the legal environment of business © 2006 prentice hall ch. 8-1 a critical thinking approach fourth...
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THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-11
A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
©2006 Prentice Hall©2006 Prentice Hall©2006 Prentice Hall©2006 Prentice Hall
CHAPTER 8CHAPTER 8
Ethics, Social Responsibility, and Ethics, Social Responsibility, and the Business Managerthe Business Manager
Ch. 8-Ch. 8-22
THE LEGAL ENVIRONMENT OF BUSINESS
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-33
Business Ethics and Social Responsibility Business Ethics and Social Responsibility
Notorious Cases:Notorious Cases:
Union Carbide Bhopal DisasterUnion Carbide Bhopal Disaster
Bridgestone-Firestone & Ford Explorer CasesBridgestone-Firestone & Ford Explorer Cases
Ethics is involved when decisions are Ethics is involved when decisions are made that affect the lives of others.made that affect the lives of others.Ethics is involved when decisions are Ethics is involved when decisions are made that affect the lives of others.made that affect the lives of others.
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-44
The Social Responsibility of BusinessThe Social Responsibility of Business
DEFINITIONConcern about business activities and their intended and unintended impact on groups and individuals other than owners or managers.
DEFINITIONConcern about business activities and their intended and unintended impact on groups and individuals other than owners or managers.
The Shareholder vs. Stakeholder DebateThe Shareholder vs. Stakeholder Debate
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-55
Theories of Ethical ThoughtTheories of Ethical ThoughtEthicsEthics: the study of good and bad behavior: the study of good and bad behavior
Business ethicsBusiness ethics: the same study directed to : the same study directed to business conductbusiness conduct
TheoriesTheories
Consequential or Utilitarian – Consequential or Utilitarian – focus on focus on consequencesconsequences
Deontological – Deontological – focus on dutiesfocus on duties
Humanist – Humanist – focus on improving human lifefocus on improving human life
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UtilitarianismUtilitarianism
Act Utilitarianism:Act Utilitarianism:
Does the act bring net Does the act bring net happiness? If not, don’t do it.happiness? If not, don’t do it.
Rule Utilitarianism:Rule Utilitarianism:
If the act were a general rule, If the act were a general rule, would it bring net happiness?would it bring net happiness?
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-77
DeontologistsDeontologists
Immanuel Kant: “Categorical Imperative” Immanuel Kant: “Categorical Imperative”
Actions are judged on the basis of their Actions are judged on the basis of their universal application: good or bad?universal application: good or bad?
Everyone is rational, has free will, and is to Everyone is rational, has free will, and is to be treated equally—never as a means to an be treated equally—never as a means to an endend
Actions are intrinsically good or bad, Actions are intrinsically good or bad, regardless of any consequencesregardless of any consequencesActions are intrinsically good or bad, Actions are intrinsically good or bad, regardless of any consequencesregardless of any consequences
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HumanistsHumanists
Human Capacities: Human Capacities:
IntelligenceIntelligence
WisdomWisdom
Self-restraintSelf-restraint
Actions that advance these are Actions that advance these are ethicalethical
Example: BriberyExample: Bribery
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-99
Code of EthicsCode of EthicsIndividualIndividual
CorporateCorporate
IndustryIndustry
ProfessionalProfessionalAccountingAccountingInsurance and FinanceInsurance and FinanceLawLaw
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-1010
Corporate CodesCorporate Codes
Widely usedWidely used
Apply to managementApply to management
Include sanctionsInclude sanctions
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-1111
Industry CodesIndustry CodesAdopted by associationsAdopted by associations
Aspirational statementsAspirational statements
ISSUE: Most associations are formed primarily to advance economic and political opportunities for their members, not to regulate themselves.
ISSUE: Most associations are formed primarily to advance economic and political opportunities for their members, not to regulate themselves.
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-1212
Professional CodesProfessional Codes
Professionals defined:Professionals defined:
Educational requirementsEducational requirements
Licensing requirementsLicensing requirements
Written and Written and enforceableenforceable ethical standards ethical standards
Formal status as organizationFormal status as organization
Formally recognized as such by publicFormally recognized as such by public
Professionals defined:Professionals defined:
Educational requirementsEducational requirements
Licensing requirementsLicensing requirements
Written and Written and enforceableenforceable ethical standards ethical standards
Formal status as organizationFormal status as organization
Formally recognized as such by publicFormally recognized as such by public
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-1313
Professional Codes Professional Codes
Professional codes may conflict with company or association codes
Management must recognize that conformity with professional code will have priority
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Examples of Professional CodesExamples of Professional CodesAccountingAccounting
AICPA Code of Professional Ethics and AICPA Code of Professional Ethics and Interpretive RulesInterpretive Rules
InsuranceInsurance
ASCLU Guides to Professional ConductASCLU Guides to Professional Conduct
LawLaw
ABA Model Rules of Professional Responsibility ABA Model Rules of Professional Responsibility and State Bar Associationsand State Bar Associations
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Schools of Social Responsibility Schools of Social Responsibility
Profit-Oriented SchoolProfit-Oriented School
Managerial SchoolManagerial School
Institutional SchoolInstitutional School
Professional Obligation SchoolProfessional Obligation School
Regulation SchoolRegulation School
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-1616
Profit-Oriented SchoolProfit-Oriented SchoolThe purpose of business is to The purpose of business is to increase value for shareholdersincrease value for shareholders
Managers who serve this goal are Managers who serve this goal are demonstrating social responsibilitydemonstrating social responsibility
Unintended negative consequences Unintended negative consequences are external to corporate financial are external to corporate financial resultsresults
““Social costs” are matters for Social costs” are matters for government, not corporate, actiongovernment, not corporate, action
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Managerial SchoolManagerial School
Many large businesses have Many large businesses have stakeholders as well as stakeholders as well as stockholdersstockholders
Management should strive to Management should strive to serve both internal and external serve both internal and external groupsgroups
Management should also strive Management should also strive to maximize long-term as well as to maximize long-term as well as short-term goalsshort-term goals
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Institutional SchoolInstitutional School
Business has responsibility to Business has responsibility to benefit all of societybenefit all of society
Business should be held Business should be held responsible for all actions, responsible for all actions, just as individuals presently just as individuals presently areare
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Professional Obligation SchoolProfessional Obligation School
Business managers should be Business managers should be ‘professionalized’‘professionalized’
Licensing based on state/national Licensing based on state/national testtest
Codified responsibilitiesCodified responsibilities
License revocation sanction for License revocation sanction for violationsviolations
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© 2006 Prentice Hall© 2006 Prentice Hall Ch. 8-Ch. 8-2020
Regulation SchoolRegulation School
Business is accountable to Business is accountable to government regulatorsgovernment regulators
Issue: How much regulation is enough?Issue: How much regulation is enough? Government seat on board of directors
Independent audits
Increased reporting requirements
Issue: How much regulation is enough?Issue: How much regulation is enough? Government seat on board of directors
Independent audits
Increased reporting requirements
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Global Dimensions Global Dimensions U.N. Code of Conduct for Transnational U.N. Code of Conduct for Transnational CorporationsCorporations
Respect for sovereigntyRespect for sovereignty
Adherence to sociocultural valuesAdherence to sociocultural values
Respect for human rightsRespect for human rights
AnticorruptionAnticorruption
Foreign Corrupt Practices ActForeign Corrupt Practices Act
OECD Anti-Bribery ConventionOECD Anti-Bribery Convention
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Summary Summary
Ethics and business ethics definedEthics and business ethics defined
Ethical theoriesEthical theories
Schools of Social ResponsibilitySchools of Social Responsibility
Global dimensions and responsesGlobal dimensions and responses
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