CHAPTER 2 BUSINESS ETHICS DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.)

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 2 ETHICS AND MORALITY The Law of Business must consider ethics and morality. – Ethics: guiding philosophy of a group, societal values concerning right and wrong. – Morals: principles of right and wrong measured by an individual’s conscience. – Ethics vary from society to society whereas individual morals remain fairly constant. The Law of Business must consider ethics and morality. – Ethics: guiding philosophy of a group, societal values concerning right and wrong. – Morals: principles of right and wrong measured by an individual’s conscience. – Ethics vary from society to society whereas individual morals remain fairly constant.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 3 ETHICAL THEORIES Consequential and Non-consequential Principles. – Consequential: evaluate action by examining the consequences produced by the action. – Non-consequential: focus of the concept of “duty” rather than what is right or wrong. Consequential and Non-consequential Principles. – Consequential: evaluate action by examining the consequences produced by the action. – Non-consequential: focus of the concept of “duty” rather than what is right or wrong.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 4 ETHICAL THEORIES Consequential Ethics. – Egoism: rightness determined by consequences the act produces for person performing the action. Holds one will act in a manner which produces greatest balance of good over bad for oneself. – Utilitarianism: rightness determined by consequences the act produces for one’s group. Holds one should act in such a manner which will, over time, produce most good over bad for one’s group. – Feminism: emphasizes attention be paid to the effect of decisions on individuals. Focuses on character traits. Consequential Ethics. – Egoism: rightness determined by consequences the act produces for person performing the action. Holds one will act in a manner which produces greatest balance of good over bad for oneself. – Utilitarianism: rightness determined by consequences the act produces for one’s group. Holds one should act in such a manner which will, over time, produce most good over bad for one’s group. – Feminism: emphasizes attention be paid to the effect of decisions on individuals. Focuses on character traits.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 5 ETHICAL THEORIES Non-Consequential Ethical Theories. – Kant and the Categorical Imperative: suggests certain universal moral truths every person must follow in order to act morally and ethically. Imperative that one follow certain perfect truths. – Rawls and the Veil of Ignorance: theory suggesting that rules of ethical behavior be created by persons who ignore their own characteristics and circumstances including gender, race, ethnicity, and/or religion. Non-Consequential Ethical Theories. – Kant and the Categorical Imperative: suggests certain universal moral truths every person must follow in order to act morally and ethically. Imperative that one follow certain perfect truths. – Rawls and the Veil of Ignorance: theory suggesting that rules of ethical behavior be created by persons who ignore their own characteristics and circumstances including gender, race, ethnicity, and/or religion.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 6 ETHICAL THEORIES Other Theories: – Relativism: states that two people or two societies may hold opposed ethical views to one another, and yet both may be correct. – The Golden Rule: advises each person to “do onto others as you would have others do unto you.” Other Theories: – Relativism: states that two people or two societies may hold opposed ethical views to one another, and yet both may be correct. – The Golden Rule: advises each person to “do onto others as you would have others do unto you.”

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 7 A SYNTHESIS FOR ETHICAL DECISION MAKING Individual and business factors to consider when charting an ethical protocol: – Short and long term impact on of the decision on society and the organization. – Who will be affected and to what degree by the decision. – Whether the decision and subsequent ethical protocol is compatible with the law. Individual and business factors to consider when charting an ethical protocol: – Short and long term impact on of the decision on society and the organization. – Who will be affected and to what degree by the decision. – Whether the decision and subsequent ethical protocol is compatible with the law.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 8 Factors considered when making a decision: – The obligations that arise from organizational relationships. – The ideals involved in any decisions that are made. – The effects or consequences of alternative actions. Factors considered when making a decision: – The obligations that arise from organizational relationships. – The ideals involved in any decisions that are made. – The effects or consequences of alternative actions. A SYNTHESIS FOR ETHICAL DECISION MAKING

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 9 GAME THEORY OF BUSINESS ETHICS Business is an Amoral Institution: originally held business to be amoral meaning they could not act morally or immorally as they were not natural persons. The “Game Theory”: operating a business is like playing a game. No longer practical as government now establish the rules (legal regulations) for business. Business is an Amoral Institution: originally held business to be amoral meaning they could not act morally or immorally as they were not natural persons. The “Game Theory”: operating a business is like playing a game. No longer practical as government now establish the rules (legal regulations) for business.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 10 SOCIAL CONTRACT THEORY Holds that businesses owe duties to society as society allows business to exist. Social Contract Theory considers: – The Changing Social Environment. – Problems with Business Ethics: no fixed guidelines to follow and no formal code of ethics that a business should follow. The Human Factor. The Legal Aspect. Holds that businesses owe duties to society as society allows business to exist. Social Contract Theory considers: – The Changing Social Environment. – Problems with Business Ethics: no fixed guidelines to follow and no formal code of ethics that a business should follow. The Human Factor. The Legal Aspect.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 11 MULTINATIONAL ETHICS Global Competition and Marketing Opportunities. – Demand business consider social values in other countries where firms do business. Global Competition and Marketing Opportunities. – Demand business consider social values in other countries where firms do business.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 12 RECOMMENDATION FOR BUSINESS Create framework for business ethics: – Adopt synthesis approach to resolve ethical issues. – Consider public image and consequences of actions. – Adapt ethical standards as rapid change is constant in business. – Work with government rather than against – Will not be easy but alternative is increased regulation and public mistrust. Create framework for business ethics: – Adopt synthesis approach to resolve ethical issues. – Consider public image and consequences of actions. – Adapt ethical standards as rapid change is constant in business. – Work with government rather than against – Will not be easy but alternative is increased regulation and public mistrust.