the legal environment of business © 2006 prentice hall ch. 8-1 a critical thinking approach fourth...

© -1

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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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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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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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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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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Code of EthicsCode of EthicsIndividualIndividual

CorporateCorporate

IndustryIndustry

ProfessionalProfessionalAccountingAccountingInsurance and FinanceInsurance and FinanceLawLaw

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Corporate CodesCorporate Codes

Widely usedWidely used

Apply to managementApply to management

Include sanctionsInclude sanctions

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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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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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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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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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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

the legal environment of business © 2006 prentice hall ch. 8-1 a critical thinking approach fourth...

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