Chapter 3
Business Ethics,
Social Forces, and the Law
Twomey, Business Law and the
Regulatory Environment (14th Ed.)
Guidelines for Analyzing a
Contemplated Action [3-1]
1.
2.
3.
4.
Define the problem from the decision
maker’s point of view.
Identify who could be injured by the
contemplated action.
Define the problem from the opposing view.
Would you (as the decision maker) be
willing to tell your family, your supervisor,
your CEO, and the board of directors
about the planned action?
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Guidelines for Analyzing a
Contemplated Action [3-1] (cont’d)
5.
6.
Would you be willing to go before a
community meeting, a congressional
hearing, or a public forum to describe the
action?
With a full consideration of the facts and
alternatives, reach a decision about
whether the contemplated action should be
taken.
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The Endless Cycle of
Societal Interaction [3-2]
Social
Forces
Ethics
Environment
Law
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Purposes of Law [3-3]
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Protection of the state
Protection of the person
Protection of public health, safety, and moral laws
Protection of property
Protection of personal rights
Enforcement of individual intent
Protection from exploitation, fraud, and oppression
Furtherance of trade
Protection of creditors and rehabilitation of debtors
Stability and flexibility
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Categories of Ethical Behavior [3-4]
1. Integrity and Truthfulness
2. Promise-Keeping
3. Loyalty: Avoiding Conflicts of Interest
4. Fairness
5. Doing No Harm
6. Maintaining Confidentiality
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Blanchard/Peale Test [3-5]
1. Is it legal?
2. Is it balanced?
3. How does it make me feel?
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The Front-Page-of-the-Newspaper
Test [3-6]
Warren Buffet described the newspaper test as follows:
“Contemplating any business act, an employee
should ask himself whether he would be willing to
see it immediately described by an informed and
critical reporter on the front page of his local
newspaper—there to be read by his spouse, children,
and friends. At Salomon, we simply want no part of
any activities that pass legal tests but that we, as
citizens, would find offensive.”
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The Laura Nash Model [3-7]
1. Have you defined the problem accurately?
2. How would you define the problem if you stood on the other
side of the fence?
3. How did this situation occur in the first place?
4. What is your intention in making this decision?
5. How does the intention compare with the probable results?
6. Whom could your decision or action injure?
7. Can you discuss your decision with the affected parties?
8. Are you confident that your position will be as valid over a
long period of time as it seems now?
9. Could you discuss your decision with your supervisor, coworkers, officers, board, friends, and family?
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Chapter 3 Summary
Business ethics is the application of values and standards
to business conduct and decisions. These values originate
in various sources from positive (codified) law to natural
law to stakeholder values. Business ethics is important
because trust is a critical component of good business
relationships and free enterprise.
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Chapter 3 Summary [2]
A business with values will enjoy the additional
competitive advantage of a good reputation and,
over the long term, better earnings. When
businesses make decisions that violate basic
ethical standards, social forces are set into
motion, and the area of abuse is regulated, with
resulting additional costs and restrictions for
business. Voluntary value choices by businesses
position them for a competitive advantage.
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Chapter 3 Summary [3]
The categories of ethical values in business are
truthfulness and integrity, promise-keeping, loyalty and
avoiding conflicts of interest, fairness, doing no harm,
and maintaining confidentiality.
Resolution of ethical dilemmas is possible through the
use of various models that require a businessperson to
examine the impact of a decision before it is made. The
models include stakeholder analysis, Blanchard/Peale,
the front-page-of-the-newspaper test, and the
Laura Nash model.
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