CHAPTER 2

Ethical Basis of Law and Business

Management
 What are Ethics?
Ethics are principles that explain what is right or
wrong, good or bad, and what is appropriate or
inappropriate in various settings.

MORALITY: Doctrine of Conduct dealing with

making the difference between right and wrong in
conduct or character.
The collection of values that guide our behavior.
Organizational ethics: Guidelines for the conduct
and decision making of employees and
 Business Ethics
Many of our ethical decisions are made for us–
by our laws. However, simply obeying the law
does not fulfil all ethical obligations. Some
actions in business may be legal but not
ethical.
Ethics has to do with questions relating to the
fairness, justness, rightness, of an action.
Business Ethics: refers to the standards for
morally right and wrong conduct in business.
Concerned with good and bad or
right and wrong behavior and Business
practices that take place in business Ethics
Relates to principles of right
Moral conduct
and wrong in behavior
The discipline that examines
good or bad practices within the Ethics
context of moral duty and obligations
What Does It Really Mean?
Business Ethics:
 Involves, the study and describing
of ethical action
Normative
 It analyses how people act Ethics
in terms of morality
The study of people's views about
moral beliefs Descriptive
 It analyses ‘what do people
Ethics
think is right
Descriptive Ethics and Normative Ethics
Based on short, practical questions
to guide ethical decision making Ethical Tests
and behavior Approach
Based upon the use of ethics Principles
principles to direct behavior, Approach
actions and policies
Based on how normal society Conventional
today views business ethics Approach
Three Approaches to Business Ethics
Factors Affecting Managerial Ethics
The Manager as a Person
• Family influences
• Religious values
• Personal standards, and needs
The Employing Organization
• Policies, codes of conduct
• Behavior of supervisors
• Behavior of peers
Factors Affecting Managerial Ethics

The External Environment

• Government regulations
• Norms and values of society
Conforms to high standards
Moral
of ethical behavior or professional
standards of conduct Management
An approach without of ethical
Immoral
Principles and active opposition
Management
to what is ethical
Models of Management Ethics
Characteristics of Immoral Managers
Intentionally do wrong
Self-centered and self-absorbed
Care only about self or organization’s profits /
success
Actively oppose what is right, fair, or justice
Exhibit no concern for stakeholders
Are the “bad guys”
An ethics course probably would not help them
 Examples of Immoral Cases
• Stealing petty cash
• Cheating on expense reports
• Taking credit for another’s accomplishments
• Lying on time
• Coming into work hung-over
• Telling a demeaning joke
• Taking office supplies for personal use
• Rewarding employees who display wrong behaviors
• Harassing a fellow employee
 Characteristics of Moral Managers
Conform to high level of ethical or right behavior
Conform to high level of personal and
professional standards
Ethical leadership is commonplace
Goal is to succeed within confines of sound
ethical precepts
High integrity is displayed
Possess an acute moral sense and moral maturity
Are the “good guys”
 Habits of Moral Mangers
1. They have a passion to do right
2. They are morally proactive
3. They consider all stakeholders
4. They have a strong ethical character
5. They have an obsession with fairness
6. They undertake principled decision making
7. They integrate ethics wisdom with management
wisdom
 Positive Ethical Behaviors
Giving proper credit where it is due
Being straightforward and honest with other
employees
Treating all employees equally
Being a responsible steward of company assets
Recognizing and rewarding ethical behavior of
others
Talking about the importance of ethics and
compliance on a regular basis
Making Moral Management Actionable

Senior management leads the transition from

amoral to moral management

• Business ethics training

• Codes of conduct
• Mission / Vision statements
• Ethics officers
• Tighter financial controls
• Ethically sensitive decision-making processes
• Leadership by example
 Corporate Social Responsibility
Corporations and various groups in the society

• Duty to Shareholders
• Duty to Employees
• Duty to Consumers
• Duty to the Community
• Duty to Society
Sources of Values for Business Ethics
There are four sources values for business ethics

• Legal regulation
• Professional code of ethics
• Organizational code of ethics
• Individual values
 Legal Regulation
Legal regulation is a significant source of values
for business ethics. These values include

• Respect for the liberty and rights of others

• The importance of acting in good faith
• The importance of honoring
confidentiality
• Avoidance of conflict of interest
 Professional Code of Ethics
Professional code of ethics sets out an
organization's ethical guidelines and best
practices to follow for
• Honesty
• Integrity
• Professionalism and
• Members of an organization, violating the
code of ethics could result in sanctions
including termination
 Organizational Code of Ethics

Many businesses have adopted ethical code of ethics,

these include

• Fundamental honesty and adherence to the law

• Product safety and quality
• Health and safety in the work place
• Fairness in selling/marketing practices
• Supplier relationships
• Pricing , billing and contracting
 Organizational Code of Ethics
• Payment to obtain business corrupt
practices act
• Security
• Political activities
• Protection of the environment
• Intellectual property/proprietary in
formation
 Individual Values
Individual Values? Values refer to what is
important to an individual. These Include

• Life experiences
• Interactions and
• Relationships they are shaped early in life and
are stable or permanent throughout life.
 Rules of Ethical Behavior
• Fraudulent acts such as theft or embezzlement of
corporate funds.
• Purposely mismanaging corporate records/expense
• Misappropriation of corporate assets
• Theft of intellectual property or misappropriation of
trade secrets
• Taking kickbacks or committing bribery
• Theft of business equipment or supplies
• Willingly ignoring safety health code violations.
 Principles of Business Ethics
• Leadership: (To guide decisions and behavior in all
aspects of professional)
• Accountability: (Holding yourself and others
responsible for their actions)
• Integrity: (Honesty, trustworthiness, and reliability)
• Respect for others: (Respecting others is a critical
component. Everyone deserves dignity, privacy, and
equality)
• Honesty: (Truth in all matters is key to fostering an
ethical climate)
 Principles of Business Ethics
• Respect for laws: (Ethical leadership should include
enforcing all local, state, and federal laws)
• Responsibility: (Allow employees to be responsible
for their work, and be accountable for yours)
• Transparency and Fairness: (Ensure that hiring,
firing, wages, salaries and promotions should be fair
and everyone should have the same opportunities )
• Compassionate: (Employees, the community,
business partners, and customers should all be
treated with concern for their well-being)
 Principles of Business Ethics
• Loyalty: (Demonstrate confidentially and
commitment to their employees and the company)
• Environmental concern: (In a world where
resources are limited, ecosystems have been
damaged by past practices, and the climate is
changing, it is important to be aware of and
concerned about the environmental impacts a
business has. All employees should be encouraged
to report solutions for practices that can add to
damages already done.)
 Why Business Ethics is Important

• Brand recognition and growth

• Increased ability to negotiate
• Increased trust in products and services
• Customer retention and growth
• Attracts talent
• Attracts investors
• Drives employee behavior
 Why Managers / Employees
Behave Ethically

1. To avoid some punishment

Most of Us
2. To receive some reward
3. To be responsive to family, friends,
or superiors
Many of Us
4. To be a good citizen

Very Few Of Us 5. To do what is right, pursue some

ideal
 Rights
Rights are what we want others to do for us.
Humans make free choices about how they live. In
this sense, humans are said to have autonomy.
To treat someone as a means or as an object is to
deny them this distinctive and essential human
characteristic; it would be to deny them their very
humanity.
If autonomy is a fundamental characteristic of
human nature, then the freedom to make our own
choices deserve special protection as a basic right.
 Duty

Duty: A legal obligation imposed by the law.

Duty: Acts which we should perform for
others
To be an ethical, you have a duty or moral
obligation

1. Not to lie
2. Keep promises
3. Keep confidence
 Universalism - Rights to be recognized

Right to privacy Right to a fair trial

Right to freedom of Right to non-
conscience discriminatory treatment
Right to free speech Right to physical security
Right of due process Right to freedom of
Right to freedom of association
physical movement Right to minimal education
Right to ownership of Right to political
property participation;
Right to freedom from Right to subsistence.
torture
 Distinguishing between Moral Rights and
Legal Rights
Legal rights may be granted on the basis of
legislation or judicial rulings.
Legal rights might also arise from contractual
agreements.
One cannot contract away one’s moral rights -
moral rights lie outside of the bargaining that
occurs in a contract.
Moral rights establish the basic moral framework,
and more specifically for any contracts that are
negotiated within business.