2. Business Ethics and the Legal Environment of Business
Chapter Five
Business Ethics and the Legal Environment of Business
© The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/Irwin
Introduction to Business

3. Learning Objectives
Understand the relationship between ethics and the law and appreciate why it is important to behave ethically.
Differentiate the claims of the different stakeholder groups affected by a company’s actions.
Identify the four main sources of business ethics, and describe four rules that can be used to help companies and their employees behave ethically.

4. Learning Objectives
Describe some methods companies can use to strengthen their ethical rules and positions.
Appreciate the important ways a nation’s business laws and regulations affect business commerce, occupations and organization.

5. Ethical Dilemmas Ethical Dilemma
the quandary people experience when they must decide whether or not they should act in a way that benefits someone else even if it harms others and isn’t in their own self interest

6. Ethical Dilemmas Ethics
the inner-guiding moral principles and values people use to analyze a situation and decide what is “right”

7. Changes in Ethics over Time
As a society’s ethical beliefs change, its laws change to reflect them
No absolute standards exist to determine how we should behave

8. Stakeholders and Business Ethics
people or groups of people who supply a company with its productive resources and thereby have an interest in how the company behaves

9. Types of Company Stakeholders
Figure 5.1

10. Types of Company Stakeholders
Stockholders
have a claim on a company because when they buy its stock, or shares, they become its owners
Managers
vital because they are responsible for using a company’s financial capital and human resources to increase its profitability and stock price

11. Types of Company Stakeholders
Employees
Suppliers and Distributors
Customers
most critical stakeholder
Community, Society, and Nation
Community – the physical society in which a company is located

12. Rules for Ethical Decision Making
Utilitarian rule
Moral rights rule
Justice rule
Practical rule

13. Four Ethical Rules
Figure 5.2

14. Question?
Which ethical rule states that an ethical decision is one that distributes benefit and harms among people in a fair or impartial way?
Utilitarian rule
Moral rights rule
Justice rule
Practical rule
The correct answer is “C” – justice rule. See slide 5-16

15. Rules for Ethical Decision Making
Utilitarian rule
states that an ethical decision is one that produces the greatest good for the greatest number of people

16. Rules for Ethical Decision Making
Moral rights rule
states that an ethical decision is one that best maintains and protects the fundamental, inalienable rights and privileges of the people affected by it

17. Rules for Ethical Decision Making
Justice rule
states that an ethical decision is one that distributes benefit and harms among people in a fair or impartial way

18. Rules for Ethical Decision Making
Practical rule
states that an ethical decision is one that a manager can communicate to society because the typical person would think it is acceptable

19. Some Effects of Ethical and Unethical Behavior
Figure 5.3

20. Why Should Managers Behave Ethically?
The relentless pursuit of self-interest can lead to a collective disaster
Trust
a person’s confidence and faith in another person’s goodwill

21. Business Ethics Societal ethics Occupational ethics Individual ethics
Organizational ethics

22. Sources of Business Ethics
Figure 5.4

23. Business Ethics Societal ethics
standards that govern how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual

24. Societal Ethics U.S. Foreign Corrupt Practices Act
prohibits U.S. companies from paying bribes in order to win contracts abroad

25. Business Ethics Occupational ethics
standards that govern how members of a profession, trade, or craft should conduct themselves when performing work-related activities

26. Business Ethics Individual ethics
a person’s standards and values that determine how he should act in situations when his own self-interest is at stake

27. Business Ethics Organizational ethics
the practices and beliefs that guide an organization’s behavior towards its stakeholders

28. The Advantages of Behaving Ethically
Companies known for their ethical behavior enjoy a good reputation
Reputation
the trust, goodwill, and confidence others have in a company that leads them to want to do business with it

29. The Advantages of Behaving Ethically
When companies don’t behave ethically, the government and taxpayers have to bear the costs of protecting their stakeholders

30. Creating an Ethical Organization
Organizations use a mission statement to guide employees in making ethical decisions
Many companies have installed “chief ethics officers”

31. Creating an Ethical Organization
Whistleblower
a stakeholder who reveals an organization’s misdeeds to the public

32. Question? What laws were passed to curb the power of big business?
Antitrust laws
Consumer safety laws
Environmental protection laws
Laws relating to the public interest
The correct answer is “A” – antitrust laws. See slide 5-33

33. Laws Affecting Business Commerce
Antitrust laws
Consumer safety laws
Environmental protection laws
Laws relating to the public interest

34. Laws Affecting Business Commerce
Antitrust laws
laws passed to curb the power of big business and make it illegal for companies to conspire with one another to limit supply and keep prices high

35. Types of Business Laws and Regulations
Figure 5.5

36. Laws Relating to the Public Interest
country-specific standards used to evaluate how a proposed course of action affects the welfare of society

37. Laws Affecting Business Occupations
Laws regulating occupations
Laws governing diversity
Laws promoting occupational health and safety

38. Laws Affecting Business Organization
Laws of incorporation and bankruptcy
Laws protecting a business’s resources

39. Laws of Incorporation and Bankruptcy
Chapter 7 bankruptcy
the dissolution of a business whereby its assets are sold to repay its creditors and owners
Chapter 11 bankruptcy
the dissolution of a company whereby it is legally protected from its creditors and allowed to develop a viable new business model

40. Laws Protecting a Business’s Resources
Patents
documents that give their owners the right to use, control, license, and profit for a 20-year period from new products or processes they have created
See information on how to apply for a patent at uspto.gov

41. Laws Protecting a Business’s Resources
Copyrights
legal documents that give their owners the right to own and profit from intellectual property such as written visual media
Trademarks
property rights to the name of a product or the company that produces it

42. Video: New Belgium Brewery
At New Belgium Brewery, environmental ethics are part of the core value system of the company’s corporate culture.
What would be considered the basic “ethical dilemma” for New Belgium Brewery?
Discussion Questions:
What would be considered the basic “ethical dilemma” for New Belgium Brewery?
Answer: Ethical issues permeate business decision-making. Behaving ethically will result in a general increase in company profitability, standard of living, and prosperity. At NBB, employees faced the dilemma of collecting their bonuses for personal gains or to use the bonus pool to invest in an environmentally friendly technology that would be consistent with the core values of the firm.
Is there a difference between ethics and values?
Answer: Ethics are actually based in part on values. In addition, inner-guiding moral principles and beliefs that people use to interpret situations also affect ethical behavior. Ethics and values are used to determine the “right” way to behave. At NBB, ethical values are an integral part of the socially responsible, and environmentally sound corporate culture.
Theoretically, how did the decisions to be environmentally conscious and create a socially responsible corporate culture evolve at NBB?
Answer: There are ethical decision rules that serve as guidelines that help managers decide on how to proceed where it is necessary to balance a particular company’s self-interest against the interests of its stakeholders. These ethical rule sets are (1) utilitarian, (2) moral rights, (3) justice, and (4) practical rules. For NBB and its owner Jeff Lebesch, moral rights and justice principles guided the decision making process.