1. Chapter 3 Business Ethics, Social Forces, and the Law
Twomey, Business Law and the Regulatory Environment (14th Ed.)

2. Guidelines for Analyzing a Contemplated Action [3-1]
1. Define the problem from the decision maker’s point of view.
2. Identify who could be injured by the contemplated action.
3. Define the problem from the opposing view.
4. Would you (as the decision maker) be willing to tell your family, your supervisor, your CEO, and the board of directors
about the planned action?
(c) 2000 West Legal Studies
Chapter 3

3. Guidelines for Analyzing a Contemplated Action [3-1] (cont’d)
5. Would you be willing to go before a community meeting, a congressional hearing, or a public forum to describe the action?
6. With a full consideration of the facts and alternatives, reach a decision about whether the contemplated action should be taken.
(c) 2000 West Legal Studies
Chapter 3

4. The Endless Cycle of Societal Interaction [3-2]
Chapter 3
The Endless Cycle of Societal Interaction [3-2]
Social
Forces
Ethics
Environment
Law
(c) 2000 West Legal Studies
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5. Purposes of Law [3-3] 1. Protection of the state
Chapter 3
Purposes of Law [3-3]
1. Protection of the state
2. Protection of the person
3. Protection of public health, safety, and moral laws
4. Protection of property
5. Protection of personal rights
6. Enforcement of individual intent
7. Protection from exploitation, fraud, and oppression
8. Furtherance of trade
9. Protection of creditors and rehabilitation of debtors
10. Stability and flexibility
(c) 2000 West Legal Studies
Chapter 3 2

6. Categories of Ethical Behavior [3-4]
Chapter 3
Categories of Ethical Behavior [3-4]
1. Integrity and Truthfulness
2. Promise-Keeping
3. Loyalty: Avoiding Conflicts of Interest
4. Fairness
5. Doing No Harm
6. Maintaining Confidentiality
(c) 2000 West Legal Studies
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7. Blanchard/Peale Test [3-5]
Chapter 3
Blanchard/Peale Test [3-5]
1. Is it legal?
2. Is it balanced?
3. How does it make me feel?
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Chapter 3 4

8. The Front-Page-of-the-Newspaper Test [3-6]
Warren Buffet described the newspaper test as follows:
“Contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local newspaper—there to be read by his spouse, children, and friends. At Salomon, we simply want no part of any activities that pass legal tests but that we, as citizens, would find offensive.”
(c) 2000 West Legal Studies
Chapter 3

9. The Laura Nash Model [3-7]
1. Have you defined the problem accurately?
2. How would you define the problem if you stood on the other side of the fence?
3. How did this situation occur in the first place?
4. What is your intention in making this decision?
5. How does the intention compare with the probable results?
6. Whom could your decision or action injure?
7. Can you discuss your decision with the affected parties?
8. Are you confident that your position will be as valid over a long period of time as it seems now?
9. Could you discuss your decision with your supervisor, co-workers, officers, board, friends, and family?
(c) 2000 West Legal Studies
Chapter 3

10. Chapter 3 Summary
Business ethics is the application of values and standards to business conduct and decisions. These values originate in various sources from positive (codified) law to natural law to stakeholder values. Business ethics is important because trust is a critical component of good business relationships and free enterprise.
(c) 2000 West Legal Studies
Chapter 3

11. Chapter 3 Summary [2]
A business with values will enjoy the additional competitive advantage of a good reputation and, over the long term, better earnings. When businesses make decisions that violate basic ethical standards, social forces are set into motion, and the area of abuse is regulated, with resulting additional costs and restrictions for business. Voluntary value choices by businesses position them for a competitive advantage.
(c) 2000 West Legal Studies
Chapter 3

12. Chapter 3 Summary [3]
The categories of ethical values in business are truthfulness and integrity, promise-keeping, loyalty and avoiding conflicts of interest, fairness, doing no harm, and maintaining confidentiality.
Resolution of ethical dilemmas is possible through the use of various models that require a businessperson to examine the impact of a decision before it is made. The models include stakeholder analysis, Blanchard/Peale, the front-page-of-the-newspaper test, and the Laura Nash model.
(c) 2000 West Legal Studies
Chapter 3