Managerial Ethics and Decision Making in Business

What is ethics?

A brand of philosophy that focuses on moral issues.

What is managerial ethics?

The study of morality and standards of business conduct.

Ethic Dilemma VS. Ethical Lapses

E.D. - Having to make a choice between two competing but arguably valid options.

E.L. - Decision that is contrary to an individual's beliefs and policies of the company.

Nike & the Sweatshop Labor Controversy:

• Increased the minimum age at factories
• Adopted U.S. Clean Air regulations
• Disclosed the locations and permitted independent monitoring
• Offered micro loans to workers
• Helped form fair labor association to monitor overseas working conditions
• Built schools and health clinics in worker communities

Basic Approaches to ethical decision making

• Utilitarian: consequences
• Moral Rights: examination of moral standing
• Universal: applies to all people
• Justice Approach: equitability the costs and benefits of actions are distributed

What is Moral Intensity & why does it matter:

The degree to which people see an issue as an ethical one; both to anticipate the moral intensity of an issue to diagnose the reasons for differing views people have about that intensity.

Factors influencing Moral Intensity:

1. Magnitude of the consequences
2. Social consensus
3. Probability of effect
4. Temporal immediacy
5. Proximity
6. Concentration of effect

Efficiency VS. Social Responsibility

EFF: The concept that a manager's responsibility is to maximize profits for the owners of the business.
SR: Corporate social responsibility is concerned with the obligation corporations have to constituencies and the nature and extent of those obligations.

Shareholders vs. Stakeholders

Shareholders: An owner of shares in a company.
Stakeholder: Any individual or group that is impacted by or has an interest in a given decision or project.
Primary stakeholder: Are people or groups formally linked to the organization (employees).
Secondary: Not formally linked but affected by its behavior nonetheless (communities).

How firms respond to pressures for social responsibility:

• Defenders: Fight efforts that they see as resulting in greater restrictions of their ability to maximize profits
• Accommodators: Less aggressive in fighting but also change when legally compelled
• Reactors: Feels that pressure from constituencies is sufficient such that nonresponsiveness could have negative economic impact on the firm
• Anticipators: Obligated to a variety of stakeholders

Ways in which companies promote ethical conduct:

• Code of ethical conduct: A formal settlement that outlines the types of behavior that are and are not acceptable
• Whistleblower: An employee who discloses illegal or unethical conduct on the part of others in the organization.

Ways government promote ethical behavior:

Foreign Corrupt Practices Act (FCPA): Law prohibiting employees of the US firms from corrupting the actions of foreign officials, politicians, or candidates for office.

What is corruption?

The use of public office for private gain (bribery, blackmail, or influence peddling).

How does corruption affect countries and companies?

Economic Impacts - Distorts markets, erodes business confidences, reduces trade, investment, and economic growth.
Political Impact - Undermines trust in government and erodes democratic processes.
Social impact - Reduces resources available for basic social needs.

Foreign Corrupt Practices Act

Law prohibits firm from paying money to any person they might suspect might be using it to bribe.
Penalty: Hefty fine and jail time.

Bribes VS. Facilitating Payments

Bribery: Involves collusion and breach of trust.
Ex: Giving a government official an item of value to influence or in results in a personal benefit.
Facilitating Payments - Funds paid to foreign officials to expedite the performance.
- PERMISSIBLE under the FCPA.
- Distinction is not always a clear cut.