Chapter 1: Ethics and Business PDF

Chapter One: Ethics and Business © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Chapter Objectives After reading this chapter, you will be able to: 1. Explain...

Chapter One: Ethics and Business © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Chapter Objectives After reading this chapter, you will be able to: 1. Explain three levels at which ethical decisions get made in business. 2. Explain the nature of business ethics as an academic discipline. 3. Describe ethical decision making as a form of practical reasoning. 4. Distinguish the ethics of personal integrity from the ethics of social responsibility. 5. Distinguish ethical norms and values from other business- related norms and values. 6. Explain why ethics is important in the business environment. 7. Explain why ethical responsibilities go beyond legal compliance. © McGraw Hill LLC. 2 ©McGraw-Hill Education.  Ethics and Business 1 It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently. Warren Buffett © McGraw Hill LLC. 3 ©McGraw-Hill Education.  Business Ethics 1 At its most basic level, ethics is concerned with how we should act and how we should live our lives. Business ethics examines responsibilities we owe to ourselves and to each other. How should I act within business? How should a business act? What responsibilities do I have as a businessperson? What responsibilities does a business have to employees, to customers, and to society? © McGraw Hill LLC. 4 ©McGraw-Hill Education.  Business Ethics 2 For business students, ethics is an important field of study. Business ethics is a process of decision making. Business must take ethics into account and integrate ethics into its organizational structure. Scandals are brought about by ethical failures and unethical decisions. This text provides a decision-making model that can help analyze avoid future ethical failures. © McGraw Hill LLC. 5 ©McGraw-Hill Education.  Levels of Ethical Decision Making Business ethics involves making decisions at the individual, at the organizational, and at a broader social and governmental level. As individuals, each person interacts with businesses as customers, as employees, and as citizens of the countries in which they operate. Organizational culture and corporate leadership have important roles to play in decision making. Individual businesses' and industries' decisions are influenced by social, economic, and political environments. © McGraw Hill LLC. 6 ©McGraw-Hill Education.  Goals of Business Ethics Developing the knowledge base and skills needed to identify ethical issues. Understanding how and why people behave unethically. Deciding how one should act, what one should do, and the type of person one should be as an individual. Creating ethical organizations. Thinking through the social, economic, and political policies that we should support as citizens. © McGraw Hill LLC. 7 ©McGraw-Hill Education.  Ethics and Business 2 Never go into business purely to make money. If that’s your motive, you are better off doing nothing. Richard Branson © McGraw Hill LLC. 8 ©McGraw-Hill Education.  Business Ethics as Ethical Decision Making Ethical decision making and deliberation will result in more responsible behavior. One perspective believes that ethics is no more than personal opinion and feelings. One perspective is that ethics can offer clear, absolute, and unambiguous truths. The authors’ approach finds a middle ground. The fundamental assumption is that a process of rational decision making can and will result in behavior that is more reasonable, accountable, and ethical. Teaching ethics must challenge students to think for themselves. © McGraw Hill LLC. 9 ©McGraw-Hill Education. Business Ethics as a Type of Reasoning Practical reasoning involves reasoning about what one ought to do. Ethics is a part of practical reason Practical reasoning focuses on what we should do, and how we should act and behave. Theoretical reasoning is aimed at establishing truth and what one should believe. According to most western philosophers, humans are rational and should believe only that which is reasonable, and act only in ways that are reasonable. Theoretical reasoning is the pursuit of truth, the highest standard for what we should believe. © McGraw Hill LLC. 10 ©McGraw-Hill Education.  How Should “We” Live? 1 If defining “we" individually: Ethics is based on our value structures: Defined by our moral systems; and, sometimes referred to as morality. Sometimes referred to as "personal integrity.“ Morality is distinguished from questions of social justice, which addresses issues of how communities and social organizations should be structured. If morals refer to the underlying values on which decisions are based, ethics refers to the application of those morals to the decisions themselves. © McGraw Hill LLC. 11 ©McGraw-Hill Education.  How Should “We” Live? 2 If defining "We" collectively: Refers to how we live together in a community. This area is sometimes referred to as social ethics. Here, we judge companies from a social perspective; for their corporate social responsibility. Managerial decisions involve the following aspects of ethics: Personal integrity. Social responsibilities. Legal and political environments. © McGraw Hill LLC. 12 ©McGraw-Hill Education.  Ethics as Practical Reason Ethics is a vital element of practical reasoning— reasoning about what we should do. Distinguished from theoretical reasoning, which is reasoning about what we should believe. Theoretical reason is the pursuit of truth. There is no single methodology for ethics that works in all situations, but guidelines provide direction and criteria for decisions. Ethical theories explain and defend various norms, standards, values, and principles used in ethical decision making. The next chapter introduces a model for making ethically responsible decisions. © McGraw Hill LLC. 13 ©McGraw-Hill Education.  Business Ethics as Personal Integrity and Social Responsibility 1 Ethics involves asking an important question—how should we live? Philosophers emphasize that ethics are normative, dealing with our reasoning about how we should act. Social sciences also examine human decision making and actions. But these sciences are descriptive rather than normative. They provide an account of how and why people do act the way they do – they describe. As a normative discipline, ethics seeks an account of how and why people should act a certain way, rather than how they do act. © McGraw Hill LLC. 14 ©McGraw-Hill Education.  Business Ethics as Personal Integrity and Social Responsibility 2 Distinguishing ethics from other practical decisions faced within business involves two approaches. Social-scientific approach: Examines the situation and the decision by exploring the factors that led to one decision rather than another or by asking why the manager acted in the way that they did. Normative approach steps back from the facts to ask: What should I do? What rights and responsibilities are involved? What good will come from this situation? Am I being fair, just, virtuous, kind, loyal, trustworthy? © McGraw Hill LLC. 15 ©McGraw-Hill Education.  Business Ethics as Personal Integrity and Social Responsibility 3 Ethics is a normative discipline as it deals with norms. Norms: Those standards of appropriate and proper (or "normal") behavior. Norms establish the guidelines or standards for determining what we should do, how we should act, and what type of person we should be. Normative disciplines presuppose some underlying values. Those beliefs that incline us to act or choose one course of action rather than another are values. Ethical values serve well-being in impartial rather than personal or selfish ways. © McGraw Hill LLC. 16 ©McGraw-Hill Education.  Distinction Between Values and Ethics Values are the underlying beliefs that cause us to act or to decide one way rather than another. Many different types of values can be recognized. Individuals have their own personal values and institutions also have values—shown in the company’s culture. An individual’s or a corporation’s set of values may lead to either ethical or unethical results. One way to distinguish values is in terms of the ends or goals they serve. Ethical values serve the ends of human well- being. Those properties of life that contribute to human well-being and a life well lived. © McGraw Hill LLC. 17 ©McGraw-Hill Education.  Making the Case for Business Ethics Separation thesis: Ordinary ethical standards should be kept separate from, and not be used to judge, business decisions because business has its own standards of good and bad. Remains common in business circles. Holds that business ought to be governed by some ethics and some values. Psychological egoism implies that all human actions are selfish and motivated by self-interest. Decision makers should consider the impact of decisions on a wide range of stakeholders. A business stakeholder is anyone who affects or is affected by decisions made within the firm, for better or worse. © McGraw Hill LLC. 18 ©McGraw-Hill Education.  Ethics and the Law 1 Deciding what one should do in business does require consideration of what the law requires, expects, or permits. Legal norms and ethical norms are not identical. Is compliance with the law enough to behave ethically? Is the law itself ethical? The law may prevent harm, but does it promote "good"? Only complying with the law may lead to more regulation. Laws may not be in place for new situations. Laws may be ambiguous. © McGraw Hill LLC. 19 ©McGraw-Hill Education.  Ethics and the Law 2 Ethical considerations demonstrate that business cannot avoid making ethical judgments, even if it is fully committed to obeying the law. Many corporations establish ethics programs and hire ethics officers who are responsible for managing corporate ethics programs. Laws offer general rules clarified by legal precedent. There is no unambiguous answer for those wishing only to obey the law. © McGraw Hill LLC. 20 ©McGraw-Hill Education.  Ethics and the Law 3 Risk assessment is a process to identify potential events that may affect the entity, and manage risk to be within its risk appetite. To provide reasonable assurance regarding the achievement of entity objectives. When the risks involve potential harms and benefits to a variety of stakeholders, it is a judgment that involves ethics as well. Business must take ethics into account and integrate ethics into its organizational structure. But what is ethics? © McGraw Hill LLC. 21 ©McGraw-Hill Education.  Ethics and Business 3 No snowflake in an avalanche ever feels responsible. Voltaire 1694 to 1778 © McGraw Hill LLC. 22 ©McGraw-Hill Education.  End of Main Content © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.