Business Ethics and the Legal Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business

Business Ethics and the Legal Environment of

Business

© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/IrwinIntroduction to Business

Chapter Five

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Chapter 5 Business Ethics and the Legal Environment

of Business

1. Understand the relationship between ethics and the law and appreciate why it is important to behave ethically.

2. Differentiate the claims of the stakeholder groups affected by a company’s actions.

3. Describe four rules to help companies and their employees act in ethical ways and identify the four main sources of business ethics.

4. Describe some methods companies can use to strengthen their ethical rules and positions.

5. Appreciate the important ways a nation’s business laws and regulations affect business commerce, occupations and organization.

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of Business

Ethical Dimension• There is an important ethical dimension in most kinds

of business decision-making

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of Business

Ethics• Ethics as a code of conduct presents ethical dilemmas

that may be separate from the legal dimension and presupposes ethical behavior

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of Business

Ethics• Ethics are motivation based on right and wrong and

standards governing behavior and conduct

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of Business

Ethical beliefs/dilemma• May lead to the development of laws it may also

question existing laws and justify illegal behavior • Digital piracy and/or downloading of copyrighted

music and software is an example of this ethical dilemma

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of Business

Scope and Significance of Ethics• Stakeholders, including employees, managers,

customers, suppliers, distributors, and community, society, and nation state. have a stake and a claim and can directly benefit or be harmed by its actions, and the business ethics of a company are important to them

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of Business

Scope and Significance of Ethics• When making business decisions managers must take

the claims of all stakeholders into consideration and use four ethical rules or principles to analyze the affects of their business decisions

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of Business

Ethical Principles• Utilitarian• Moral rights• Justice

• Practical rules

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of Business

Ethical Principles• The utilitarian rule suggests the ethical decision

should produce the greatest good for the greatest number of people

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of Business

Ethical Principles

• The moral rights rule suggests ethical decision should maintain and protect the fundamental rights and privileges of people

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of Business

Ethical Principles

• The justice rule suggests the ethical decision should distribute benefits and harm among people in a fair equitable, and impartial manner

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of Business

Ethical Principles• The practical rules suggests the ethical decision should

be one that a manager has no hesitation to communicate to people outside the company because the typical person in a society would think the decision is acceptable

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of Business

Effects of Ethical Behavior• Creates trust • Lowers transaction costs• Increases efficiency and effectiveness• Increases production of trade

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of Business

Effects of Ethical Behavior• Increases company profitability• Increases national standard of living, well being, and

prosperity• unethical behavior is vice versa (no pun intended) or

negates these effects

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of Business

Differences in Business Ethics• Determinants between companies and countries:• Societal • Organizational• Occupational

• Individual

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of Business

Differences in Business Ethics• Determinants between companies and countries• Especially significant are the ethics of the company’s

top managers

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of Business

Significance of Ethical Behavior• The company’s reputation is part of their goodwill and

can enhance its profitability • Ethical behavior improves the quality of life and can

reduce crime, poverty and unemployment rates and increase literacy rates

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of Business

Significance of Ethical Behavior• An organization can encourage its member to act

ethically with incentives for ethical behavior and disincentives to punish those who behave unethically

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of Business

Significance of Ethical Behavior• Managers can also create authority relationships and

rules that both promote and punish ethical/unethical behavior

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of Business

Significance of Ethical Behavior• Whistle- blowing occurs when employees feel

powerless in the organization

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of Business

Legal Environment• Subdivision of laws governing the business system

and include: • Laws affecting business commerce• Laws affecting business occupations• Laws affecting business organization

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of Business

Legal Environment• Additional classes of laws include• Practices related to business occupations• Regulation of occupational qualifications, promotion

of employee health and safety, and business diversity

• All laws help business protect its valuable resources

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of Business

Legal Environment• Additional classes of laws include• Laws relevant to a company’s form of business

organization and • Incorporation laws and bankruptcy laws• All laws help business protect its valuable resources

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of Business

Legal Environment• Property rights are established in the granting of

patents, copyrights, and trademarks

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of Business

Ethical Self-Interested Behavior• Managing money and personal finances is a complex

and difficult activity but it can be one of the most rewarding

• If you focus on determining the value of products and how they will provide you with utility now and in the future

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of Business

Ethical Self-Interested Behavior• Financial success ultimately derives from hard work,

some luck and the ability to look ahead and think about the future consequences of the spending and saving decisions made in the present

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of Business

Ethical Self-Interested Behavior• The spending/saving decisions are are the same

factors that result in success or failure in business

Documents

Business Ethics and the Legal Environment of Business © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Introduction to Business