CHAPTER 2

BUSINESS ETHICS

DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8th Ed.)

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

ETHICS AND MORALITY

The Law of Business must consider ethics and morality.

Ethics: guiding philosophy of a group, societal

values concerning right and wrong. Morals: principles of right and wrong measured by an individuals conscience. Ethics vary from society to society whereas individual morals remain fairly constant.
2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

ETHICAL THEORIES

Consequential and Non-consequential Principles.

Consequential: evaluate action by examining

the consequences produced by the action. Non-consequential: focus of the concept of duty rather than what is right or wrong.

2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

ETHICAL THEORIES

Consequential Ethics.
Egoism: rightness determined by consequences the act

produces for person performing the action. Holds one will act in a manner which produces greatest balance of good over bad for oneself. Utilitarianism: rightness determined by consequences the act produces for ones group. Holds one should act in such a manner which will, over time, produce most good over bad for ones group. Feminism: emphasizes attention be paid to the effect of decisions on individuals. Focuses on character traits.
2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

ETHICAL THEORIES

Non-Consequential Ethical Theories.

Kant and the Categorical Imperative: suggests certain

universal moral truths every person must follow in order to act morally and ethically. Imperative that one follow certain perfect truths. Rawls and the Veil of Ignorance: theory suggesting that rules of ethical behavior be created by persons who ignore their own characteristics and circumstances including gender, race, ethnicity, and/or religion.

2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

ETHICAL THEORIES

Other Theories:
Relativism: states that two people or two

societies may hold opposed ethical views to one another, and yet both may be correct. The Golden Rule: advises each person to do onto others as you would have others do unto you.

2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

A SYNTHESIS FOR ETHICAL DECISION MAKING

Individual and business factors to consider when charting an ethical protocol:

Short and long term impact on of the decision

on society and the organization. Who will be affected and to what degree by the decision. Whether the decision and subsequent ethical protocol is compatible with the law.
2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

A SYNTHESIS FOR ETHICAL DECISION MAKING

Factors considered when making a decision:

The obligations that arise from organizational

relationships. The ideals involved in any decisions that are made. The effects or consequences of alternative actions.
2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

GAME THEORY OF BUSINESS ETHICS

Business is an Amoral Institution: originally held business to be amoral meaning they could not act morally or immorally as they were not natural persons. The Game Theory: operating a business is like playing a game. No longer practical as government now establish the rules (legal regulations) for business.
2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

SOCIAL CONTRACT THEORY

Holds that businesses owe duties to society as society allows business to exist. Social Contract Theory considers:
The Changing Social Environment. Problems with Business Ethics: no fixed

guidelines to follow and no formal code of ethics that a business should follow.

The Human Factor. The Legal Aspect.

10

2004 West Legal Studies in Business A Division of Thomson Learning

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

MULTINATIONAL ETHICS

Global Competition and Marketing Opportunities.

Demand business consider social values in

other countries where firms do business.

2004 West Legal Studies in Business A Division of Thomson Learning

11

BUSINESS LAW: Cases & Principles

Davidson Knowles Forsythe 8th Ed.

RECOMMENDATION FOR BUSINESS

Create framework for business ethics:

Adopt synthesis approach to resolve ethical issues. Consider public image and consequences of actions. Adapt ethical standards as rapid change is constant in

business. Work with government rather than against Will not be easy but alternative is increased regulation and public mistrust.
2004 West Legal Studies in Business A Division of Thomson Learning

12