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Ethical Thoughts

•“The biggest corporation, like the humblest citizen, must be held to strict compliance with the will of the people.”

•Theodore Roosevelt

Understanding Business Ethics

CHAPTER 1 THE FOUNDATION OF ETHICAL THOUGHT

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Ethical Thoughts

•“We demand that big business give people a square deal, in return we must insist when anyone engaged in big business honestly endeavors to do right, he shall himself be given a square deal.”

•Theodore Roosevelt

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Ethics in Action •Trevor Field wanted to give back to the community •Watched women in South Africa carry water from the

watering hole everyday, when they could be doing more productive things •Designed a water pump that could be used by

children when they play to pull water from the deeper points in the ground where the water is not contaminated and is cooler – works like a merry-go-round •Field sells advertising for the water towers where the

water is collected

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Ethics in Action •Each pump costs about $7,000 (US $) to install

•PlayPumps International received a check in 2006 from the US government, the Case Foundation and the MCJ Foundation to help support the expansion of Field’s project

•Field’s goal is to raise $45 million (US $) by 2010 to help ten million African citizens gain access to clean drinking water

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Ethics •The values an individual uses to interpret whether

any particular action or behavior is considered acceptable or appropriate. •Questions to ask: • Is the behavior or action consistent with the overall basic

duties of the individual in question? • Does the behavior or action acknowledge and respect the

underlying rights of all the individuals who will be impacted by the action?

• Would the behavior or action be considered the best practice in that specific set of circumstances?

• Does the behavior or action match the overall entrenched beliefs of the individual?

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Business Ethics •The collective values of a business organization that

can be used to evaluate whether the behavior of the collective members of the organization are considered acceptable and appropriate

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Foundation of Ethical Theory

•Initially classified based on what perspective is considered by the reader

•Descriptive ethics

•Analytical ethics

•Normative ethics

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Descriptive Ethics •The presentation of facts related to the specific ethical actions of an individual or organization

•Used when an observer wants to understand the course of events that generated the ethical issue

•No interpretation of the facts or assumptions concerning why that course of action took place

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Analytical Ethics • Understanding the reasons a course of action that may have

an ethical impact took place

• Also called metaethics

• Moves from the how and when inquiry, which is the basis of the descriptive ethics viewpoint, to asking why

• Hypotheses can be developed to help understand the relationships among different variables impacting ethical behavior

• Addresses the ‘motive’ behind the actions instead of just being satisfied with a description of the actions

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Normative Ethics • A prescribed course of action that attempts to ensure that

ethical behavior will be followed in the future • Moves the evaluation of ethical behavior from the past to

future tense • Presents information on what should be done in the future

rather than what was done in the past, both part of descriptive and analytical ethics

• Allows employees and managers to address potential ethical issues before they occur

• Use of ethical tools (like ethics codes) help direct the normative ethical behavior by presenting what are acceptable and unacceptable types of behavior tolerated within the firm

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Teleological Frameworks

•Focus on the results of the conduct of the individual

•Ethical Egoism: focusing on each individual’s self interest

•Based on the belief that every individual should act in a way to promote himself/herself if the net result will generate, on balance, positive rather than negative results

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Teleological Frameworks

•Utilitarianism: based on the principle of utility

•Each person’s actions add to the overall utility of the community impacted by those actions

•Focus on the net result of their actions instead of the means or motives that generated the reason for their actions

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Teleological Frameworks

•Sidgwick’s Dualism: attempts to bridge the gap between the two competing ethical frameworks of ethical egoism and utilitarianism • Core of argument was that both theories had

elements of cost-benefit analysis to help analyze the actions of individuals

•Adam Smith presented an argument that could support Sidgwick’s dualism – argues the greatest good for the greatest number is achieved by individuals pursuing their self-interests in the marketplace

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Deontological Frameworks

•Focus on the duty or obligation in determining whether the actions are right or wrong

•Existentialism

•Based on the underlying belief that the only person who can determine right and wrong is the person making the decisions

•Each individual determines his or her own actions and is ultimately responsible for the consequences of those actions

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Deontological Frameworks

•Contractarianism

•Social contract theory

•Based on the belief that all individuals agree to social contracts to be members within a society

•Kant’s Ethics

•Ethical decisions based on the free will of the individual

•The free will to make decisions that were considered rational needed to be converted into a universal will

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Mixed Frameworks •Seven guiding principles that are considered part of the prima facie obligation an individual has to society:

•Fidelity: an individual needs to keep explicit and implicit promises

•Reparation: an individual must act on repairing the consequences for previous wrongful acts

•Gratitude: an individual must be able to show gratitude for the kindnesses that others have given him or her

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Mixed Frameworks

•Justice: an individual should try to see that any goods are fairly distributed

•Beneficence: an individual should focus on trying to improve the lives of others

•Self-Improvement: an individual should improve oneself by focusing on virtue and intelligence

•Noninjury: an individual should not cause any harm to others

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Global Business Standards Codex •A codex that captures the eight major underlying

principles in which ethical behavior can be interpreted and evaluated •Eight ethical principles: • Fiduciary • Property • Reliability • Transparency • Dignity • Fairness • Citizenship • Responsiveness

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Fiduciary Principle

•Each officer has a legal fiduciary duty to act in the best interests of the stakeholders and other employees within the firm

•An implied fiduciary duty for every employee to act in a way that generates positive benefits for the firm • Examples: conflicts of interest, good faith efforts for

carrying out responsibilities. Prudence with the company’s resources, loyalty

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Property Principle

•Based on the belief that every employee should respect property as well as the rights of the owners of the property

•Expected that the employee should be a good steward to the resource that he/she has access to.

•Examples: theft, misappropriation of funds, wasting resources, misappropriation of intellectual property

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Reliability Principle

•Based on the belief that it is the employee’s responsibility to honor the commitments he or she has made to the firm

•Examples: breaching a promise or contract, not fulfilling a promised action, ensuring that suppliers and other business partners are paid in a timely manner

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Transparency Principle •Based on the belief that every employee should conduct business in a truthful and open manner.

•Assumes that employees will not make decisions based on a personal agenda

•Examples: keep accurate and current records of business obligations, fraudulent and deceptive actions of the employee, financial information is presented in a truthful and accurate way

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Dignity Principle •Based on the belief that each employee needs to respect the dignity of all individuals

•Encourages the enhancement of human development not only within the company and the marketplace, but also in the society at large

•Examples: ensuring the human rights of health, safety and privacy

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Fairness Principle

•Based on the belief that stakeholders who have a vested interest in the firm should be treated fairly

•Reciprocal fairness, distributive fairness, fair competition, procedural fairness

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Citizenship Principle

•Based on the belief that every employee should act as a responsible citizen in the community

•Expected that employees respect the laws of the community – criminal, competition, environmental, corporate social responsibility

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Responsiveness Principle

•Based on the belief that employees have a responsibility to respond to the requests for information about the operations from various stakeholders

•Expected to react in a timely manner

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Questions for Thought

•Choose an event in your life where you believe you acted ethically. Discuss the event in terms of the teleological frameworks discussed in the text.

•Using the same event you chose in question 1 above, discuss the event in terms of the deontological frameworks discussed in the text.

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Questions for Thought •Choose any Fortune 500 Company. Locate the

company’s code of ethics published on the company’s Web page. Evaluate the code of ethics in terms of the Global Business Standards Codex.

•Using the principles set forth in the Global Business Standards Codex, find an example of a company that does or did not follow one of the principles. Discuss the implications of the company’s actions.

COMPLETED CHAPTER 1