• What is business ethics, and why is it
important?
• How can business leaders encourage
their companies to act ethically?
• How do duty-based ethical standards
differ from outcome-based ethical
standards? 
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• What are six guidelines that an
employee can use to evaluate
whether his or her actions are
ethical?
• What types of ethical issues might
arise in the context of international
business transactions?
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• Ethics is the study of right and wrong
behavior; whether an action is fair,
right or just.
• In business, ethical decisions are the
application of moral and ethical
principles to the marketplace and
workplace.
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• Why Is Business Ethics Important?
–Directors and Officers owe a complex
set of ethical duties to their
stakeholders (internal and external).
–When these duties conflict, ethical
dilemmas are created.
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• The Moral Minimum.
–Normally considered as mere
compliance with the law.
• “Gray Areas” in the Law.
–Make it difficult for companies to
navigate and forecast.
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• Short-Run Profit Maximization.
–Some argue a businesses only goal
should be to maximize profit. But
executives need to distinguish between
short-term and long-term maximization.
–CASE 8.1 United States v. Skilling
(2009). What was Skilling’s ethical
dilemma?
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• Importance of Ethical Leadership.
–Attitude of Top Management.
–Behavior of Owners and Managers.
• CASE 8.2 Krasner v. HSH Nordbank
AG (2010). Did the plaintiff prove the
incidents and environment of sexual
favoritism were related to his gender?
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• Creating Ethical Codes of Conduct.
One of the most effective ways to
promote ethical behavior in an
organization.
–Ethics Training for Employees.
–The Sarbanes-Oxley Act and WebBased Reporting Systems (EthicsPoint).
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• Corporate Stock Buybacks.
–Rationale: Corporate management
believes stock is undervalued, so
instead of issuing dividends it buys
stock in the market, thus boosting
share value.
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• Startling Executive Decisions at
American International Group.
• Executive Bonuses.
–Bonuses and Salaries Before the Crisis.
–Some Bonuses Were Paid Early.
–Congress Acts to Limit Bonuses.
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• Duty Based Ethics - derived from
religious and philosophical principles.
–Religious Ethical Standards. 
–Kantian Ethics. 
–The Principle of Rights. 
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• Duty-Based Ethics.
–Religious Ethical Standards.
• The rightness or wrongness of an action
is usually judged according to its
conformity to an absolute rule that
commands a particular form of behavior.
• The motive of the actor is irrelevant in
judging the rightness or the wrongness of
the action. Often involves compassion.
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• Duty-Based Ethics (cont’d).
–Kantian Ethics.
• Belief that general guiding principles for
moral behavior can be derived from
human nature (categorical imperative).
• The rightness or wrongness of an action
is judged by estimating the consequences
that would follow if everyone in a society
performed the act under consideration.
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• Duty-Based Ethics (cont’d).
–Principle of Rights.
• Belief that every duty gives rise to a
corresponding right, deeply embedded in
Western culture.
• Ethicality of an action is judged by how
the consequences of the action will affect
the rights of others.
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• Outcome-based Ethics: Utilitarianism.
–Action is ethical based on whether it
produces the greatest good for the
greatest number of people.
–If it affects the majority adversely, it is
morally wrong.
–Applying the utilitarian theory requires:
• Determination of individuals affected;
• Cost-Benefit analysis, and
• Choice among alternative actions.
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• Corporate Social Responsibility.
–Those who manage corporations should
be accountable to society for their
actions.
–Stakeholder Approach: corporations have a
duty not only to shareholders but other
groups (stakeholders) affected by corporate
actions. 
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• Corporate Social Responsibility
(cont’d).
–Corporate Citizenship: promote goals
that society considers worthwhile and
take positive steps towards solving
problems.
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• Corporate Social Responsibility
(cont’d).
–Way of Doing Business: Poll found that
70% of executives polled agreed that
corporate citizenship should be a
priority.
–But not all socially responsible
activities benefit a company.
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• Corporate Social Responsibility
(cont’d).
–Employee Recruiting and Retention.
Younger employees look for firms
that are committed to socially
responsible goals and community
projects.
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• George S. May company has
provided six guidelines:
–The law.
–Rules and procedures.
–Values.
–Conscience.
–Promises.
–Heroes (role models).
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• Corporate-Ethics.us has devised a
procedure:
–Inquiry.
–Discussion.
–Decision.
–Justification.
–Evaluation.
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• American companies must be trained
in cross-cultural business practices.
• Monitoring of Employment Practices
of Foreign Suppliers.
–Corporate Watch groups can hold
corporations accountable.
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• Foreign Corrupt Practices Act.
–Prohibition Against Bribery of Foreign
Officials. But FCPA does not permit
“grease” payments to minor officials.
–Nor does FCPA prohibit payments to
foreign officials which are lawful in that
country.
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• Foreign Corrupt Practices Act (cont’d):
–Nor does FCPA prohibit payments to
private companies, unless the US firm
knows the payments will go to an
official. 
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• Foreign Corrupt Practices Act (cont’d):
–Bribery by Foreign Companies.
–Accounting Requirements.
–Penalties for Violations: companies up to
$2 million in fines, individuals up to
$100,000, and up to 5 years in prison.
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