Business Ethics, An Introduction
Chapter 40
Ethics: Moral principles and values applied to social
behavior. A reasoned
set of principles of conduct. Usually
has a religious underpinning, which is logical.
Business Ethics: Moral principles and values applied to
situations arising in a business setting.
In other
words, the fairness, rightness, or wrongness, if you will, of an action.
If you have ever seen the
movie “Wall Street” with Michael Douglass, you probably recall his character
Gordon Gekko, who basically espoused that “Greed
is Good.”
You might question his
approach to ethics.
Than again, maybe you
wouldn’t!
Unfortunately, companies have conflicting duties: to make a profit, to work efficiently, and still stay
within the law or suffer dramatic consequences.
As you might imagine, it is sometimes like putting a square peg into a
round circle.
For example, a company can
make a higher profit if it uses overseas labor or raw materials, but what about
the legality and ethics of such a decision?
It would seem in recent years
there has been an emphasis on the bottom line, rightly or wrongly.
Questions generally asked by
companies:
Is the proposed action:
profitable? If so, is it:
Legal?
Ethical?
Notice the ordering.
Legal Behavior: many actions
are clearly legal or illegal, but many items also fall into a gray area.
While legal compliance is
achieved, i.e., a minimum accepted standard, what about
Advertising-
how far can we stretch the truth and get away with it and attract new
customers?
Product Misuse? Are we responsible for the
foolishness of consumers?
How
can a company defend itself when pushing the limits?
General “rule”: if the company can demonstrate that it has acted in
good faith and responsibly, it has a good opportunity to defend its actions.
So, following the law makes many ethical decisions
for us.
èThis is often called the “moral minimum”
Well, just because it is legal, does it make
it ethical? Lets see:
Ethical behavior: even when a contemplated action is legal (or even
illegal), business decision makers must also consider whether the action is
ethical.
Certain guides are available
to meet or exceed the moral minimum (usually legal compliance).
General Guides for such
compliance:
·
Corporate or
professional codes
of ethics.
·
Optimizing (making the best) versus maximizing (making
the most) behavior (more on this later)
·
Public opinion
and sentiment- i.e, the general public, what does it
want or perceive?; and
·
Personal Morality
( Gordon Gekko??)
Let’s get back to the conflicting “duties”
of the company previously noted above.
So, just what are the priorities among the
various folks involved?
·
Shareholders: Their
concern is profits and return on their investment. And, they want a “good” company.
Versus:
·
Employees: they are concerned
about their wages, jobs and benefits. They want to work for a “good” company.
Versus:
·
Consumers
(advocates): those vocal groups who
are upset when products are introduced that hurt the user, environment or other
similar such situation. Recall the
boycotts of Exxon during Exxon-Valdez mess in
Query:
What if a toy company
produced a product that might have dangerous fluid in a teething ring, but yet no
one had ever complained or been injured? Should they stop, fix, recall or remove the
product? Or should they wait?
What about the book’s example
of selling glue – as you might recall, some users were misusing the product and
causing injury to themselves. That isn’t the intent of the product. Are they responsible?
·
Under utilitarian
approaches, all that matters is what is the best for the most
matters. Here the item wasn’t illegal.
·
Contrast: under
the duty based Kantian approach, it is hard to defend any
product that hurts people, even if due
to misuse by the persons using it.
Business Ethics- Duty versus
Outcome
Duty based Ethics: based on
underlying concept of duty regardless of consequences of action taken. Usually arise from religious belief and/or
philosophic reasoning, i.e., compassion, basic rights.
·
Recall
è Kantian: moral- each of us is unique. If treated as a means to an end, people
become objects. Therefore, if even one
person is/could be hurt, there needs to be corrective action.
Compare: Outcome based ethics: Ethics based on the consequences of action
taken or foresworn, without regard to any underlying concept of duty or
morality- situational ethics.
Outcome based ethics = Utilitarianism dictates that a decision to act or not act should be directed
towards producing the greatest good for the greatest number of people. Occasional “injury” to individuals is
therefore an acceptable risk.
This, of course, is a cost benefit analysis. In other words, who will be affected by the action; the cost/benefit of such an action, and a choice among alternative actions that produces the
greatest return or social utility.
Is it right to allow
(non-voluntary or without the subject’s knowledge) drug testing on people if it
helps many people?
Doesn’t this fly in the face
of human individuality and rights?
Similar to the Nazi’s in the concentration camp?
So, how does a business
consider the issues from a more common perspective- its profits?
Maximum vs. Optimum Profits
Maximum
profits implies maximum return without considering other factors,
such as legality and morality.
Optimum profits
implies the maximum return you can achieve within legal and moral constraints
Example: you could make huge (maximum) profits selling
a controlled substance illegally. You
would make optimum profits selling the same controlled substance following all
rules and ethical considerations.
Thus in summary:
Is it Profitable?
Legal?
Ethical? Really, it depends on the first two questions.
Some common elements,
forgetting a moment about the Legality of the situation:
·
Sexual
harassment- who has the responsibility- the company or the individual? More on
this in the labor section.
·
Downsizing (laying off) of persons- is your severance notice via e-mail
or voice mail ethical? What about giving you 10 minutes or less to pick up your
personal effects before you are escorted out of the building?
·
Consumer Welfare
(Sales activities)
o
Product
misuse (change of the buyer
beware to seller beware)
o
Duty to warn
(except where open and obvious- like a knife)
So, what is ethical? All I can say is that the standard is
constantly evolving, and you will be part of that changing target!
Other “ethical issues”/laws
Foreign Corrupt Practices
Act:
A law to prevent the paying of bribes to foreign government officials, a
practice that was once common. Established in 1977.
Sometimes called the Internal auditors job
enhancement act.
Foreign Suppliers employment
issues (recall Nike?)