1. Ethical Contexts of Law
Chapter 5
Business, Societal, and
Ethical Contexts of Law
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter Overview
The definition of business ethics, systems of ethical reasoning, and goals of values management.
Ethical decision making in the business environment.
Fundamentals of corporate social responsibility.

3. BUSINESS ETHICS
Attention to business ethics is critical during times of fundamental change such as the financial crisis that began in late 2008.
In such volatile times, unethical and/or illegal practices are often highlighted.

4. Stakeholders
Stakeholder is an expansive term that includes a business entity’s owners, investors, employees, customers, suppliers, and the wider community.

5. Moral Philosophy Principles-Based Approach –
Ethical decisions made according to a set of established principles such as religious tenets.
Consequences-Based Approach - Provides the most good for the greatest number of people.

6. VALUES MANAGEMENT
Prioritizing moral values for the organization and ensuring behaviors are aligned with those values.

7. ADVANTAGES OF VALUES MANAGEMENT
Values management is crucial in other management practices such as managing a diverse workforce, total quality management (TQM), and strategic planning.

8. Cultivation of Strong Teamwork and Productivity
Values management helps align employee behaviors with the top priority ethical values preferred by organization’s top-level management.

9. Clarity in Business Operations
Gives more clarity to strategic planning by identifying preferred values and ensuring organizational behaviors are aligned with those values.

10. Strong Public Image
Devoting consistent and serious attention to values management allows a business organization to portray a strong positive image to the public.

11. TRAITS OF EFFECTIVE ETHICAL PROGRAMS
Management has articulated a clear vision of integrity throughout the organization.
Reward systems are aligned with the vision of integrity.
Responsibility is seen as individual rather than collective so that individuals are willing to assume personal responsibility.

12. TRAITS OF EFFECTIVE ETHICAL PROGRAMS
Policies and practices of the organization are aligned with the vision.
The vision of integrity is well integrated into the decision-making process so that any significant management decision has ethical value dimensions.

13. The Enron Scandal
The systematic looting of the corporation by its executives and the massive fraud and subsequent cover-ups that culminated in a public crash made Enron the symbol of corporate greed and arrogance.

14. Key Enron Players Lay - Chairman Skilling - CEO Fastow - CFO
Causey – Chief Accountant
Discuss each person’s role in the downfall of Enron, and the consequences of their activities.

15. Arthur Andersen Anderson was Enron’s CPA/Audit firm.
The government indicted the entire firm of Arthur Andersen on charges of obstruction of justice.
Anderson went out of business.

16. Arthur Andersen LLP v. United States, 544 U.S. 696 (2005)
In a unanimous decision by the Supreme Court, Andersen’s conviction was overturned. The Court reasoned that the instructions allowed the jury to convict Andersen without proving that the firm knew it had broken the law.

17. AIG Example
AIG was in the center of the financial crisis of 2008 that culminated in massive government bailouts for financial institutions and others who were considered too important to the financial infrastructure to be allowed to fail.
Just months before the bonuses were distributed, AIG had received $173 billion in taxpayer money in exchange for an 80 percent stake in AIG for the U.S. government.

18. CORPORATE SOCIAL RESPONSIBILITY
The fundamental notion underlying CSR is that conscience resides not just in individuals but also in a corporation.

19. The Narrow View: Invisible Hand
What is good for business is good for America because the market’s efficiencies provide an invisible hand that guides morality and responsibility. Corporations acting unethically would inevitable suffer.

20. The Moderate View: Government’s Hand
The regulatory hands of the law and the political process, rather than Smith’s invisible hand, provide the basis for ethical decision making.

21. The Broad View: Management’s Hand
The broadest view of CSR is that corporations have a social responsibility and that profitability is secondary.

22. Grimshaw v. Ford Motor Company, 119 Cal. App. 3d 757(1981)
“[T]here was substantial evidence that Ford’s management decided to proceed with the production of the Pinto with knowledge of test results revealing design defects which rendered the fuel tank extremely vulnerable on rear impact at low speeds and endangered the safety and lives of the occupants. Such conduct constitutes corporate malice.”

23. learning outcomes checklist
5 - 1 Articulate a working definition of business ethics.
5 - 2 Differentiate between primary and secondary stakeholders.
5 - 3 List alternate approaches to ethical decision making based on different theories of moral philosophy.

24. learning outcomes checklist
5 - 4 Identify the challenges to business ethics management and articulate a response to each challenge.
5 - 5 Define values management and articulate several reasons why values management is important in business operations.
5 - 6 List the common traits of an ethical organization.
5 - 7 Demonstrate an understanding of how to develop a code of ethics and conduct.

25. learning outcomes checklist
5 - 8 Employ an ethical decision-making paradigm used by managers for resolving ethical dilemmas.
5 - 9 Give examples of ethical lapses using historical case studies of businesses facing ethical dilemmas.
5- 10 Articulate the various views on corporate social responsibility and defend a particular view.