1. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 Defining Business Ethics McGraw-Hill

2. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-2 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. A large company was hiring a new CEO. The four leading candidates worked inside the company so the board decided to ask each candidate a very basic question. The comptroller was brought in. "How much is 2 plus 2?" "This must be a trick question, but the answer is 4. It will always be 4." They brought in the head of research and development, an engineer by training. "How much is 2 plus 2?" "That depends on whether it is a positive 2 or a negative 2. It could be 4, zero or minus 4." They brought in the head of marketing. "The way I figure it, 2 plus 2 is 22." Finally, they brought in legal counsel. "How much is 2 plus 2?" they asked. He looked furtively at each board member. "How much do you want it to be?" Tom Selleck, Commencement Speech, Pepperdine University, 2000. 2-2

3. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-3 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Defining Business Ethics Two Distinct Perspectives: –A Descriptive summation of the customs, attitudes, and rules that are observed within a business. As such, we are simply documenting what is happening. –A Normative (or Prescriptive) evaluation of the degree to which the observed customs, attitudes, and rules can be said to be ethical. Here we are more interested in recommending what should be happening 2-3

4. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-4 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Who are the Stakeholders? Stakeholders are those with a share or interest in a business enterprise. 2-4

5. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-5 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Who are the Stakeholders? 2-5

6. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-6 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. An Ethical Crisis: Is Business Ethics an Oxymoron? Corporate Governance –The system by which business corporations are directed and controlled. Oxymoron –The combination of two contradictory terms, such as “deafening silence” or “jumbo shrimp.” 2-6

7. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-7 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. An Ethical Crisis: Is Business Ethics an Oxymoron? Code of ethics –A company’s written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day. 2-7

8. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-8 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. A Code of Ethics The Ethics Resource Center (ERC) defines a Code of Ethics as: "..a central guide to support day-to-day decision making at work. It clarifies the cornerstones of your organization – its mission, values and principles – helping your managers, employees and stakeholders understand how these cornerstones translate into everyday decisions, behaviors and actions. While some may believe codes are designed to limit one’s actions, the best codes are actually structured to liberate and empower people to make more effective decisions with greater confidence." 2-8

9. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-9 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. History of Business Ethics 2-9

10. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-10 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. History of Business Ethics 2-10

11. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-11 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Doing The Right Thing A series of clichés: Consult the Company Code of Ethics Do what’s right for the Organizations Stakeholders Do what’s legal Do what you think is best (‘use your best judgment’) Do the right thing. 2-11

12. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-12 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Resolving Ethical Dilemmas - I Truth versus Loyalty oDo you tell the truth or remain loyal to the person or organization that is asking you not to reveal that truth? Short-Term versus Long-Term oDoes your decision have a short-term consequence or a longer-term consequence? Justice versus Mercy oDo you perceive this issue as a question of dispensing Justice or Mercy? (and which one are you more comfortable with?). Individual versus Community oWill your choice impact one individual or a wider group or community? 2-12

13. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-13 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Resolving an Ethical Dilemma - II Three Resolution Principles: ‘Ends-Based’- which decision would provide the greatest good for the greatest number of people? ‘Rules-Based’- what would happen if everyone made the same decision as you? ‘The Golden Rule’ – ‘do unto others as you would have them do unto you’. 2-13

14. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-14 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Justifying Unethical Behavior 1.A belief that the activity is within reasonable ethical and legal limits – that is, that it is not “really” illegal or immoral. 2.A belief that the activity is in the individual’s or the corporation’s best interests – that the individual would somehow be expected to undertake the activity. 3.A belief that the activity is “safe” because it will never be found out or publicized; the classic crime-and-punishment issue of discovery. 4.A belief that because the activity helps the company, the company will condone it and even protect the person who engages in it. 2-14

15. Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. 2-15 Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved. Building & Operating an Ethical Business Requires a great deal more than simply doing the right thing Must devote time to the development of a detailed code of ethics that offers “guidance with traction” Offer support to employees when they are faced with an ethical dilemma Creating and maintaining a corporate culture of trust 2-15