MGT. OF ETHICS
6540
Moral Problems in
Business Management
•What does “right” really mean?
•How do you know when something is truly “right” or
truly “wrong”?
•Why do people’s views on what is “right” and
“wrong” differ?
•Why would a local construction worker in Moab
feel differently about allocation of additional land
for development and expansion than a young
environmentalist who enjoys hiking in the
mountains?
•How do you attempt to convince people who disagree
with you about what is “right”?
•What arguments should that unemployed construction
worker make if he/she were at a meeting with the
young environmentalist? What arguments should the
environmentalist make?
Moral Standards
•Do moral standards in business differ in some ways from
those of our personal life?
•Business managers do not know how to apply the
beliefs and standards they hold to the ethical problems
they encounter.
•The goal: Bring managers to think in a structured,
orderly way about their obligations to other people.
How?
The course should be:
• Short
•Direct
•Focused
•Lively and move along quickly
•Convey a method of analysis - not a standard of behavior
Direct:
•Recognition of ethical problems
•Understanding of ethical analysis
•Reliance upon personal values
Focused:
•Ethical problems in management are complex
•Ethical problems in management are pervasive
•Ethical problems in management are personal
Specific Incidents That Demand Our
Attention to Ethics of Management
•H.B. Fuller Company
•Beech-Nut Nutrition Company
•Dow Corning
•Sears Roebuck and Company
•Tobacco Industry
•The Enron Case
•Firestone Tire Failure on Ford SUVs. 60 minutes earlier
film about failures in Venezuela
General issues also shape the
business ethics relationship:
•Sexual harassment in the
workplace
•Toxic waste disposal crisis
•Use of lie detectors
•Minority rights
•AIDS in the workplace
•Smoking in the workplace
•Drug testing
•Insider trading
•Whistle blowing
•Product liability
1. What groups will benefit?
2. What groups will be harmed?
3. Whose rights will be exercised?
4. Whose rights will be ignored?
5. Express the moral problem so that
everyone will believe that his or her moral
concerns have been recognized and
included.
6. What are the economic benefits?
7. What are the legal requirements?
8. What are the ethical duties?
Method of analysis
Complex Nature of Moral Problems in
Business
Benefits Some
Harms to Others
Rights Exercised
Rights Denied
Moral Problems in a
Business Firm
Individual Determinants of Moral Standards
Religious/Cultural
traditions
Personal Goals
Personal Norms
Personal beliefs
Personal Values
Economic/social
situations
}
Subjective standards
of moral behavior
Analytical Process for the Resolution of Moral Problems
Understand all
moral standards
Determine the
economic outcomes
} { }
Define complete
moral problems
Recognize all
moral impacts:
Benefits to some
Harms to others
Rights exercised
Rights denied
Consider the
legal requirements
Evaluate the
ethical duties
Propose convincing
moral solution
Building Trust, Commitment and
Effort within an Organization
Recognition of Moral
Problems
- What is “duty”?
Corporate Mgt.
in Extended
Organizations
Application of Moral
Reasoning
-What is “right”?
Possession of Moral
Character
-What is “integrity”?
Trust
Commitment
Effort
Extending Cooperation,
Innovation and Unification
Organizational
Values
Corporate
Goals
Mission
Statement
Managerial
balancing:
-Economic benefits
-Legal requirements
-Ethical Principles
Financial
Supports
Performance
Measures
Incentive
Payments
Prohibited
Procedures
Leadership
Actions
Trust
Commitment
Effort
Cooperation
Innovation
Unification
Analytical Process for the Resolution of Moral Problems
Understand all
moral standards
Determine the
economic outcomes
} { }
Define complete
moral problems
Recognize all
moral impacts:
Benefits to some
Harms to others
Rights exercised
Rights denied
Consider the
legal requirements
Evaluate the
ethical duties
Propose convincing
moral solution
Chapter Two
Moral Analysis and
Economic Outcomes
Microeconomic theory of
best for society is:
Economic Theory
• Managers should optimize profits
and
• Ensure that those markets are
competitive
Pareto Optimality
•Increase in the well-being of some and
decrease in the well-being of others. Any
lasting harms should be remedied by
political, not financial, procedures!
•Is it possible to rely totally on the
economic concept of Pareto Optimality
in making decisions?
“Few trends could so thoroughly
undermine the very foundations of
our free society as the acceptance
by corporate officials of a social
responsibility other than make as
much money for their stockholders
as possible.”
-Milton Friedman
Personal Demand Curve
Individual Demand
Units
Market Demand and Supply Curve
Market Supply
Market Demand
Units
Marginal Cost Curve
Marginal Costs
Marginal Revenues
Units
•The executives who happened to hold
duplicate positions following a merger
and consequently were to be victims of
“downsizing”.
•The wholesalers who helped to
successfully establish a new product but
now represent a much more costly means
of reaching the market.
•The dam, which is to be built on private
land, but which will block a river used by
local residents and summer vacationers for
years.
• Since no one is perfect then legal
requirements (decisions by full
society) and observing ethical duties
(principles for a good society) are
needed.
Factor Supply Curves
Labor Supply
Capital Supply
Material Supply
Units
Consumers, whose marginal
utilities for a mix of goods and
services can be expressed as
individual demand curves
Product markets for goods and
services, with aggregate demand
and supply curves that determine
the prices to be charged
Political process, for a partial
redistribution of income from
owners and workers to individual
consumers and public agencies
within the society
Producing firms, whose marginal
costs determine a company supply
curve for the goods and services
and whose marginal productivity
rates determine company demand
curves for the various input factors
Owners of land and capital, whose
supplies are fixed over the short
term, and workers, whose marginal
utility for income limits the labor
supply, also over the short term
Microeconomic
Theory
Factor markets for material, labor,
and capital, with aggregate demand
and supply curves that determine
the prices to be charged