Ethics and Business Decision
Making
Chapter 2
What does ethics have to do with
the Law?
Ethics - Moral principles and values applied
to social behavior. Law is the moral
minimum.
Business Ethics – a consensus of what
constitutes right and wrong behavior and
the application of moral principles in a
business setting.
Bad Faith and Punitive Damages
Ethical lapses result in judicial findings of
bad faith and the award of punitive damages.
In re Exxon Valdez
($5 billion punitive damages due to oil spill)
Business Ethics:
Duty Vs. Outcome
• Duty-Based Ethics
– Ethics based upon an underlying concept
of duty regardless of the consequences of
action taken.
– Generally arise from religious belief
and/or philosophical reasoning.
Business Ethics:
Duty Vs. Outcome
• Outcome-Based Ethics
– Ethics based upon the consequences of
action taken, without regard to any
underlying concept of duty or morality.
– Sometimes referred to as “situational
ethics” or “the end justifies the means.”
Business Ethics:
Duty Vs. Outcome
• Utilitarianism
– Form of outcome-based ethics based on
producing the greatest good for the
greatest number of people.
– Requires a cost-benefit analysis of the
negative and positive effects.
Corporate Social Responsibility
• The concept that corporations and
businesses are citizens of the community
should act ethically and be accountable to
stakeholders for their actions.
Corporate Social Responsibility
• Duties to Shareholders
– Corporate directors and officers have
duty to act in shareholders’ best interest.
– the law holds directors and officers to a
high standard of care in performing these
“fiduciary duties.”
Corporate Social Responsibility
• Duties to Employees - Employers are
required by law to provide their employees
with a safe workplace, equal employment
opportunity, minimum wage, etc.
Corporate Social Responsibility
• Duties to Consumers - In marketing a
product, the law imposes a duty to warn
consumers of the harms that can result from
foreseeable misuses of the product.
Corporate Social Responsibility
• Duties to the Community - Considering the
needs of the community when deciding
whether to take or not take certain actions,
such as relocating a plant or a large number
of employees.
Corporate Social Responsibility
• Duties to Society as a Whole - Considering
to what extent corporations should act to
further societal interests at the expense of
the corporation’s own profit-maximizing
behavior.
Ethics in International Situations
Monitoring of Foreign Suppliers
Foreign Corrupt Practices Act
- prohibition of bribery of high-ranking
foreign officials
-“grease” to ministerial employees is not
illegal
Ethics and Social Responsibility
End of Chapter 2