P A R T P A R T Foundations of American Law The Nature of Law The Resolution of Private Disputes Business and The Constitution Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking 1 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking PA E TR HC 4 “It is not what a lawyer tells me I may do; but what humanity, reason, and justice, tell me I ought to do.” Edmund Burke

Learning Objectives  Business Ethics  Ethical Theories  Corporate Social Responsibility  Guidelines for Ethical Decision Making  Critical Thinking 4 - 4

 Ethics is the study of how people should act  Ethics also refers to the values and beliefs related to the nature of human conduct  Business ethics seeks to balance the values of society with the goal of profitable operation  Teleological ethical theories focus on the consequences of a decision  Deontological ethical theories focus on decisions or actions alone Basics of Ethics 4 - 5

 Kantianism applies the categorical imperative: judge an action by applying it universally  Modern Rights Theories soften Kant’s absolute duty approach, yet protects fundamental rights (a strength of the theory)  Justice Theory declares that a society’s benefits and burdens should be allocated fairly among its members Major Ethics Theories 4 - 6

 Utilitarianism maximizes utility for society as a whole by a cost-benefit analysis  Profit Maximization maximizes a company’s long-run profits within the limits of law Major Ethics Theories 4 - 7

 Business stakeholder standard of behavior determines whether an act is, or is not, ethical by examining interests of stakeholders with regard to a particular business action  Supports corporate social responsibility  Some laws, such as Sarbanes-Oxley Act, have forced some firms to adopt codes of ethics  Business Stakeholder Standard 4 - 8

 Who and what are the business stakeholders for this college?  What duties – if any – does a college owe to society? Question for Discussion 4 - 9

Guidelines for Ethical Decision Making

 Ethical decision making requires critical thinking, or ability to evaluate arguments logically, honestly, and objectively Critical Thinking

 Fallacies in thinking: non sequitur, appeals to pity, false analogy, circular reasoning, argumentum ad populum, argumentum ad baculum, argumentum ad hominem, argument from authority, false cause fallacy, gambler’s fallacy, appeal to tradition, reductio ad absurdum, lure of the new, sunk cost fallacy Critical Thinking

4 - 13

Test Your Knowledge  True=A, False = B  Teleological ethical theories focus on the consequences of a decision  Kantianism holds that a society’s benefits and burdens should be allocated fairly among its members  Utilitarianism attempts to maximize utility for society as a whole by a cost-benefit analysis

Test Your Knowledge  True=A, False = B  A non sequitur is a conclusion that does not follow from the facts  Argumentum ad baculum is using past conduct to support an argument about future conduct  Reductio ad absurdum is also referred to as the slippery slope fallacy.  Argumentum ad populum is an emotional appeal to sympathy for victims

Test Your Knowledge  Multiple Choice  The business stakeholder standard of behavior determines whether an act is, or is not, ethical by:  (a) maximizing a company’s long-run profits within the limits of law  (b) examining the interests of various interested parties with regard to a particular business action

Test Your Knowledge  Multiple Choice  If a person assumes the thing the person is trying to prove, the person has made the following error in reasoning:  (a) A false analogy  (b) Argumentum ad hominem  (c) Circular reasoning

Test Your Knowledge  Multiple Choice  Jack said Firm X and Firm Y are both large telecommunications firms. Then Jack said Firm X had implemented The Process, so Firm Y should also implement The Process. Jack has made the following error in reasoning:  (a) the sunk cost fallacy  (b) the fallacy of utilitarianism  (c) fallacy based on the lure of the new  (d) a false analogy

Thought Question #1  If your boss asked you to shred documents as part of a “routine document retention policy” and you knew the documents were important to a criminal investigation, what would you do?

 Do corporations have a duty to society?  This question has engendered ongoing debate for over a century Thought Question #