Fundamentals of Business Law
Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.
ROGER LeROY MILLER Institute for University Studies Arlington, Texas
GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin
Learning Objectives • What is business ethics and why is it important? • How can business leaders encourage their companies to act ethically? • How do duty based ethical standards differ from outcome-based ethical standards?
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Learning Objectives • What are six guidelines that an employer can use to evaluate whether his or her actions are ethical? • What types of ethical issues might arise in the context of international business transactions?
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Business Ethics • Ethics is the study of right and wrong behavior; whether an action is fair, right or just. • In business, ethical decisions are the application of moral and ethical principles to the marketplace and workplace.
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Why is Business Ethics So Important? • Directors and Officers owe a complex set of ethical duties to the company, shareholders, customers, community, employees, and suppliers. • When these duties conflict, ethical dilemmas are created.
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Importance of Ethical Leadership • Attitude of Top Management. – Management must be committed to creating an ethical company. – Management must set realistic goals for production. – Management must deal with unethical issues quickly
• (Unethical) Behavior of Owners and Managers. – CASE 3.1 Baum v. Blue Moon Ventures, LLC (5th Circuit, 2008). Copyright © 2010 South-Western
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Approaches to Ethical Reasoning • Duty Based Ethics - derived from religious and philosophical principles. – Religious Ethical Standards – Kantian Ethics – Rights Principles
• Outcome-Based Ethics - seek to ensure a given outcome. – Utilitarianism. Copyright © 2010 South-Western
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Religious Ethical Standards • The rightness or wrongness of an action is usually judged according to its conformity to an absolute rule that commands a particular form of behavior. • The motive of the actor is irrelevant in judging the rightness or the wrongness of the action. • These rules often involve an element of compassion. Copyright © 2010 South-Western
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Kantian Ethics • Premised on the belief that general guiding principles for moral behavior can be derived from human nature. • The categorical imperative is a central postulate of Kantian ethics. – The rightness or wrongness of an action is judged by estimating the consequences that would follow if everyone in a society performed the act under consideration. Copyright © 2010 South-Western
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Rights Principle • This principle derives from the belief that every duty gives rise to a corresponding right. • The belief in fundamental rights is a deeply embedded feature of Western culture. • The ethicality of an action is judged by how the consequences of the action will affect the rights of others. Copyright © 2010 South-Western
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Utilitarianism • An action is ethical based on whether it produces the greatest good for the greatest number of people upon which it has an effect. • A cost-benefit analysis must be performed to determine the effects of competing alternatives on the persons affected. • The best alternative is the one that produces the greatest good for the greatest number. Copyright © 2010 South-Western
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Corporate Social Responsibility • Corporations should be interested in impact on civil rights, environment, consumer protection, employee safety and welfare. – Stakeholder Approach. – Corporate Citizenship. – CASE 3.2 Fog Cutter Capital Group, Inc. v. Securities Exchange Commission (2007). Copyright © 2010 South-Western
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Creating Ethical Codes of Conduct • Codes Must be Well-Written. • Companies Should Provide Ethics Training to Employees. • Sarbanes-Oxley Act and Web-Based Reporting. – SO requires confidential ethics reporting systems to “raise red flags” about practices.
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How the Law Influences Business Ethics • Moral Minimum: Legal compliance is the moral (ethical) minimum. – Simply obeying the law does not necessarily make the business practice ethical. – What about Excessive Executive Pay? – Determining the Legality of a Given Action. Copyright © 2010 South-Western
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How the Law Influences Business Ethics • The Law Cannot Control All Business Behavior. – Breaking the Law: Backdating Stock Options. – When is Backdating Illegal? – The consequences of Illegal Backdating. – Misleading Regulators: Oxycontin.
• “Gray Areas” in the Law. – CASE 3.3 Guin v. Brazos Higher Education Service Corp. (Minnesota, 2006). Copyright © 2010 South-Western
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Making Ethical Business Decisions • Six Guidelines: – 1. – 2. – 3. – 4. – 5. – 6.
The Law. Rules and Procedures. Values. Conscience. Promises. Heroes.
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Business Ethics on A Global Level • American companies must be trained in cross-cultural business practices. • Monitoring the Employment Practices of Foreign Suppliers. – Corporate Watch groups can disseminate information instantly around world.
• Foreign Corrupt Practices Act. – Bribes and Accounting Practices. Copyright © 2010 South-Western
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