Ethics - St. Cloud State University

Ethics and Professional
Manufacture shoes in Indonesia
You are a high level shoe manager. You know you could increase profit margin by having shoes
produced in Indonesia where you could pay women $40 a month to assemble the shoes. You also
know that human rights activists have recently accused a competing shoe manufacturer of
engaging in exploitative labor practices for doing that. You do not personally believe that paying
the women $40 a month is unethical because that is a better than average wage in Indonesia.
What do you do? What do you think about?
Corporate Social Responsibility
Disclosure Helps
Corporations are perceived to hold duties to the
following groups, duties that often come into
Duty to Employees
Employers have numerous legal duties to employees, including
providing employees with a safe workplace and refraining from
discriminating against employees on the basis of race, color, national
origin, gender, religion, age, or disability.
These duties often come into conflict.
Many believe that employers hold ethical duties to their employees
that go beyond those prescribed by law.
UAS v. Johnson Controls
Not in Book
•Battery Division
•Lead Exposure
•No Women of Child Bearing Age
Duty to Shareholders
Because the shareholders are the owners of
the corporation, directors and officers have a
duty to act in the shareholders’ interest
(maximize profits).
Google IPO example
Is profit maximization an ethical goal?
Milton Friedman – On “greed”
•What is corporate social responsibility?
•Corporate philanthropy?
Approach to Making Ethical Decisions:
Open and full disclosure reduces ethical breaches
Duty to Consumers
Corporate directors and officers have a legal duty to
the users of their products.
Most feel that corporations also have an ethical duty
that goes beyond what the law requires.
Controversy exists over the point at which corporate
responsibility for consumer safety ends and
consumer responsibility begins.
Died from Inhaling Butane. Twenty-year-old Stephen
Pavlik died from intentionally inhaling the contents of Zeus
brand butane lighter. His father filed suit, claiming there was
not an adequate warning on the can Pavlik v. Lane
Ltd./Tobacco Exporters International
Duty to the Community/Society
Most people believe a corporation has a duty
to the community in which it operates.
The corporation should consider the needs of
the community when making decisions that
substantially affect the welfare of the
•Remsburg v. Docusearch, Inc. (2003)
(Sold employer name address to stalker).
•Wal-Mart – Impact on small communities
Ethical Responsibilities of Firms
Do firms have a duty to prevent criminal
misuses of their products? In a Colorado
case, a man bought a cupful of gasoline at a
gas station, threw it on a woman, and set
her on fire. The woman argued that the gas
station was negligent for selling him the
The Colorado Appellate Court stated that
knowing a customer buying gasoline was
going to intentionally throw it on a victim and
set the victim on fire was not reasonably
Ethics In The Global Context
Hypothetical – US Developed Drug
U.S. drug laws are among the toughest in the world.
Therefore, companies with products banned from sale in
the U.S. will naturally look elsewhere for potential
customers—particularly in developing countries that do
not have such extensive restrictions on consumer
Despite the cultural and
religious differences
among nations, the
most important ethical
precepts are common
to virtually all countries.
Ethics in the
Global Context
Two notable differences
relate to:
– The role of women in
– The practice of giving
side payments to foreign
officials to secure
favorable contracts.
The Foreign Corrupt
Practices Act of 1977
(FCPA), prohibits the bribery
of foreign officials through
such side payments.
US Jail for Thailand Bribery
$1.8 Million Bribe. Two Hollywood producers paid
$1.8 million in bribes to secure a $13.5 million
contract for the Bangkok International Film Festival.
Festival Financial Success. The government made
a lot of money on the festival and overall it was a
6 Months Prison. They got 6 months in prison and 6
months home suspension (prosecution wanted 10
years – even though one defendant was 78 years old
with health problems). Plus $250,000 in restitution.
Aug 16, 2010 National Law Journal
Michael Douglas, Actor
The Nature Of Business Ethics
Law does not codify all ethical responsibility
Business ethics are created from moral
The law reflects society’s convictions on what
constitutes right or wrong behavior.
Ethics versus law
the sick
There are legal
‘consequences’ to
some decisions
which are different
than ‘illegal’ acts.
” Act
Okay Act
Watch the sick
collapse in
agony, do not
call for help, but
laugh the evil
laugh (muhaha)
Good Act
Not visit
the sick
Sources of Ethical Standards
Ends never justify means
Ethics based on religious
beliefs and philosophical
What if everyone acted
that way
Example: Ten
based on
philosophical reasoning.
 Example: utilitarianism
Rights Based
based on
human/individual rights.
Obstacles To Ethical
Business Behavior
The corporate structure:
 Collective decision making
tends to deter individual ethical
 The corporate structure tends to
shield corporate actors from
personal responsibility and
SCSU Employee Code of Ethics
• Cell Phone Use.
• Gifts
• Nepotism
• Influence staff/students
• Frequent Flyer Miles
• Use of SCSU name
Discussion of values, policy, law….
Uncertainty on the part of
employees as to what kind of
behavior is expected of them
makes it difficult for them to
behave ethically.
Unethical conduct by management
shows employees that ethical
behavior is not a priority.
Enron asked Merrill Lynch to participate in a bogus sale
of three barges. Sale/buy back deal. Ethical for Enron to
do this? Is it unethical for Merrill Lynch to play along?
Difference between illegal and unethical
Origins of ethics
Duty Based - Religion
Rights Based-- Individuals
Outcome Based – Utilitarianism
Corporate Responsibility
Group 1 v. Group 2 Debate
Extra Slides
Ethics In The Global Context
Hypothetical – Women in Business
Assume you are the executive of an international company, Widgets International. After
a lot of work, you finally received approval to give a sales presentation before a buying
committee of a Saudi Arabian based company, Arabia, Inc. If successful this opportunity
will increase your overall sales by 20% (a very much needed 20% given that your other
sales are slipping in an overall poor economy).
You explain to your contact at Arabia that Amanda Smith, your Vice President of
Marketing, will give the presentation. The contact immediately tells you that the key
members of the committee do not welcome women in business leadership roles and
bringing Amanda will reflect badly on your company.
Although you do have others you could send, you know that Amanda is the best person
you have for the presentation, she is the person with the job title to give it and that she
will question the ethics of sending a man to do her job.
Do you send Amanda?
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