Chapter Three

Ethics – the study of what constitutes right or wrong behavior Business ethics – what constitutes what is right or wrong behavior in the business world and on how moral and ethical principles are applied by business persons to situations that arise in the workplace. –Ethics is vital to the long-run viability of a corporation/business

Stakeholders of a business include: stockholders, employees, owners, suppliers and community Fiduciary duty – a duty of trust and loyalty between partners to each other and their firm, agents & clients, etc.

Setting the Tone Attitude of top management –Adhering to ethical norms –Looking the other way –Setting realistic goals –Periodic evaluations

Ethics is a top priority Employees can be measure in regard to ethical performance Clear communication to employees Seminars Code of conduct Training program

Sarbanes-Oxley Act of 2002 – requires companies to set up confidential reporting systems so employees may report suspected illegal or unethical auditing and accounting practices.

Corporate governance – internal procedures establishing rights and responsibilities of a corporations management, board of directors, shareholders and stakeholders –Information/transparency Ethic programs need to be monitored by a committee separate from each department – creates unbiased monitoring –Enron, Merck, WorldCom, Exxon Valdez

Moral minimum – legal compliance – most companies go beyond the moral minimum –Ignorance is not an excuse – most corporations have attorneys constantly keeping updated with changes in laws that affect their industry

Ethical Reasoning Duty based ethics –Religious standards – thou shall not steal –Kantian – philosophical reasoning – individuals should evaluate their actions in light if the consequences if everyone did the action (also called categorical imperative) (the end doesn’t justify the means) –Principle of Rights – everyone has certain expected rights and decisions should be based on that

Outcome Based Ethics: Utilitarianism (a.k.a. Consequentialism) Using cost benefit analysis – choose the option that will benefit the most people Pros vs. Cons

Foreign Corrupt Practices Act of 1977 – prohibits U.S. businesspersons from bribing foreign officials to secure advantageous contacts unless it is lawful in that country –Also, companies must keep detailed and accurate financial activities (greasing to minor officials not included…speeding up a license approval) Organization of Economic Cooperation and Development (1997) – created a treaty that made bribery of a foreign official a serious crime…by 2006, 35 countries had adopted it