1. Ethics n Business

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BUSINESS ETHICSChapter 1 Ethics and Business

Lecturer: Risa Virgosita, S.E., M.Sc


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Are ethics important?


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Morality

Morality:

The standards that an individual/group has about what isright/wrong and good/evil

Moral standards:

The norms about actions believed to be morallyright/wrong and the values placed on the kinds of objectsbelieved to be morally good and bad

Nonmoral standards:

The standards ofwhats right/wrong and good/bad in anonmoral way


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Ethics

Ethics is the study of moral standards The process of examining the moral standards of aperson/society to determine whether thesestandards are reasonable or unreasonable to beapplied to concrete situations/issues

Business Ethics: A study on moral standards

How moral standards apply to social systems andorganizations that produce and distribute goodsand services


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Ethical Issues

Systemic

Social systems or institutions within which businessoperate

Corporate

An individual company taken as a whole

Individual

A particular individual(s) within a company and theirbehaviors and decisions


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Business Ethics & Cultural

Differences

Ethical Relativism

A theory that there are no ethical standards that areabsolutely true and that apply or should be applied tothe companies and people of all societies differentsocieties have different moral beliefs

Objections to Theory of Ethical Relativism Some moral standards are found in all societies Moral differences do not logically imply relativism

Relativism is incoherent

Relativism privileges the current moral standards of a society


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Technology & Business Ethics

New technologies raise new ethical issues for

business

Ethical issues related to technology:

The use of information technology

Cyberspace

Nanotechnology

Genetic engineering


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Moral Development

Kohlbergs 3 Levels of Moral Development

Level 1: Preconventional Stages1. Punishment & Obedience Orientation

2. Instrumental & Relative Orientation

Level 2: Conventional Stages3. Interpersonal Concordance Orientation

4. Law & Order Orientation

Postconventional, Autonomous, or Principled Stages5. Social Contract Orientation

6. Universal Ethical Principles Orientation


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Moral Reasoning

Moral Reasoning

The reasoning process by which human behaviors,institutions, or policies are judged to be in accordance

with or in violation of moral standards

Essential Components of Moral Reasoning

1. An understanding of what reasonable moral standardsrequire, prohibit, value, or condemn

2. Evidence or information that shows that a particularperson, policy, institution, or behavior has the kinds offeatures that these moral standards require, prohibit,

value, or condemn


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Business Ethics: Cons

1. In a free market economy, the pursuit of profit willensure maximum social benefit

2. A managers most important obligation is to servethe company

3. Business ethics is limited to obeying the law

Law of Agency

A law that specifies the duties of persons who

agree to act on behalf of another party & whoare authorized by an agreement so to act (e.g.

lawyers, managers, stockbrokers, etc)


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Business Ethics: Pros

1. Ethics applies to all human activities

2. Business cannot survive without ethics3. Ethics is consistent with profit seeking

4. Prisoners dilemma argument

5. Customers & employees care about ethics


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The Prisoners Dilemma

A & B who are arrested for robbing a store secretly

agree to cooperate that neither of them will confess

the crime. The police officer separates the twoprisoners and tell each of them the following:

B cooperates with A B does not cooperate with A

A cooperates with B A gets 1 yearB gets 1 year

A gets 3 yearsB goes free

A does not cooperate

with B

A goes free

B gets 3 years

A gets 2 years

B gets 2 years


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When people must choose between cooperating or

not cooperating in rules/agreement, and when each

has more to gain by NOT cooperating the bestchoice: not cooperating the rules/agreement

Ethics consists of rules that each of us can choose to

follow or not a prisoners dilemma

In real life, individuals have an ongoing relationship

with the other party if we cheat the other party,

they will do the same in the next opportunity


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In business, interactions with employees, customers,

suppliers, and creditors are repetitive and ongoing

if a business is trying to take advantage of themthrough unethical behavior, they will likely to retaliate

in the next opportunity.

Over the long run and in the most part, its better to

be ethical in business than to be unethical

Ethics is a key component of effective management


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Moral Responsibility

A person is morally responsible for an injury or a

wrong if:

1. He/she caused or helped cause it, or failed to

prevent it when he/she could and should have

2. He/she did so and knows what he/she was doing

3. He/she did so of his/her free will

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1. Ethics n Business