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Chapter Summary This chapter begins by defining how ethics are applied to business behavior. It describes and explains who the stakeholders are in an organization, their interests in the organization, and the impact on them from unethical behavior. Many people, because of the track record over the past two decades, believe that business ethics is an oxymoron, the combination of two contradictory terms.
This chapter also discusses the history of business ethics and the dramatic changes that have taken place in the business environment over the last five decades.
It continues going into deeper detail about the definition and resolution of ethical dilemmas. It discusses four commonly held rationalizations that can lead to misconduct. In conclusion, this chapter begins looking at the aspects in building and operating an ethical business. Define the term business ethics. Discuss the position that business ethics is an oxymoron. Summarize the history of business ethics. Identify and propose a resolution for an ethical dilemma in your work environment.
Explain how executives and employees seek to justify unethical behavior. Look at Figures 2. Describe the ethical dilemma that Carol is facing here. What should Carol do now?
Carol must decide if her values are strong enough to stand up to this dilemma. Business ethics is the application of ethical standards to business behavior. Students of business ethics can approach the topic from two distinct perspectives: o A descriptive summation of the customs, attitudes, and rules that are observed within a business.
In either case, business ethics should not be applied as a separate set of moral standards or ethical concepts from general ethics.
By recognizing the challenging environment of business, people are acknowledging the identity of the key players impacted by any potentially unethical behavior—the stakeholders. Figure 2. A stakeholder is someone with a share or interest in a business enterprise. Not every stakeholder will be relevant in every business situation. Of great concern is the involvement of stakeholders with the actions of the organization and the extent to which they would be impacted by unethical behavior. Over the last two decades, the ethical track record of many organizations would lead people to believe that no ethical policies or procedures have been in place.
Corporate governance is the system by which business corporations are directed and controlled. The standard of corporate governance appears to be at the lowest level in business history: o Several prominent organizations—Enron, WorldCom, Lehman Brothers, Bear Stearns—have been found to have hidden the true state of their precarious finances from their stakeholders.
Therefore, it is understandable that many observers would believe that the business world lacks any sense of ethical behavior whatsoever. While these may not be the best of times for business ethics, it could be argued that the recent negative publicity has served as a wake-up call for many organizations to take a more active role in establishing standards of ethical conduct in their daily operations. As an internal document, the code should represent a clear guide to managers and employees in making the decisions and choices they face every day.
When employees observe unethical behavior e. Ethical dilemma is a situation in which there is no obvious right or wrong decision, but rather a right or right answer. Resolution of an ethical dilemma can be achieved by first reorganizing the type of conflict people are dealing with:.
Truth versus loyalty—do you tell the truth or remain loyal to the person or organization that is asking you not to reveal that truth? Which one are you more comfortable with?
Once people have reached a decision as to the type of conflict they are facing, three resolution principles are available to them: o Ends-based—which decision would provide the greatest good for the greatest number of people? None of these principles can be said to offer a perfect solution or resolution to the problem because one cannot possibly predict the reactions of the other people involved in the scenario.
Life Skills Making Tough Choices This Life Skills box discusses what happens when your personal values appear to directly conflict with those of your employer. All three options are tough choices. Explain the term business ethics. Explain the difference between a descriptive and prescriptive approach to business ethics. A descriptive approach is a descriptive summation of the customs, attitudes, and rules that are observed within a business.
This involves documenting what is happening. A prescriptive approach is a prescriptive evaluation of the degree to which the observed customs, attitudes, and rules can be said to be ethical.
This involves recommending what should be happening. Identify six stakeholders of an organization. Stakeholders of an organization can include stockholders or shareholders, employees, customers, suppliers or vendor partners, retailers or wholesalers, federal government, creditors, and community. Give four examples of how stakeholders could be negatively impacted by unethical corporate behavior.
The following are four examples of how stakeholders could be negatively impacted by unethical corporate behavior: Stockholders could lose value of their stock ownership. Employees could lose their job. Customers could receive poor service quality. Suppliers may not be paid for invoices when a company declares bankruptcy.
Define the term oxymoron and provide three examples. Is the term business ethics an oxymoron? Explain your answer. Student answers will vary. Given the ethical track record of organizations over the last several decades, many students may believe that the business world lacks any sense of ethical behavior. Define the term corporate governance. Explain the term code of ethics. Identify a major ethical dilemma in each of the last five decades.
Following are some of the major ethical dilemmas in each of the last five decades: s—environmental issues, increased employee-employer tension, civil rights issues dominate, honesty, the work ethic changes, and drug use escalates. Identify a key development in business ethics in each of the last five decades. Which decade saw the most development in business ethics? The s saw the most developments in business ethics because of global expansion and the emergence of the Internet. Which decade saw the most ethical dilemmas?
The s saw the most ethical dilemmas because of the Internet, international expansion, and financial mismanagement. Do the right thing. List the four types of ethical conflict. The four types of ethical conflict are: Truth versus loyalty Short-term versus long-term Justice versus mercy Individual versus community List the three principles available to you in resolving an ethical dilemma.
The three principles for resolving an ethical dilemma are: Ends-based Rules-based The Golden Rule Give an example of an ethical business dilemma you have faced in your career, and explain how you resolved it, indicating the type of conflict you experienced and the resolution principle you adopted. The ethical dilemma described should fit the definition—a situation in which there is no obvious right or wrong decision, but rather a right or right answer.
Should a manufacturer go beyond government standards if it feels there may be a potential safety hazard with its product? Other will argue that a manufacturer will only do what is required by government standards. However, to remain competitive in the marketplace, a manufacturer can go above and beyond to ensure that the consumer is safe. This strategy not only benefits the stakeholders, but also establishes a positive reputation within the industry.
Once the safety issue became apparent, should Ford have recalled the vehicle and paid for the retrofit? Should it have invited owners to pay for the new barrier if they so chose? Student responses will vary. Some of the students may feel that Ford should have recalled the vehicle and paid for the retrofit once they knew that there was a safety issue.
Is there a difference for a consumer between being able to make a conscious decision about upgrading safety features such as side airbags and relying on the manufacturer to determine features such as the tensile strength of the gas tank? There is a huge difference between being able to make a conscious decision about a safety-feature upgrade and relying on a manufacturer to determine the safety features.
Typically, manufacturers only have the obligation to offer basic or required safety features on the automobiles sold to consumers. Once Pintos had a poor reputation, they were often sold at a discount. Do private sellers have the same obligations as Ford if they sell a car they know may have design defects? Does the discount price absolve sellers from any responsibility for the product? Private owners should have the same obligation as Ford if they sell a car they know may have design defects.
A discount price should not absolve sellers. It is important for sellers to have a strong code of ethics in their business transactions. Summarize the positions of both critics and supporters of these tax strategies. Critics call the tax strategies the movement of those funds by many companies as deliberate tax avoidance; and supporters call it profit maximization.
Supporters and critics of these tax strategies agree that corporations are making use of legal financial options that are available to them under current tax law. However, does that equate to ethical business conduct? Why or why not? They may cite the following reasons to support their answer: Microsoft elected to shift the intellectual property IP rights for software that the company developed in America to Puerto Rico, Ireland, and Singapore.
The French chairman and CEO of Louis Vuitton, Bernard Arnault, recently announced that he was leaving France for Belgium, allegedly to avoid the new highest-income tax rate of 75 percent. Is that any different from what corporations are doing?
Arnault is leaving France just to avoid paying high income taxes.
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Chapter Summary This chapter begins by defining how ethics are applied to business behavior. It describes and explains who the stakeholders are in an organization, their interests in the organization, and the impact on them from unethical behavior. Many people, because of the track record over the past two decades, believe that business ethics is an oxymoron, the combination of two contradictory terms. This chapter also discusses the history of business ethics and the dramatic changes that have taken place in the business environment over the last five decades. It continues going into deeper detail about the definition and resolution of ethical dilemmas. It discusses four commonly held rationalizations that can lead to misconduct.