Focal Points for Midterm Exam

Chapter 1: “Ethics and Business”

1- Business Ethics as Personal Integrity and Social Responsibility

People who are quite decent can, under the wrong circumstances, engage in
unethical behavior while less ethically motivated individuals can, in the right
circumstances, do the “right thing”.
Ethical business leadership is the skill to create the circumstances within which
good people are able to do good, and bad people are prevented from doing bad.
Ethics involves: How should we live? Ethics is, in this sense, practical, having to
do with how we act, choose, behave, and do things. Philosophers often
emphasize that ethics is normative, which means that it deals with our
reasoning about how we should act. Social sciences, such as psychology and
sociology are descriptive rather than normative, how and why people do act the
way they do.
How should we live? can be interpreted in two ways: “We” can mean each one of
us individually, or all of us collectively.
a. In the first sense, this is a question about: how I should live my life - how I should act
- what I should do - what kind of person I should be. This meaning of ethics is
based on our value structures; and is sometimes referred to as morality and
“personal integrity. “If morals refer to the underlying values on which our
decisions are based, ethics refers to the applications of those morals to the
decisions themselves. So, an individual could have a moral value of honesty,
which, when applied to her/his decisions, results for example in a refusal to lie on an
expense report.
b. In the second sense, “How should we live?” refers to how we live together in a
community. how corporations, ought to be structured and how we ought to live
together. This is sometimes referred to as social ethics like justice, law,
organizational structure, and political philosophy. In this sense, business ethics is
concerned with how business institutions ought to be structured, about
whether they have a responsibility to the greater society (corporate social
responsibility, or CSR), and about making decisions that will have an impact
on many people other than the individual decision maker. This aspect of
business ethics asks us to examine business institutions from a social rather
than from an individual perspective. We refer to this broader social aspect of
ethics as decision making for social responsibility.
Managerial decision making will always involve both aspects of ethics. Within a
business setting, individuals will constantly be asked to make decisions
affecting both their own personal integrity and their social responsibilities.

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 2- Ethics and the Law

The law provides an important guide to ethical decision making, but legal norms
and ethical norms are not identical, nor do they always agree. However, is
compliance with the law all that is required to behave ethically?

a) Believing that obedience to the law is sufficient to fulfill one’s ethical

duties raises questions of whether the law, itself, is ethical. From the
perspective of ethics, a business does not avoid its need to consider
ethical responsibilities just by obeying the law.
b) The law can be efficient to prevent serious harms, but it is not very
effective at promoting “goods.” What would a society be like if it had a
law that prohibited lying under all circumstances?
c) A business acting as if its ethical responsibilities end with obedience to
the law is just inviting more legal regulation. Consider the difficulty of
trying to create laws to cover every possible business challenge; then
the number of regulated areas would become unmanageable. If
business restricts its ethical responsibilities to obedience to the law, it
should not be surprised to find a new wave of government regulations
that require what were formerly voluntary actions.
d) The law cannot possibly anticipate every new dilemma that businesses
might face. When new dilemmas arise, one must be able to rely on
ethics because the law might not yet—or might never—provide a
solution.
e) Finally, the perspective that compliance is enough relies on a
misleading understanding of law. To say that all a business needs to do
is obey the law suggests that laws are clear-cut, unambiguous rules that
can be easily applied. If the law was clear and unambiguous, there
would not be much of a role for lawyers and courts.

Chapter 2: “Ethical Decision Making: Personal and Professional Contexts”

1- A Decision-Making Process for Ethics

a. The first step is to determine the facts of the situation. What facts would be
useful to know before making a decision? Suppose you already owned an IPod.
Would that make a difference? Suppose you knew who sat at the desk in the
previous class. Suppose the IPod did not work and you found it in a wastebasket. An
ethical judgment made in light of a diligent determination of the facts is a more
reasonable ethical judgment than one made without regard for the facts.
b. A second step is identifying the ethical issues involved. Certainly, the first
and second steps might arise in reverse order, depending on the
circumstances. In the IPod case, imagine that the student claims that he simply
discovered a lost item and kept it. He denies that this is even an ethical issue
because, after all, he did not steal the IPod. Similarly, in many business
situations, what appears to be an ethical issue for one person will be

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 perceived as a simple financial decision by others. When does a business
decision become an ethical decision? First, of course, we need to recognize
that “business” or “economic” decisions and ethical decisions are not
mutually exclusive. Just because a decision is made on economic grounds
does not mean that it does not involve ethical considerations as well. Being
sensitive to ethical issues is a vital characteristic that needs to be cultivated in
ethically responsible people.
The third step is to identify and to consider all the people affected by a
decision, the stakeholders. Examining issues from a variety of perspectives
other than one’s own, and other than what local conventions suggest, helps
make one’s decisions more reasonable, accountable, and responsible. what
would you think of this case if you were the person who lost it? How does that affect
your thinking? The very fact that there are many perspectives and interests at
stake means that ethical decisions often involve dilemmas.

d. The fourth step is to consider the available alternatives. Creativity in

identifying ethical options—also called moral imagination—is one element that
distinguishes good people who make ethically responsible decisions from
good people who do not. It is important not only to consider the obvious
options with regard to a particular dilemma, but also the much subtler ones
that might not be evident at first glance. In the case of discovering a lost IPod:
One person might decide to keep it and that, if she does not keep it, the next
person to discover it will do so anyway. Another person might find out who teaches
the previous class and ask that teacher for help in identifying the owner.
e. The fifth step is to compare and weigh the alternatives. Understanding a
situation from another’s point of view, making an effort to “walk a mile in their
shoes,” contributes significantly to responsible ethical decision making.
Ethics experts sometimes ask the decision maker to consider whether she/he
would feel proud or ashamed if a daily newspaper printed this decision as a
front-page article. In the iPod case, the student was described as looking around to
see if anyone else noticed his discovery. Would your behavior change if other people
knew about it?

f. The sixth step is to make a decision. Decisions in business are not typically
simple “yes” or “no” decisions; in most cases, making a decision means
formulating a plan and carrying it out.
g. The final step evaluates the implications of our decisions, to monitor and learn
from the outcomes, and to modify our actions accordingly when faced with
similar challenges in the future.

2- When ethical decision making goes wrong: why do “Good” people

engage in “Bad” acts?
a. Some stumbling blocks standing in the way of responsible action are cognitive or
intellectual.
1. Ignorance can be sometimes willful and intentional. You might even choose

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 not to think about it and try to put any guilty feelings out of your mind.
2. We sometimes consider only limited alternatives, missing the fact that other
alternatives might be possible.
3. Having a simple rule to follow can be reassuring to many decision makers.
We also often select the alternative that satisfies minimum decision criteria,
known as satisficing, even if it might not be the best.
b. Other stumbling blocks are less intellectual or cognitive than they are a question of
motivation and willpower.
1. Sometimes it is simply easier to do the wrong thing. It is often easy to do a
little thing that crosses the line, and the next time it is easier, and the next easier still.
And then, one day, you find yourself much further over your ethical line than you
thought you would ever be.
2. People sometimes LACK THE COURAGE to make the right decision because
they are afraid to lose income, job, or other valuable components of our life. The
easiest thing to do would be to remain passive and simply conform to social
and cultural expectations, to “go with the flow.”

Chapter 3: “Philosophical Ethics and Business”

1- Utilitarianism: Making Decisions Based on Ethical Consequences

Challenges to Utilitarian Ethics

a. If utilitarianism advises that we make decisions by comparing the

consequences of alternative actions, then we must have a method for making
such comparisons. In practice, however, some comparisons and
measurements are very difficult. There is no consensus among utilitarians on
how to measure and determine the overall good. Many business ethics issues
highlight how difficult this could be.
b. Utilitarianism focuses on the overall consequences. FOR UTILITARIANS THE
END JUSTIFIES THE MEANS. But this seems to deny one of the earliest ethical
principles: the end does not always justify the means. We have certain duties
or responsibilities that we ought to obey, even when doing so does not
produce a net increase in overall happiness. Example, if it turns out that
slavery and child labor increase the net overall happiness, utilitarianism will
have to support these practices. In the judgment of many people, such a
decision would violate fundamental ethical principles of justice, equality, and
respect.

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 2- An Ethics of Principles and Rights

What principles or rules should guide our decisions?

a. Legal rules are one major set of rules that we ought to follow. Decision making
within a business context will involve many situations in which one ought to
obey legal rules even when the consequences, economic and otherwise, seem
to be undesirable. Examples: We have a duty to pay our taxes, even if we think
the money might be more efficiently spent on our children’s college education.
b. Other rules are derived from various institutions in which we participate, or
from various social roles that we fill. In my role as teacher and university
faculty member, I have taken on certain responsibilities that cannot be
abandoned whenever it is convenient for me to do so. Similar rule-based
duties follow from our roles as friends (“do not gossip about your friends”),
students (“do not plagiarize”).
c. There will be many occasions in which such role-based duties arise in
business. Every business will have a set of rules that employees are expected
to follow. Sometimes these rules stated in a code of conduct, other times in
employee handbooks, whereas still others are simply stated by managers.
d. Perhaps the most dramatic example of role-based duties concerns the work of
professionals within business. Lawyers, accountants, auditors, financial
analysts, and bankers have important roles to play within political and
economic institutions. Many of these roles, ensure the integrity and proper
functioning of the economic, legal, or financial system.

In the language of many philosophers, ethical duties should be categorical

imperatives rather than hypothetical. Hypothetical duties would be like a
professional code of conduct that binds you only if you are a member of the
profession. Categorical duties do not contain this “if” clause. I should or must (an
imperative) obey a fundamental ethical rule no matter what (a categorical).

Chapter 5: “Corporate Social Responsibility”

1- Ethics and Social Responsibility

As a first step, we should recognize that the words responsible and responsibility are
used in several different ways. The general meaning involves attributing something
as a cause for an event or action. Example: Poor lending practices were responsible
for (i.e., the cause of) the collapse of many banks. In a second sense, to be
responsible does carry an ethical connotation. When we say that business is
responsible to someone or for something, we are referring to what a business
ethically ought or should do. Philosophers often distinguish between three different
levels of responsibilities on a scale from less to more obligatory.

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•  Responsibilities to do good. Volunteering and charitable work are typical
examples of responsibilities in this sense. Examples of corporate
philanthropy, as when a business sponsors a charity event or contributes to a
school project.
•  A more obligatory sense of ethical responsibility is the responsibility to
prevent harm, even though they no strict duty or obligation to do so; Thus, for
example, we might say that a company has a responsibility to use
renewable energy, even though its actions alone are not causing harm and
fossil fuels are legal to use.
•  The most demanding sense of responsibility is the responsibility not to
cause harm to others. Society uses the law and legal punishment to enforce
responsibilities.

Let us consider how each of these three types of responsibilities might be

seen in business.

I. Is there a duty for business not to cause harm?

The strongest sense of responsibility is the duty not to cause harm, even when not
prohibited by law. This ethical duty not to cause harm overrides business’s pursuit of
profit. Example, if a product causes harm, then business is prevented from marketing
that product and can be held liable for harms caused by it.

II. Is there a responsibility for business to prevent harm?

There are also cases in which business is not causing harm but could easily prevent
harm from occurring. Example: A pharmaceutical company has a drug that cures a
tropical disease with one yearly dose, but it's not profitable due to limited demand.
Legally, the company isn't obliged to make it. Despite this, the company decides to
provide the drug, prioritizing its social responsibility and values.

III. Is there a responsibility to do good?

Business has a social responsibility to do good things and to make society a better
place. Corporate philanthropy would be the most obvious case in which business
takes on a responsibility to do good, Ex: projects in the arts, education, and culture
are clear examples. Also, some corporations have a charitable foundation or office
that deals with such philanthropic programs.

Different models of Corporate Social Responsibility (CSR):

- The narrow economic model prioritizes profit and shareholder wealth, with
philanthropy seen as a means to enhance reputation and indirectly increase profit.
- The broader stakeholder model emphasizes the ethical duty of businesses to
prevent harm and sometimes do good.
- The integrative model integrates social responsibility into the company's mission.

2- Stakeholder Model of CSR

The stakeholder model understands that:

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a) Business exists within a web of social and ethical relationships. The
stakeholder model holds that businesses exist to create value for a range of
stakeholders, including employees, customers, suppliers, and local
communities as well as investors and stockholders.
b) Business managers have responsibilities to all those who have a stake in the
success or failure of the company, not only to those who have invested
financially.
c) Perhaps the most influential version of stakeholder theory was
introduced by R. Edward Freeman. He offers a defense of the stakeholder
model describing both a narrow and a wider understanding of the concept of
a “stakeholder.” In a narrow sense, a stakeholder includes anyone who is
vital to the survival and success of the corporation. More widely, a
stakeholder could be “any group or individual who can affect or be
affected by the corporation”. Freeman argues that “the stakeholder theory
does not give primacy to one stakeholder group over another, though there
will be times when one group will benefit at the expense of others. In general,
however, management must keep the relationships among stakeholders in
balance.”