ChapterOne:EthicsandBusinessCopyright?2021McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.ChapterObjectivesAfterreadingthischapter,youwillbeableto:Explainthreelevelsatwhichethicaldecisionsgetmadeinbusiness.Explainthenatureofbusinessethicsasanacademicdiscipline.Explainwhyethicsisimportantinthebusinessenvironment.Explainwhyethicalresponsibilitiesgobeyondlegalcompliance.Distinguishtheethicsofpersonalintegrityfromtheethicsofsocialresponsibility.Distinguishethicalnormsandvaluesfromotherbusiness-relatednormsandvalues.Describeethicaldecisionmakingasaformofpracticalreasoning.EthicsandBusiness1Ittakes20yearstobuildareputationandfiveminutestoruinit.Ifyouthinkaboutthatyou’lldothingsdifferently. WarrenBuffettBusinessEthicsForbusinessstudents,ethicsisanimportantfieldofstudy.Businessethicsisaprocessofdecisionmaking.Businessmusttakeethicsintoaccountandintegrateethicsintoitsorganizationalstructure.Scandalsarebroughtaboutbyethicalfailuresandunethicaldecisions.Thistextprovidesadecision-makingmodelthatcanhelpanalyzeavoidfutureethicalfailures.LevelsofEthicalDecisionMakingBusinessethicsinvolvesmakingdecisionsattheindividual,attheorganizational,andatabroadersocialandgovernmentallevel.Asindividuals,eachpersoninteractswithbusinessesascustomers,asemployees,andascitizensofthecountriesinwhichtheyoperate.Organizationalcultureandcorporateleadershiphaveimportantrolestoplayindecisionmaking.Individualbusinesses'andindustries'decisionsareinfluencedbysocial,economic,andpoliticalenvironments.GoalsofBusinessEthicsDevelopingtheknowledgebaseandskillsneededtoidentifyethicalissues.Understandinghowandwhypeoplebehaveunethically.Decidinghowoneshouldact,whatoneshoulddo,andthetypeofpersononeshouldbeasanindividual.Creatingethicalorganizations.Thinkingthroughthesocial,economic,andpoliticalpoliciesthatweshouldsupportascitizens.MakingtheCaseforBusinessEthicsSeparationthesis:

Assertsthatordinaryethicalstandardsshouldbekeptseparatefrom,andnotbeusedtojudge,businessdecisionsbecausebusinesshasitsownstandardsofgoodandbad.Remainscommoninbusinesscircles.Holdsthatbusinessoughttobegovernedbysomeethicsandsomevalues.Boththeexistenceofafirmandtheconditionsunderwhichitoperatesrequirethatdecisionmakersconsidertheimpactofthosedecisionsonawiderangeofstakeholders.Abusinessstakeholderisanyonewhoaffectsorisaffectedbydecisionsmadewithinthefirm,forbetterorworse.EthicsandBusiness2Ethicsisthenewcompetitiveenvironment.PeterRobinson,CEO,MountainEquipmentCo-op(2000to2007)EthicsandtheLaw1Decidingwhatoneshoulddoinbusinessdoesrequireconsiderationofwhatthelawrequires,expects,orpermits.Legalnormsandethicalnormsarenotidentical.Iscompliancewiththelawenoughtobehaveethically?Isthelawitselfethical?Thelawmaypreventharm,butdoesitpromote"good"?Onlycomplyingwiththelawmayleadtomoreregulation.Lawsmaynotbeinplacefornewsituations.Lawsmaybeambiguous.EthicsandtheLaw2Ethicalconsiderationsdemonstratethatbusinesscannotavoidmakingethicaljudgments,evenifitisfullycommittedtoobeyingthelaw.Manycorporationsestablishethicsprogramsandhireethicsofficerswhoareresponsibleformanagingcorporateethicsprograms.Lawsoffergeneralrulesclarifiedbylegalprecedent.Thereisnounambiguousanswerforthosewishingonlytoobeythelaw.EthicsandtheLaw3Riskassessmentisaprocesstoidentifypotentialeventsthatmayaffecttheentity,andmanagerisktobewithinitsriskappetite.Toprovidereasonableassuranceregardingtheachievementofentityobjectives.Whentherisksinvolvepotentialharmsandbenefitstoavarietyofstakeholders,itisajudgmentthatinvolvesethicsaswell.Businessmusttakeethicsintoaccountandintegrateethicsintoitsorganizationalstructure.Butwhatisethics?BusinessEthicsasEthicalDecisionMakingResponsibledecisionmakinganddeliberationwillresultinmoreresponsiblebehavior.Here,ethics

referstohowhumanbeingsshouldproperlylivetheirlives.Theauthors’fundamentalassumptionisthataprocessofrationaldecisionmakingcanandwillresultinbehaviorthatismorereasonable,accountable,andethical.Teachingethicsmustchallengestudentstothinkforthemselves.BusinessEthicsasPersonalIntegrityandSocialResponsibility1Ethicsinvolvesaskinganimportantquestion—howshouldwelive?Philosophersemphasizethatethicsisnormative,dealingwithourreasoningabouthowweshouldact.Socialsciencesalsoexaminehumandecisionmakingandactions.Butthesesciencesaredescriptiveratherthannormative.Theyprovideanaccountofhowandwhypeopledoactthewaytheydo–theydescribe.Asanormativediscipline,ethicsseeksanaccountofhowandwhypeopleshouldactacertainway,ratherthanhowtheydoact.HowShouldWeLive?1Ifdefining"We"individually:Ethicsisbasedonourvaluestructures:Definedbyourmoralsystems;and,sometimesreferredtoasmorality.Or"personalintegrity."Ifmoralsrefertotheunderlyingvaluesonwhichdecisionsarebasedethicsreferstotheapplicationofthosemoralstothedecisionsthemselves.HowShouldWeLive?2Ifdefining"We"collectively:Referstohowwelivetogetherinacommunity.Thisareaissometimesreferredtoassocialethics.Here,wejudgecompaniesfromasocialperspective;fortheirsocialresponsibility.Managerialdecisionsinvolvethefollowingaspectsofethics:Personalintegrity.Socialresponsibilities.BusinessEthicsasPersonalIntegrityandSocialResponsibility2Distinguishingethicsfromotherpracticaldecisionsfacedwithinbusinessinvolvestwoapproaches.Social-scientificapproach:Examinesthesituationandthedecisionbyexploringthefactorsthatledtoonedecisionratherthananotherorbyaskingwhythemanageractedinthewaythathedid.Normativeapproachstepsbackfromthefactstoask:WhatshouldIdo?Whatrightsandresponsibilitiesareinvolved?Whatgoodwillcomefromthissituation?AmIbeingfair,just,virtuous,kind,loyal,trustworthy?BusinessEthicsasPersonalIntegrityandSocialResponsibility3Ethicsisanormativedisciplineasitdealswithnorms.Norms:Thosestandardsofappropriateandproper(or"normal")behavior.Normsestablishtheguidelinesorstandardsfordeterminingwhatweshoulddo,howweshouldact,andwhattypeofpersonweshouldbe.Normativedisciplinespresupposesomeunderlyingvalues.DistinctionBetweenValuesandEthicsValuesaretheunderlyingbeliefsthatcauseustoactortodecideonewayratherthananother.Manydifferenttypesofvaluescanberecognized.Individualshavetheirownpersonalvaluesandinstitutionsalsohavevalues—showninthecompany’sculture.Anindividual’soracorporation’ssetofvaluesmayleadtoeitherethicalorunethicalresults.Onewaytodistinguishvaluesisintermsoftheendsorgoalstheyserve.