CHAPTER ONE: WHY STUDY ETHICS? McGraw-Hill©2009 by the McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER ONE: WHY STUDY ETHICS?

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Identify reasons why the study of ethics is important

Explain the nature and meaning of business ethics

Explain the difference between ethical values and other values

Clarify the difference between ethics and the law

Describe the distinction between ethics and ethos

Introduce the distinction between personal morality, virtues and social ethics

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State whether or not you believe the man’s actions, in whole or in part, are ethically defensible.

Was it right for the man to steal the bread and milk?

How about the jacket? If the man finds money in the jacket

pocket, and he’s weak with hunger, can he buy food for himself with the money?

What is the man did not have a child? Would your view change?

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Is it an oxymoron like “jumbo-shrimp”?

Is it a discipline of sentimentality and personal opinion?

Who’s to say what is right and what is wrong?

Is there a place for ethics in business?

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Another way of saying a corporation has a set of identifiable values.

But there is no “right” set of core values.

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Often described as the single-most sweeping legislation aimed at public corporations since the great depression of the 1930s, the Sarbanes-Oxley Act of 2002 (SARBOX) is a powerful juggernaut steered toward corporate financial accountability. For without The Sarbanes-Oxley Act, many of the unscrupulous corporate actions that robbed trusting investors of millions (and possibly billions) of dollars, could go both unnoticed and uncontrolled.

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Finding its source from the egregious corporate scandals of the late 1990s and early 2000s, SARBOX maintains its presence as a primary gatekeeper for the public’s trust in the companies where they invest their hard-earned wages.

Sarbanes Oxley is necessary law designed to keep public companies honest with their financial reporting. No longer can dishonest corporate executives or fiscal managers load their books with false or misleading financial information. The investing public has once again been imparted the sense of security and integrity they deserve with the passing of The Sarbanes Oxley Act.

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Sometimes referred to as the Public Company Accounting Reform and Investor Protection Act of 2002, SARBOX is geared toward accountability. The act is broken down into 11 sections each with subsections. With regard to compliance, there is no option. ALL publicly-traded corporations MUST COMPLY with the mandates of the act.

Although consisting of 11 sections, the primary sections requiring the greatest level of compliance and delegation of resources are sections 302 and 404.

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Under section 302 of SARBOX, a set of internal guidelines are mandated to be developed and implemented; thus ensuring proper and accurate financial disclosure of all corporate activity. After these internal protocols have been established, the responsible, signing officers must acknowledge their accountability for so doing and in effect creating a powerful benchmark of culpability.

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Often considered the most difficult section for compliance, section 404 mandates corporate management, along with an external auditor, to provide accurate information (in the form of an “internal control report”) regarding the efficacy of the company’s internal auditing and reporting controls.

Due to the enormity of this task for most corporations, section 404 of SARBOX is the most costly and time-consuming portion regarding proper compliance and therefore the root of most contentiousness and disagreement.

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The Sarbanes Oxley Act was passed with an overwhelming majority (334-90 in the House and 99-0 in the Senate) of the United States Congress in July, 2002. The legislation establishes a welcome set of ethical standards and financial accountability for all publicly-traded US (and foreign) corporations doing business in the United States.

The primary goal of the Act is to restore public trust in the American corporate and financial-reporting system thus increasing current and future investment.

SARBOX compliance need not be a burden. If handled correctly and efficiently, the benefits far outweigh the costs.

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The Law: In 2002, Congress passed the Sarbanes-Oxley Act

Financial risksReputation and competitive

advantageConsumer boycottsEfficiency and effectivenessEmployee trust, loyalty,

commitment and initiativeMcGraw-Hill

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2003: Deloitte polled 5000 directors of the top 4000 publicly traded companies and reported that 98 percent believed ethics and compliance programs are essential to corporate governance.

80% of those surveyed had developed codes of ethics beyond those required by Sarbanes-Oxley

90% included statements concerning the company’s obligation to its stakeholders.

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If business managers see the need to focus on ethical behavior, so should business students

Preparation for career in contemporary business

Consumers are affected by decisions made by businesses

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Have you experienced any unethical issues at work? If so, did you do anything about it? Why or why not?

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How do Core Values support a company’s vision and business practices?

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Those beliefs or standards that incline us to act or to choose in one way rather than another

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Could you work at Philip Morris if you did not smoke?

Could you support and work for a company that produces a product/service that many are against?

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A company’s core values are those beliefs and principles that provide the ultimate guide in the company’s decision-making

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December 11, 1995 – A fire destroys most of Malden Mills, the manufacturer of Polartec.

The last major textile manufacturer in town with 2,400 employees; community life’s blood

Malden Mills provides fabric to L.L. Bean, Land’s End, J. Crew and Eddie Bauer

Aaron Feuerstein, the owner pledged to rebuild the plant, keep jobs in the community and pay his employees until work resumes.

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Factory was rebuilt and reopened in one year.

Employees came back to work.The community seemed to recover.Malden Mills filed for bankruptcy

protection.Eventually controlled by creditors.Remaining employees voted to

authorize a strike in December 2004.

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Built to Last: Successful Habits of Visionary Companies by James Collins and Jerry Porras Key finding: Exceptional and enduring

companies place great emphasis on a set of core values

These core values are essential and enduring tenets defining the company, and not to be compromised for financial gain.

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What are the ends that our core values serve?

Financial values serve monetary ends.

Religious values serve spiritual ends.

Aesthetic values serve the end of Beauty.

What ends are served by ethics?McGraw-Hill

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Ethical values serve the ends of human well-being.

The well-being promoted by ethical values is not personal and selfish well-being.

No one person’s well-being is to be counted as more worthy or valuable than any other’s.

Ethical values promote human well-being in an impartial way.

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People disagree about what ethics commits us to and what ends are served by ethical values.

Ethical values can conflict, and may result in serious illness and death to others.

So how do you decide if a company is an ethical company?

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IBM Johnson & Johnson Hewlett Packard Procter and Gamble Wal-Mart Merck Motorola Sony General Electric

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Law consists of rules that regulate the conduct of individuals, businesses, and other organizations within society. It is intended to protect persons and their property from unwanted interference from others.

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Keeping the peaceShaping moral standards Promoting social justice Maintaining the status quo

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Facilitating orderly changeFacilitating planningProviding a basis for

compromise Maximizing individual freedom

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Equal ProtectionRoe v. WadeRight to Die/Euthanasia/Assisted

SuicideAffordable Care ActGay MarriageRight to Bear ArmsDeath Penalty

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Fairness The American legal system is one

of the most comprehensive, fair, and democratic systems of law ever developed and enforced.

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The idea that laws and legal proceedings must be fair. The Constitution guarantees that the government cannot take away a person's basic rights to 'life, liberty or property, without due process of law.' Courts have issued numerous rulings about what this means in particular cases.

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Due process is best defined in one word--fairness. Throughout the U.S.'s history, its constitutions, statutes and case law have provided standards for fair treatment of citizens by federal, state and local governments. These standards are known as due process. When a person is treated unfairly by the government, including the courts, he is said to have been deprived of or denied due process.

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Can a business be unethical but still following law?

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Compliance with the law will prove insufficient for ethically responsible businesses.

The Law is rife with ambiguity. Many acts are not illegal until a court rules that they are.

Court cases demonstrate that you cannot always rely on the law to decide what is right or wrong.

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Business ethics refers to those values, standards and principles that operate within business.

Business ethics is also an academic discipline that studies those standards, values and principles while seeking to articulate and defend the ones that ought or should operate in business.

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How can the study of ethics improve your performance in your current and future business positions?

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There is a growing body of literature in business ethics about the right ways to teach and learn business ethics.

There are a set of principles, standards, concepts, and values common to business ethics.

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From the time of Aristotle we have noticed a discontinuity between judging some act as right and behaving rightly.

Knowing what is right is different from doing what is right.

People vary in strength of character and motivation and fortitude.

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To treat students as active learners To engage students in an active process

of thinking and questioning To allow students to think for

themselves To deal with the mess of relativistic

conclusions

The unexamined life is not worth living (Socrates).

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The process of ethical reasoning must be emphasized.

Reasoning is distinct from answers. Begin with an accurate and fair

account of the facts from all “sides”. Be objective and open-minded. Analyze each issue fully and

rigorously.

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The word “ethics” is derived from the Greek ethos, meaning “customary” or “conventional.”

To be ethical in the sense of ethos is to conform to what is typically done, to obey the conventions and rules of one’s society and religion.

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Denies that simple conformity and obedience are the best guides to living

Rejects authority as the source of ethics

Defends the use of reason as the foundation of ethics

Seeks a reasoned analysis of custom and a reasoned defense of how we ought to live

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Distinguishes what people do value from what people should value

Requires we stand back, abstract ourselves from what is typically done and reflect upon whether or not what is done, should be done.

The difference between what is valued and what ought to be valued is the difference between ethos and ethics.

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A branch of philosophical ethics

Reflect: In what ways do the practices and decisions made within business promote or undermine human well-being?

How ought we to live?

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Morality: How should I live my life? How should I act? What should I do? What kind of person should I become?

Virtues: character traits that constitute a life worth living

Social Ethics: How ought society be structured? How ought we live together?

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Humans can not avoid responsibility for something they have created or contributed to.

Business institutions have a tremendous influence on human lives and the quality of human life.

As business people we face particular business decisions about our corporations, but as citizens we have to decide whether or not to regulate those businesses for the public good.

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Managerial ethics: What should a business manager do in various situations?

The types of questions asked will vary from perspective to perspective.

All decisions faced by business managers, from finance to marketing to ethics and human resources, exist in a social and legal context.

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A wide range of people can be adversely affected by the decision made within contemporary business.

There are many roles to play within the economic system to insure integrity of that system and to prevent fraud and abuse.

Business operates within a social context and has duties to a wide range of people beyond those people who own a company’s stock.

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Describe several reasons why ethics is relevant to business? Can a “good business” be an unethical business?

What are values? What is the difference between ethical values and other types of values? What is the difference between “value” when used as a verb, and “value” when used as a noun?

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What is the difference between “ethics” and “ethos”?

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Other than business managers and owners, which other constituencies might have a stake in business decisions?

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