Ethics & Business

McGraw-Hill/Irwin Business Ethics: Decision-Making for Personal Integrity & Social Responsibility

Copyright 2008

1-1 1-1 The McGraw-Hill Companies, Inc. All rights reserved.

Point to discuss

Identify areas of business ethics violation Ethical failure means business failure Importance of ethics in business environment Business ethics as the ethical decision making Ethical Responsibilities vs Legal Responsibilities Business Ethics Principles Doing business ethically is .....

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Define areas business ethics violation

Marketing Food safety and security Health and Environment Labour Human Right Corruption and Bribery Information Assimetry Oligopoly/Cartel/Unfair Competition Illegal Product and Manufaturing
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Inventory of ethical issues in business

Company customer relation Company shareholder relation Company government relation Company community relation Company environment relation Employer employee relation

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Business ethics is a process of responsible decision-making

The scandals and ruin experienced since the Enron collapse were brought about by ethical failures. We will discuss a decision-making model that can help individuals to understand such failures and avoid future business and personal tragedies.
Why explore ethics in business? Because

Ethics Failures = Business Failures

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An Ethical Corporate Climate . . .

is either developing or deteriorating, enriching itself or impoverishing itself. It needs constant care and attention.
Study by the Woodstock Center Georgetown University, D.C.

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Why is ethics important in the business environment?

Consider the range of people who were harmed by the collapse of Enron.

Stockholders lost over $1 billion in stock value. Thousands of employees lost their jobs, their retirement funds, and their health care benefits. Consumers in California suffered from energy shortages and blackouts that were caused by Enrons manipulation of the market. Hundreds of businesses that worked with Enron as suppliers suffered economic loss with the loss of a large client. Enrons accounting firm, Arthur Andersen, went out of business as a direct result. The wider Houston community was also hurt by the loss of a major employer and community benefactor. Families of employees, investors, suppliers were also hurt. Many of the individuals directly involved will themselves suffer criminal and civil punishment, including prison sentences for some.
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Multiply these harms by the dozens of other companies implicated in similar scandals and one gets an idea of why ethics is no longer dismissed as irrelevant.

The consequences of unethical behavior and unethical business institutions are too serious for too many people to be ignored.

Stakeholders

This discussion of the range of people impacted by the Enron collapse evidences how one case can dramatically affect the lives of thousands of people: employees, stockholders, management, suppliers, customers, and surrounding communities. For better or for worse, the decisions made within a business firm will affect many more people than only the individual herself. Ethically responsible business decision-making therefore must move beyond a narrow concern with stockholders, and consider the impact that decisions will have on a wide range of stakeholders. In a general sense, a business stakeholder will be anyone affected, for better or worse, by decisions made within the firm.
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Stakeholder Theory

Stakeholder theory is a model of corporate social responsibility that holds that business managers have ethical responsibilities to this more broad range of stakeholders, as opposed to a more narrow view that the primary responsibility of managers is limited to stockholders.

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Stakeholders: Corporations

Customers/Clients Stockholders Employees Consumer advocates Regulators Media

Government Trade Associations Competitors Local Community Others?????

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Why care about ethics?

Unethical behavior creates financial and marketing risks. A company can go out of business, and its employees can go to jail, if no one is paying attention to the ethical standards of the firm. A firms ethical reputation can provide a competitive advantage, or disadvantage. Consumer boycotts give even the most skeptical business leader reason to pay attention to ethics. Managing ethically can also pay significant dividends in organizational structure and efficiency. Trust, loyalty, commitment, creativity, and initiative are just some of the organizational benefits that are more likely to flourish within ethically stable and credible organizations
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Business Ethics as Ethical Decision-Making

Decisions which follow from a process of thoughtful and conscientious reasoning will be more responsible and ethical decisions. Responsible decision-making and deliberation will result in more responsible behavior. The point of a business ethics course?

To learn about the great ethicists of history such as Aristotle, John Stuart Mill, and Immanuel Kant (the informational content of the class) To explore ethical behavior, to consider how human beings properly should live their lives.
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Business Ethics as Ethical Decision-Making

An ethics class strives to produce more ethical behavior among the students who enroll. But the only academically and ethically legitimate way to do this is through careful, and reasoned decision-making. A process of rational decision-making, a process that involves careful thought and deliberation, can and will result in behavior that is both more reasonable and more ethical.

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Legal Responsibilities vs. Ethical Responsibilities

The law provides a very important guide to ethical decisionmaking, but legal norms and ethical norms are not identical nor do they always agree. Over the last decade, many corporations have established ethics programs and hired ethics officers who are charged with managing corporate ethics programs. Much good work gets done by ethics officers, but it is fair to say that much of this focuses on compliance issues. The Sarbanes-Oxley Act created a dramatic and vast new layer of legal compliance issues.
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Cant the law answer the question of right or wrong?

Whats good about this approach? Whats challenging (negative) about this approach?

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The law can be a floor

The law is constantly changing (consider segregation). The law is not necessarily representative of universal (or your) morals. The law is not always right. The law doesnt answer every challenging dilemma. The law is slow to catch up to new quandaries.

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Reality Check Ethics goes Mainstream!

A 2003 poll by Deloitte of 5,000 directors of the top 4,000 publicly traded companies reported that 98 percent believed that an ethics and compliance program was an essential part of corporate governance. Over 80 percent had developed formal codes of ethics beyond those required by Sarbanes-Oxley, and over 90 percent included statements concerning the companys obligations to employees, shareholders, suppliers, customers, and the community at large in their corporate code of ethics. [See next slide.]
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How is ethical decision-making different from other decisionmaking?

Ethics is a part of practical reason, reasoning about what we should do, as opposed to theoretical reason, which is reasoning about what we should believe. Theoretical reason is the pursuit of truth, which is the highest standard for what we should believe.

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Philosophical Ethics and Theories

Is there a comparable methodology or procedure for deciding what we should do and how we should act? There are guidelines that can provide direction and criteria for decisions that are more or less reasonable and responsible: philosophical ethics.

Ethical theories are patterns of thinking, or methodologies, to help us decide what to do.
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Business Ethics Principles (Caux, 1995)

Having responsibilities not only to shareholders, but also to all stakeholders Impact of business activities are not limited to economic and social , but also justice, human rights, education, innovation and utilization of natural resources Not just obey the laws and regulations Respect the environment Do not do anything illegal in business process

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Doing business ethically is :

Be Honest, Transparent and Having Integrity Do not produce product that harmful tp consumer/ Respect to consumer Do not damage the Environmental Fair trade Obey the Law Respect to human right Respect to Employee ....... ( any other)
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Next week assignment

Find one listed company in Indonesia Stock Exchange Give a description about the companys ethics policy Review the ethics policy Describe the implementation of companys ethics policy Analyze the difference between ethics policy and implementation Make a conclusion

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