Business Ethics and the Legal Environment of Business Chapter Five Business Ethics and the Legal Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

Chapter 5 Business Ethics and the Legal Environment of Business Understand the relationship between ethics and the law and appreciate why it is important to behave ethically. Differentiate the claims of the stakeholder groups affected by a company’s actions. Describe four rules to help companies and their employees act in ethical ways and identify the four main sources of business ethics. 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.

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Dimension There is an important ethical dimension in most kinds of business decision-making

Chapter 5 Business Ethics and the Legal Environment of Business Ethics as a code of conduct presents ethical dilemmas that may be separate from the legal dimension and presupposes ethical behavior

Chapter 5 Business Ethics and the Legal Environment of Business Ethics are motivation based on right and wrong and standards governing behavior and conduct

Chapter 5 Business Ethics and the Legal Environment of Business Ethical beliefs/dilemma May lead to the development of laws it may also question existing laws and justify illegal behavior Digital piracy and/or downloading of copyrighted music and software is an example of this ethical dilemma

Chapter 5 Business Ethics and the Legal Environment of Business Scope and Significance of Ethics Stakeholders, including employees, managers, customers, suppliers, distributors, and community, society, and nation state. have a stake and a claim and can directly benefit or be harmed by its actions, and the business ethics of a company are important to them

Chapter 5 Business Ethics and the Legal Environment of Business Scope and Significance of Ethics When making business decisions managers must take the claims of all stakeholders into consideration and use four ethical rules or principles to analyze the affects of their business decisions

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Principles Utilitarian Moral rights Justice Practical rules

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Principles The utilitarian rule suggests the ethical decision should produce the greatest good for the greatest number of people

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Principles The moral rights rule suggests ethical decision should maintain and protect the fundamental rights and privileges of people

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Principles The justice rule suggests the ethical decision should distribute benefits and harm among people in a fair equitable, and impartial manner

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Principles The practical rules suggests the ethical decision should be one that a manager has no hesitation to communicate to people outside the company because the typical person in a society would think the decision is acceptable

Chapter 5 Business Ethics and the Legal Environment of Business Effects of Ethical Behavior Creates trust Lowers transaction costs Increases efficiency and effectiveness Increases production of trade

Chapter 5 Business Ethics and the Legal Environment of Business Effects of Ethical Behavior Increases company profitability Increases national standard of living, well being, and prosperity unethical behavior is vice versa (no pun intended) or negates these effects

Chapter 5 Business Ethics and the Legal Environment of Business Differences in Business Ethics Determinants between companies and countries: Societal Organizational Occupational Individual

Chapter 5 Business Ethics and the Legal Environment of Business Differences in Business Ethics Determinants between companies and countries Especially significant are the ethics of the company’s top managers

Chapter 5 Business Ethics and the Legal Environment of Business Significance of Ethical Behavior The company’s reputation is part of their goodwill and can enhance its profitability Ethical behavior improves the quality of life and can reduce crime, poverty and unemployment rates and increase literacy rates

Chapter 5 Business Ethics and the Legal Environment of Business Significance of Ethical Behavior An organization can encourage its member to act ethically with incentives for ethical behavior and disincentives to punish those who behave unethically

Chapter 5 Business Ethics and the Legal Environment of Business Significance of Ethical Behavior Managers can also create authority relationships and rules that both promote and punish ethical/unethical behavior

Chapter 5 Business Ethics and the Legal Environment of Business Significance of Ethical Behavior Whistle- blowing occurs when employees feel powerless in the organization

Chapter 5 Business Ethics and the Legal Environment of Business Subdivision of laws governing the business system and include: Laws affecting business commerce Laws affecting business occupations Laws affecting business organization

Chapter 5 Business Ethics and the Legal Environment of Business Additional classes of laws include Practices related to business occupations Regulation of occupational qualifications, promotion of employee health and safety, and business diversity All laws help business protect its valuable resources

Chapter 5 Business Ethics and the Legal Environment of Business Additional classes of laws include Laws relevant to a company’s form of business organization and Incorporation laws and bankruptcy laws All laws help business protect its valuable resources

Chapter 5 Business Ethics and the Legal Environment of Business Property rights are established in the granting of patents, copyrights, and trademarks

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Self-Interested Behavior Managing money and personal finances is a complex and difficult activity but it can be one of the most rewarding If you focus on determining the value of products and how they will provide you with utility now and in the future

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Self-Interested Behavior Financial success ultimately derives from hard work, some luck and the ability to look ahead and think about the future consequences of the spending and saving decisions made in the present

Chapter 5 Business Ethics and the Legal Environment of Business Ethical Self-Interested Behavior The spending/saving decisions are are the same factors that result in success or failure in business