Ethics and Professional Responsibility Unit E Customized by Professor Ludlum Oct. 12, 2016 Ethics and Professional Responsibility Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

§1: Business Ethics Ethics is the study of right and wrong behavior; whether an action is fair, right or just. In business, ethical decisions are the application of moral and ethical principles to the marketplace and workplace.

What should happen as a result? What is a fair result?

Two ethics questions:

Two opposite views on the role of ethics in business Friedman Stakeholders

Why is Business Ethics Important? Directors and Officers owe a complex set of ethical duties to the company, shareholders, customers, community, employees, and suppliers. These parties are called “stakeholders” When these duties conflict, ethical dilemmas are created.

Setting the Right Ethical Tone Importance of Ethical Leadership. Attitude of Top Management. Howard Schultz, Starbuck’s CEO dropped his pay to $10,000 (1/2009) Looking the Other Way. In Re The Exxon Valdez

Actions Penn State took to protect the child victims from 1994 to 2011:

Approaches to Ethical Reasoning Duty Based Ethics = (____________  ethics) derived from religious and philosophical duties. Religious Ethical Standards. Kantian Ethics. Rights Principles. Outcome-Based Ethics: Utilitarianism. Seeks to ensure a given outcome.

Religious Ethical Standards The rightness or wrongness of an action is judged according to its conformity to an _______________________. The motive of the actor is irrelevant. Which school of legal thought would use this?

Kantian Ethics The ______________________ is a central postulate of Kantian ethics. The rightness or wrongness of an action is judged by estimating the consequences that would follow if everyone in a society performed the act under consideration. Very similar to “The Golden Rule”

Principle of Rights This principle derives from the belief that every duty gives rise to a corresponding right. The belief in fundamental rights is a deeply embedded feature of Western culture. The ethicality of an action is judged by

Outcome-based Ethics: Utilitarianism From: A cost-benefit analysis must be performed to determine the effects of competing alternatives on the persons affected. The best alternative is the one that produces the

Utilitarian Dilemna Schadenfreude

Corporate Social Responsibility CSR is the idea that those who manage corporations should be accountable to society for their actions. Stakeholder Approach: corporations have a duty not only to shareholders but other groups (stakeholders) affected by corporate actions. Corporate Citizenship: promote goals that society considers worthwhile and take positive steps towards solving problems.

Question: How would Natural Law advocates view ethical problems? How would Legal Positivists view ethical problems?

Archie Carroll’s Hierarchy (1991) Level 4: Philanthropic responsibilities Level 3: Ethical responsibilities Level 2: Legal responsibilities Level 1: Economic responsibilities

Creating Ethical Codes Creating Ethical Codes of Conduct. Providing Employee Ethics Training. Johnson and Johnson: web-based ethical training. Sarbanes-Oxley Act (slang, SOX, the law was a response to Enron) and web-based reporting systems.

A Long Time Ago . . . Kenneth Lay Sweetheart of Wall Street $2m to Bush/Cheney On Bush’s White House Transition Handpicked appointed regulators in energy Harvard Business School Enron Field (Houston Astros Park)

Enron’s Dubious Accounting Arthur Anderson

Enron’s False Transactions & Bonuses Kenneth Lay: $400,000,000 in Bonuses

Enron’s Self-Dealing: Travel

CSR Example: Hershey School Started in 1909 for “Healthy, white male orphans between 8 and 18.” Started with 10 kids Now 1700+ Donated fortune (now $7.8 B) in 1915 when his wife died. He died in 1945