1. The Ethical Basis of Law and Business Management

2. The Nature of Ethics “However selfish man believes himself to be, there is no doubt that there are some elements in his nature which lead him to concern himself about the fortune of others, in such a way that their happiness is necessary for him, although he obtains nothing from it except the pleasure of seeing it” (Adam Smith, 1759)

3. Morals Rules relating to dealing with, or making a distinction between right and wrong in conduct Universal rules or guidelines that determine our actions and character

4. ETHICS Moral principles and values applied to social behavior. A systematic statement of right and wrong together with a philosophical system that both justifies and necessitates rules of conduct

5. Law and Ethics (Similarities) Ethics and Law have similar or complemetary purposes. Both consist of rules to guide conduct and foster social cooperation Both deal with right and wrong

6. Law and Ethics (Differences) Motivation to observe moral rules comes from Within. Motivation to observe law comes from outside the individual Law sets only the minimum standards acceptable by society. Ethical behavior a higher moral standard.

7. Ethics in Business (Business Ethics) Many firms and individuals simply adopt a standard of complying with positive law. Is legal conduct ethical conduct?

8. Legal v. Ethical East German border guards tried for manslaughter for killing East Germans as they attempted to escape into west Germany defended their actions by arguing that they were only following orders. Sentencing judge noted that not all legal activity is right.

9. Legal v. Ethical Arizona passed state statute providing tax credit for vehicles with alternative fuel tanks. Many dealers added 2-gallon fuel tanks to vehicles to qualify for credit. State lost over $600 million in taxes

10. EHTICAL THEORIES Duty Based: Deontology / Formalism “Deontos” Greek meaning what must be done Moral principles are generally universal and absolute and followed regardless of the consequences – Religion-Ten Commandments – Philosophical- Immanual Kant Categorical imperative

11. Deontology Actions themselves are ethical in spite of consequences Emanuel Kant Categorical Imperative: A. Act so that you can will the maxim of your action to become a universal law. What would happen if everyone acted as you decide to act? B. Act so as never to treat another rational being as a means

12. THEORIES CONTINUED Out-come Based: Consequentialism – Utilitarianism (Jeremy Bentham, John Stuart Mill) Focuses on the consequences of an action not on the nature of the action itself or on any set of preestablished moral values or religious beliefs. – 1.Who will be affected – 2.Compare negative and positive effects of actions – 3.Choose action providing maximum benefit to greatest number.

13. Ethical Theory Utilitarian (John Stewart Mill/Jeremy Benthem) “Actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness” Do that action which will bring about the Greatest good for the greatest number of people

14. Utilitarianism / Distribution Problem “greatest good for greatest number” Ends justify the means Five pickles to distribute to five people. 2 people love pickles two don’t A=1 pickle =1unit of happiness 2 pickles=2units B=1 pickle =1unit of happiness 2 pickles=2units C=1 pickle =1unit of happiness 1 pickle =1unit D=1 pickle = 0unit of happiness 0 pickles= 0 units E=1 pickle = 0unit of happiness 0 pickles =0 units 5 recipients 3 units 3 recipients 5 units

15. Recognizing Ethical Dilemmas 1. Everybody Else Does It 2. If we don't do it, Someone else will 3. That’s the way it has always been done. 4. We’ll wait until the lawyers tell us it’s wrong 5. It doesn’t really hurt anybody 6. The system is unfair 7. I was just following orders.

16. Business Ethics Stakeholder theory Duty to Shareholders Duty to Employees Duty to Consumers Duty to Community Duty to Society Global Ethics

17. . PENNSYLVANIA CONSOLIDATED STATUTES 15 Pa.C.S. 1715 (2004) (a) GENERAL RULE.-- In discharging the duties of their respective positions, the board of directors, committees of the board and individual directors of a business corporation may, in considering the best interests of the corporation, consider to the extent they deem appropriate: (1) The effects of any action upon any or all groups affected by such action, including shareholders, employees, suppliers, customers and creditors of the corporation, and upon communities in which offices or other establishments of the corporation are located.

18. OHIO REVISED CODE ORC Ann. 1701.59 (2004) (E) For purposes of this section, a director, in determining what the director reasonably believes to be in the best interests of the corporation, shall consider the interests of the corporation's shareholders and, in the director's discretion, may consider any of the following: (1) The interests of the corporation's employees, suppliers, creditors, and customers; (2) The economy of the state and nation; (3) Community and societal considerations