a process of decision making. • Business must take ethics into account and integrate ethics into its organizational structure. Scandals are brought about by ethical failures and unethical decisions. • This text provides a decision-making model that can help analyze avoid future ethical failures. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Levels of Ethical Decision Making Business ethics involves making decisions at the individual, at the organizational, and at a broader social and governmental level. • As individuals, each person interacts with businesses as customers, as employees, and as citizens of the countries in which they operate. • Organizational culture and corporate leadership have important roles to play in decision making. • Individual businesses' and industries' decisions are influenced by social, economic, and political environments. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Goals of Business Ethics • Developing the knowledge base and skills needed to identify ethical issues. • Understanding how and why people behave unethically. • Deciding how one should act, what one should do, and the type of person one should be as an individual. • Creating ethical organizations. • Thinking through the social, economic, and political policies that we should support as citizens. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Making the Case for Business Ethics Separation thesis: Asserts that ordinary ethical standards should be kept separate from, and not be used to judge, business decisions because business has its own standards of good and bad. • Remains common in business circles. • Holds that business ought to be governed by some ethics and some values. Both the existence of a firm and the conditions under which it operates require that decision makers consider the impact of those decisions on a wide range of stakeholders. • A business stakeholder is anyone who affects or is affected by decisions made within the firm, for better or worse. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Ethics and the Law 1 Deciding what one should do in business does require consideration of what the law requires, expects, or permits. Legal norms and ethical norms are not identical. Is compliance with the law enough to behave ethically? • Is the law itself ethical? • The law may prevent harm, but does it promote "good"? • Only complying with the law may lead to more regulation. • Laws may not be in place for new situations. • Laws may be ambiguous. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Ethics and the Law 2 Ethical considerations demonstrate that business cannot avoid making ethical judgments, even if it is fully committed to obeying the law. Many corporations establish ethics programs and hire ethics officers who are responsible for managing corporate ethics programs. Laws offer general rules clarified by legal precedent. • There is no unambiguous answer for those wishing only to obey the law. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Ethics and the Law 3 Risk assessment is a process to identify potential events that may affect the entity, and manage risk to be within its risk appetite. • To provide reasonable assurance regarding the achievement of entity objectives. • When the risks involve potential harms and benefits to a variety of stakeholders, it is a judgment that involves ethics as well. • Business must take ethics into account and integrate ethics into its organizational structure. • But what is ethics? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Business Ethics as Ethical Decision Making • Responsible decision making and deliberation will result in more responsible behavior. • Here, ethics refers to how human beings should properly live their lives. • The authors’ fundamental assumption is that a process of rational decision making can and will result in behavior that is more reasonable, accountable, and ethical. • Teaching ethics must challenge students to think for themselves. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Business Ethics as Personal Integrity and Social Responsibility 1 Ethics involves asking an important question—how should we live? • Philosophers emphasize that ethics is normative, dealing with our reasoning about how we should act. • Social sciences also examine human decision making and actions. • But these sciences are descriptive rather than normative. • They provide an account of how and why people do act the way they do – they describe. • As a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. How Should We Live? 1 If defining "We" individually: Ethics is based on our value structures: • Defined by our moral systems; • and, sometimes referred to as morality. • Or "personal integrity." If morals refer to the underlying values on which decisions are based ethics refers to the application of those morals to the decisions themselves. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. How Should We Live? 2 If defining "We" collectively: Refers to how we live together in a community. • This area is sometimes referred to as social ethics. • Here, we judge companies from a social perspective; for their social responsibility. • Managerial decisions involve the following aspects of ethics: • Personal integrity. • Social responsibilities. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Business Ethics as Personal Integrity and Social Responsibility 2 Distinguishing ethics from other practical decisions faced within business involves two approaches. • Social-scientific approach: Examines the situation and the decision by exploring the factors that led to one decision rather than another or by asking why the manager acted in the way that he did. • Normative approach steps back from the facts to ask: • What should I do? • What rights and responsibilities are involved? • What good will come from this situation? • Am I being fair, just, virtuous, kind, loyal, trustworthy? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Business Ethics as Personal Integrity and Social Responsibility 3 Ethics is a normative discipline as it deals with norms. • Norms: Those standards of appropriate and proper (or "normal") behavior. • Norms establish the guidelines or standards for determining what we should do, how we should act, and what type of person we should be. • Normative disciplines presuppose some underlying values. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Distinction Between Values and Ethics Values are the underlying beliefs that cause us to act or to decide one way rather than another. • Many different types of values can be recognized. • Individuals have their own personal values and institutions also have values—shown in the company’s culture. • An individual’s or a corporation’s set of values may lead to either ethical or unethical results. • One way to distinguish values is in terms of the ends or goals they serve. Ethical values serve the ends of human well-being. • Those properties of life that contribute to human well-being and a life well lived. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education. Ethics as Practical Reason Ethics is a vital element of practical reasoning—reasoning about what we should do. • Distinguished from theoretical reasoning, which is reasoning about what we should believe. • Theoretical reason is the pursuit of truth. There is no single methodology for ethics that works in all situations, but guidelines provide direction and criteria for decisions. • Ethical theories explain and defend various norms, standards, values, and principles used in ethical decision making. • The next chapter introduces a model for making ethically responsible decisions. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©McGraw-Hill Education.
