Business Ethics

“Doing the Right thing, and Making the Good Life Better”

Overview of Ethics

What is Business Ethics? Some moral theories Moral Development Professional Standards/Industry

Paradigms Moral Decision Making Specific Cases

Vocabulary: “Business Ethics”

What is “Business” ? What is “Ethics” ?

Business is inherently social

Business has its own culture Enron, Paypal, your office

Business Transforms Culture Mutual of Omaha, FNB, community

outreach Business is about relationships

Insurance business is about relationships

Business: Its purpose/goal

Lone Ranger/I am an Island View:

The purpose of business is to make me money, and increase stockholder value

(Milton Friedman)

Alternate Stakeholder View: Business should make money, but it has many

stakeholders– groups/individuals who have a stake in what the business does. Owners are not the only one’s with a stake (Freeman)

Your business makes the world Better or Worse for people by: The way you treat your customers The way you treat your

employees or coworkers The way you treat your

boss/company The way you contribute to the

local community

Responsibilities in Business:

To your employer To Customers To employees To boss/es To your community To your family To your God

The challenge: Balancing Responsibilities

What is ethics?

“Ethics” isn’t “legal” Difference between the Law and Ethics:

Some legal issues are neither ethical or unethical.

Some ethical issues have no laws to support them.

Law often tries to encourage ethical behavior:

Federal Sentencing Guidelines Sarbanes-Oxley Act (SOX) Better to have self-regulation than more gov’t

regulations

Many think Ethics is just about what to NOT do: “Don’t do __!!”

But ethics is more than just what not to do

Minimal: What we shouldn’t do Don’t steal, don’t kill, don’t lie

Better: What we should do (justice) Be fair, Be honest, Fulfill duties, work

hard

Best: What we could do to make things excellent for all of us…

Mutual of Omaha Project, Real Estate

Business can help create an excellent life Example of this mindset: Midland

National Life insurance mission:

"To make life better for individuals and families… to afford security, trust, superior value, and peace of mind to those we serve… to offer the best in financial resources and services.“

How does Business make life better? Table discussion (5 min)

How do you make life better for your community through your business?

What are positive things you do for the benefit of the many through your work?

Do you see these things you do for others as being ethical?

The Point is: Realize the good you do in society!

Businesses do have an effect on society and culture. Business is not just about making money.

Moral Psychology

WHY DO PEOPLE DO WRONG

THINGS?

Question: Why do Soccer mom’s sometimes drive like jerks?

Question: Why do people forge signatures and documents?

Why do people stretch or edit the truth, or exaggerate?

Moral Development: Why do people do unethical things? Why did the soccer mom drive like

a jerk? Why did my student cheat on the

exam? Why did people at Enron do

unethical things? Why do insurance professionals cut

corners?

Some reasons people do wrong: Ignorant In a hurry Thoughtless Didn’t plan ahead Financial difficulties Pressure from organization Not clear communication from management Lazy Want a quick buck They are a Bad evil wicked person

More Moral Psychology:

WHY DO PEOPLE DO THE RIGHT

THINGS?

Kohlberg’s theory of moral development Stage 1: Obedience and Punishment Stage 2: For self-benefit Stage 3: For sake of reputation (good

boy) Stage 4: Maintain Social order Stage 5: Contractual-Legalistic

orientation Stage 6: Conscience/Principle Orientation

moral dilemma In Europe, a woman was near death from a special kind of cancer.

There was one drug that the doctors thought might save her. It was a form of radium that a druggist in the same town had recently discovered. the drug was expensive to make, but the druggist was charging ten times what the drug cost him to make. He paid $400 for the radium and charged $4,000 for a small dose of the drug. The sick woman's husband, Heinz, went to everyone he knew to borrow the money and tried every legal means, but he could only get together about $2,000, which is half of what it cost. He told the druggist that his wife was dying, and asked him to sell it cheaper or let him pay later. But the druggist said, "No, I discovered the drug and I'm going to make money from if." So, having tried every legal means, Heinz gets desperate and considers breaking into the man's store to steal the drug for his wife.

Kohlberg’s theory of moral development Stage 1: Obedience and Punishment Stage 2: For self-benefit Stage 3: For sake of reputation (good

boy) Stage 4: Maintain Social order Stage 5: Contractual-Legalistic

orientation Stage 6: Conscience/Principle Orientation

Part 2: Ethical Principles, and how to use them

Brief explanation of the 5 classic ethical theories: Egoism: Social Contract Theory Utilitarianism Duty-Based Virtue Ethics

Egoism

People should always do what is in their own self-interest.

(ex: do what it takes to get repeat business)

Social Contract Theory

Make concessions to others, but try to get what you can

Obey the law, respect others because you want to be respected, etc

When driving, slow down near other schools, not just your own kid’s school

Utilitarian:Outcome-Based Do what benefits the greatest number

the most Jump on the grenade if it benefits the most. Do what is right if it will make for a better

society in the long run, even if you could have short term maximization right now

I can save my client on this insurance premium by under-reporting risks, but in the long run this will cause the insurance company and other clients to be at considerable risk.

We can lose our moral conscience and concern! “Capacity for the nobler feeling is in most

natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favourable to keeping that higher capacity in exercise.”

John Stuart Mill: “Men lose their high aspirations as they

lose their intellectual tastes, because they have not time or opportunity for indulging them; and they addict themselves to inferior pleasures, not because they deliberately prefer them, but because they are either the only ones to which they have access, or the only ones which they are any longer capable of enjoying.”

Principle/Duty-Based: Only act in a way that you could

make your act a universal law

Should I lie? Would I make lying a universal law? No. Then don’t lie!

Should I cheat on my taxes? Would I want everyone to do that? No. Then don’t!

Principle #2

Treat others always as an end, not as a means to an end.

Don’t treat checkout person as humanoid ATM

Don’t treat other drivers as obstacles in your path

Don’t treat customer as a just a means to money

Virtue Ethics/Nebraska Ethics

What is the GOOD life,

and how do we achieve that?

Aim for excellence Moderation/Balance

-- Vice Virtue ++Vice(Too little) (just right) (too much)

Coward Courage Foolhardy

Being Virtuous: Does depend on the situation

When to be witty Does depend on the individual

Child ‘Maestro’ Is something we must constantly

strive to upkeep, work at We can lose our touch!

It helps to have roll models: WWJD?

Virtues Honesty Integrity Responsibility Respect/Caring Truthfulness

Moral Principles for Living and Working

Banker Friend: “look in the mirror rule”

Showgirl from Las Vegas: Grandma rule

Golden Rule: do unto others… Silver Rule: do no harm… What rules do you use?....

Guiding Questions

Questions to help decide if the situation or decision has ethical dimensions

Is it legal but unethical? Is it necessary? Does it involve a core ethical

principle such as honesty, integrity, truthfulness, etc.?

Guiding Questions: Info Information gathering questions

Who are the stakeholders and what are their rights?

Consider the source, reliability, and accuracy of all relevant information.

Who should be involved in this decision?

Do I have enough information to make a sound ethical decision? If not, how do I get it?

Guiding Questions: Options Questions to help identify and evaluate

alternatives Am I rationalizing to justify what I want to

do? Am I using anyone for my own personal

gain? (Who will be injured and how) Are there conflicting loyalties to

stakeholders? What would result in the long run if

everyone did this?

Guiding Questions: Conclusion Questions that help in reaching a decision

Could I defend my position before the Board of Directors, the CEO, or the media?

What would ______________________ do? (Fill in the name of the best role model you know.)

Will this seem to be the right decision a year from now? Five years from mow?

Do I have the moral courage to take the more ethical course of action? (Am I willing to pay the price for my convictions?)

Case: Simple situation

In discussing a premium quote with a customer, you ask them to remind you how far they drive to work each way. “20 miles”, they say. “Oh, I put down 5-- I’d better change that”, you say. The client says, “No, lets just leave it”.

How do you handle this?

Final Thoughts

Usually, doing the right thing is clear, even if its not easy

We tend to cut corners for short-term apparently inconsequential issues, but this can come back to haunt us

Having Ethical Habits takes practice, and some thoughtfulness.

Summary: What have we covered?

What is Business Ethics? Some moral theories Moral Development Moral Decision Making

The End