© 2005 West Legal Studies in Business A Division of Thomson Learning 1 Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny. - Frank Outlaw

© 2005 West Legal Studies in Business A Division of Thomson Learning 2 Welcome to Introduction to Business BUS 002 Agenda – January 31, 2008 (Th), February 6, 2008 (Wed) TOPIC: Ethics & Professional Responsibility Check-Ins: Questions, Comments, Reflections, AhHa Moments Article – –“FTC Warns Mortgage Advertisers and Media That Ads May Be Deceptive” source: Federal Trade Commission –“FAA Orders Inspections of All Newer 737s” source: SFGate.com Distribute Think & Write 1 Review Sources of American Law; Commerce Clause Ethics and Professional Responsibility Emancipate

© 2005 West Legal Studies in Business A Division of Thomson Learning 3 Class Norms No Anxiety Take care of your of your own needs Agenda then emancipate Submit assignments on time Preserve the dignity of self and others in the class Have regard for everyone’s voice

© 2005 West Legal Studies in Business A Division of Thomson Learning 4 What is ethics? What is business ethics? Why is business ethics important? How can business leaders encourage their companies to act ethically? What duties do professionals owe to those who rely on their services? What types of ethical issues might arise in the context of international business transactions? Learning Objectives

© 2005 West Legal Studies in Business A Division of Thomson Learning 5 Ethics = Right or Wrong behavior in society Business Ethics = What constitutes right or wrong behavior in business Fiduciary Duty = A professional responsibility of a duty of trust and loyalty Utilitarianism = An approach to ethical reasoning that evaluates behavior not on the basis of any moral values but on the consequences of that behavior for those who will be affected by it. Moral minimum = a businesses minimum behavior to be considered legally compliant Principle of Rights = human beings have a fundamental (basic) rights to life, freedom, and the pursuit of happiness Vocabulary

© 2005 West Legal Studies in Business A Division of Thomson Learning 6 Video View Title: Ms. Vogel’s Lemon View video, use “Unpacking An Issue” to analyze the situation in the video. In groups of 3 or 4, answer the following questions? –Are Mrs. Vogel's speeches and actions protected as "free speech"? Explain. –Which source of American Law(s) is in question in this situation? –What should Herman do? What legal rights does Mrs. Vogel have? How should Herman and Mrs. Vogel address their problems?

© 2005 West Legal Studies in Business A Division of Thomson Learning 7 Business Ethics Ethics: Moral principles and values applied to social behavior. Business Ethics: Moral principles and values applied to situations that arise in a business setting. Business Challenge in Ethics – Competing demands from multiple stakeholders – e.g., shareholders, employees, retirees, suppliers, creditors, customers, the communities in which the business operates – whose lives are affected by business decisions. Fiduciary (Trust and Loyalty) Duties. –(see Time Warner Entertainment Co. v. Six Flags over Georgia, LLC (2002) p. 48)

© 2005 West Legal Studies in Business A Division of Thomson Learning 8 Setting the Right Ethical Tone Importance of Ethical Leadership –Management Attitudes: Managers who are not committed to creating and maintaining an ethical workplace rarely have one. –Employees tend to follow what they perceive to be management’s lead, so managers must model ethical behavior for their employees. –Managers who “look the other way” because an unethical employee is successful risk other employees believing that acting unethically is the key to success. –Managers should set realistic goals for their employees to reduce the incentive to “cheat” in order to achieve management’s goals.

© 2005 West Legal Studies in Business A Division of Thomson Learning 9 Setting the Right Ethical Tone But How? Creating Professional & Ethical Codes of Conduct, Civility Policies, etc. –See Proposed AB 1582 – Healthy Workplace –See Peralta Community College District Civility Policy Clear Communications to Employees. –See Costco. –Johnson and Johnson: web-based ethical training. –(see Exxon Valdez case (2004) p. 49). Corporate Compliance Programs. –Periodic checks each month for ethical behavior –Sarbanes-Oxley Act of 2002 (system where employees can confidentially report unethical accounting & auditing actions) –Web-based reporting (online reporting systems). Training Hire outside experts to oversee ethics in a company Conflicts and Trade-Offs. –Dilemma – Which stakeholders to support? All with opposing positions.

© 2005 West Legal Studies in Business A Division of Thomson Learning 10 What do you think? In groups of three(3), reflect and respond to the following two questions… How is influential is ethics to business? On a scale of 1-10, how would you rate ethics in terms of focus for business? Why the rating?

© 2005 West Legal Studies in Business A Division of Thomson Learning 11 Business Ethics and the Law Relationship between ethics and law. –Historically, a law was supposedly always ethical (or morally correct). (For example, Christian Ten Commandments) –Today, obeying laws does not mean an action is ethical. –An action may be legal but unethical or immoral. (For example, lying to your family member is not illegal, but it’s considered morally/ethically wrong)

© 2005 West Legal Studies in Business A Division of Thomson Learning 12 Technological Developments Internet has given rise to new court cases heard before the judicial system. A company’s actions come under quick scrutiny with the power of and the internet. Blakey v.Continental Airlines, Inc. (2000). When a corporation embarks on a course of business deemed “unethical” by a special interest group, the news will spread around the world in a matter of minutes.

© 2005 West Legal Studies in Business A Division of Thomson Learning 13 How do you decide what’s ethical? –Ethical Reasoning = The process you take to make an ethical decision Duty Based Ethics = derived from religious and philosophical principles. –See examples 2.7, 2.8 p. 57 Outcome-Based Ethics = act based upon what is good for the greatest number. –How will the action affect people. –A cost-benefit analysis must be performed to determine the effects of competing alternatives on the persons affected –Utilitarianism (The most usefulness). Ethical Decision-Making

© 2005 West Legal Studies in Business A Division of Thomson Learning 14 The rightness or wrongness of an action is usually judged according to its conformity to an absolute rule that commands a particular form of behavior. The motive of the action is irrelevant in judging the rightness or the wrongness of the action. These rules often involve an element of compassion. Immanuel Kant = German philosopher (1800s) –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. Religious Ethical Standards

© 2005 West Legal Studies in Business A Division of Thomson Learning 15 Principle of Rights The belief in fundamental rights is a deeply embedded feature of Western culture. How ethical an action is is judged by how the consequences of the action will affect the rights of others.

© 2005 West Legal Studies in Business A Division of Thomson Learning 16 Business Ethics and the Law Relationship between business ethics and law. –We know from Article 1 Section 8 of the U.S. Constitution that business is regulated by the government (Commerce Clause). –Ignorance of the law (statute or regulation) will not excuse a business owner or manager from liability For example, Federal Trade Commission (Administrative Agency) regulates deceptive advertising. There are federal and state laws against such advertising.

© 2005 West Legal Studies in Business A Division of Thomson Learning 17 Professional Responsibility Professional = Those with knowledge or skills in a specific area; expected to deliver services competently Accountant’s Duty of Care. –Audit. –Standard of Care/GAAP/GAAS. –Violations of GAAP and GAAS. Attorney’s Duty of Care. –Liability for Malpractice. Statutory Duties of Accountants. –Duty under Securities Laws. –Potential Criminal Liability of Accountants.

© 2005 West Legal Studies in Business A Division of Thomson Learning 18 Professional Responsibility Defying the Rules: the Enron Case. –Accounting Issues. –Off the Books Transactions. –Self-Dealing. –Corporate Culture. Sarbanes-Oxley Act of –Public Company Accounting Oversight Board. –Applicability to Public Accounting Firms. –Auditor Independence.

© 2005 West Legal Studies in Business A Division of Thomson Learning 19 What kind of business person are you in terms of ethics? –Duty-based or Outcome-based Read example 2.10 p.58, what would you do? What do you think?

© 2005 West Legal Studies in Business A Division of Thomson Learning 20 Business Ethics on a Global Level Global company is faced with a variety of cultures, traditions and religions in the different nations it serves. What may be ethical practices in the United States, may not be in another country? –Example: Drinking alcohol forbidden for religious reasons in another country Monitoring Foreign Employment Practices. –Example: Foreign manufacturer exploiting workers, low wage, long hours, no breaks Foreign Corrupt Practices Act (1977). –Prohibits U.S. businessperson from bribing foreign officials

© 2005 West Legal Studies in Business A Division of Thomson Learning 21 Reflection How might today’s content impact my practice in business? What implications might today’s content have on the local, state, national, and global communities? What have I learned about law and business that will influence my practice?