Final Business Ethics: Dr. T Class

Front 1

•Before 1960, US went through several phases of questioning the concept of capitalism.
•1920s – Progressive Movement attempted to provide citizens w/ a “living wage” and businesses were asked to check unwarranted price increases that would hurt a family’s living wage.
o“Living Wage” – Income sufficient for Education, recreation, health and retirement.
•1930s – New Deal, blamed business for country’s economic woes. Business was asked to work with gov’t to raise family income.
oFDR felt that the way to cope w/ unemployment ways to create WPA – Works Progress Administration. He created programs that both helped the American people and created an infrastructure that is still used today.
Road ways, Hoover Dam, and National Parks
•1950s – Fair Deal by Harry S. Truman – defined matters such as civil rights and environmental responsibility.
•Before 1960, most ethical issues were discussed within domain of religion or philosophy

Back 1

Before 1960

Front 2

•American society turned to causes.
•Anti-business attitude developed as many critics attacked the interests that controlled the economic and political sides of society-the military industrial impact. – Vietnam conflict created anti-business attitude – believed that big business profited from war.
•Decay of inner cities and ecological problems, ie pollution and toxic wastes.
•Rise of consumerism
•JFK outlined “Consumers’ Bill of Rights”
o Right to safety
o Right to choose
o Right to be heard
•1965-Ralph Nadar – criticized auto industry (GM) for putting profit and style ahead of safety.
•Fought for automakers to require seat belts, padded dashboards, stronger door latches, head restraints, shatterproof windshields, and collapsible steering columns

Back 2

1960s – Rise of Social Issues

Front 3

•Ethics began to develop as a field of study.
•Professors began to teach/write about corporate social responsibility – organization’s obligation to maximize positive impact on stakeholders and minimize negative impact.
•Nixon’s Watergate scandal focused interest on ethics in government.
•Jimmy Carter - Foreign Corrupt Practices Act was passed making it illegal to bribe gov’t officials of other countries.
•Issues emerged such as bribery, deceptive advertising, price collusion, product safety, and the environment.

Back 3

1970s – Business Ethics as Emerging Field

Front 4

•Business ethics acknowledged as field of study. – 500 courses in bus. Ethics offered in colleges around the country.
•Ethics organizations grew to include thousands of members.
•Business ethics was major concern w/ leading companies (GE, GM, S.C. Johnson & Son)
•Defense Industry Initiative on Business Ethics and Conduct (DII)
o Guide corporate support for ethical conduct
o Drafted principles for guiding business ethics and conduct.
o 50 members
•Reagan/Bush era – self-regulation, not regulation by gov’t, was in public’s interest.
•Rules of business ethics were changing at phenomenal rate b/c of less regulation.

Back 4

1980s - Consolidation

Front 5

•Clinton – continued support of self-regulation and free trade.
•Health-related social issues (teenage smoking) addressed.
o Restricting cigarette advertising, banning vending machine sales, ending use of cigarette logos at sporting events.
•Federal Sentencing Guidelines for Organizations (FSGO)
o Reward organizations for taking action to prevent misconduct (developing ethical compliance programs)
o If company lacks effective program and employees break the law, it can incur severe penalties
o Company must develop corporate values, enforce own code of ethics, and strive to prevent misconduct.

Back 5

1990s – Institutionalization of Business Ethics

Front 6

•Loss of confidence in financial reporting and corporate ethics b/c of instances such as Tyco, Enron, WorldCom, Halliburton…
o Sarbanes-Oxley Act – 2002 Congress passed act that made securities fraud a criminal offense and stiffened penalties for corporate fraud.
 Requires corporations to establish code of ethics for financial reporting.
 Requires top executives to sign off firm’s financial reports, and risk jail time and fines if they represent their companies’ financial position.
 Requires executives to disclose stock sales immediately and prohibits companies from giving loans to top executives.
•Current trend is away from legally based ethical initiatives in orgs to cultural or integrity-based initiatives that make ethics a part of core organizational values.

Back 6

2000s – A New Focus

Front 7

Teleology

Back 7

Greek for “end” or “purpose”

Front 8

•Moral philosophies in which act considered morally right or acceptable if it produces some desired result (ie…pleasure, knowledge, career growth, wealth, celebrity.)
•Assess moral worth of a behavior by looking at its consequences – consequentialism
•Considers the ends associated with any action.

Back 8

Teleology

Front 9

2 Teleogical philosophies that guide decision making include

Back 9

Egoism & Utilitarianism

Front 10

defines right or acceptable behavior in terms of consequences of individual.
 Believe that you should make decisions that maximize own self-interest.
 Ex: contractors taking advantage of elderly victims of hurricane Katrina.

Back 10

Egoism

Front 11

2 types of Egoism

Back 11

Hedonism and Enlightened Egoist

Front 12

- extreme form of egoism
•Right or acceptable behavior as that which maximizes personal pleasure.
•Quantitative hedonists – believe that more pleasure is better
•Qualitative hedonists– it is possible to get too much of a good thing (pleasure)
•Pluralists (non-hedonists)– pleasure is one aspect of “the good life”

o View things like education, knowledge, or helping others, as contributing to own self-interest.

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Hedonism

Front 13

put self-interest first, but allow for well-being of others as long as own self interest doesn’t suffer
Ex: McDonalds, IBM do charitable-type work. (allow benefit of others but still get something out of it.

Back 13

Enlightened Egoists

Front 14

– concerned with consequences like egoism—but seeks greatest good for the greatest number of people.
----Make decisions that achieve the greatest benefit for all those affected by a
decision

Back 14

Utilitarianism

Front 15

2 Types of Utalitarians

Back 15

Rule Utilitarians and Act Utilitarians

Front 16

“rules should determine which actions produce greatest value”
EX: Bribery is wrong

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Rule Utilitarians

Front 17

– Looks at act, rather than rule, to determine greatest utility for greatest utility.
Rules such as “Bribery is wrong” serve only as guideline.
---They agree that bribery is wrong, but not because there is anything wrong with bribery, but because total amount of utility decreases when one person’s interest is placed ahead of those in a society.

Back 17

Act Utilitarians

Front 18

Greek: Deon - obligation or duty) Greek for “ethics”)

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Deontology

Front 19

•Focus on rights of people and on intentions associated with particular behavior, rather than consequences
•Equal respect must be given to all persons
•There are some things what we should not do, even to maximize utility.
•Considers the means associated with any action.
•EX: Deontologists consider it wrong to kill an innocent person, no matter how much greater social utility may result from doing so---b/c such an action may infringe on that person’s rights as an individual.
o (Whereas a utilitarian may consider it acceptable if that action created some greater benefit.)

Back 19

Deontology

Front 20

•Rule Deontologists – “conformity to general moral principles determines whether the action or behavior is ethical.
oEX: Golden Rule
oMade up of:
Basic rights of individual
Rules of Conduct that should govern society
•Act Deontologists – Actions are the proper basis on which to judge morality or ethicalness.
oPeople just know that certain acts are right and some are wrong.
oPerson should use equity, fairness, and impartiality when making and enforcing decisions

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2 types of Deontologist

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“conformity to general moral principles determines whether the action or behavior is ethical.
o EX: Golden Rule
o Made up of:
 Basic rights of individual
 Rules of Conduct that should govern society

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Rule Deontologists

Front 22

Actions are the proper basis on which to judge morality or ethicalness.
o People just know that certain acts are right and some are wrong.
o Person should use equity, fairness, and impartiality when making and enforcing decisions

Back 22

Act Deontologists

Front 23

1. Punishment and Obedience
• Defines right as literal obedience to rules and authority.
• Makes decisions on basis of specific rules or authority figures
• Right and wrong associated w/ a person who has the power
• Usually associated w/ small children, but not always

2. Individual Instrumental Purpose and Exchange (Fairness to Oneself)
• Defines right as which serves his/her own needs
• Evaluates behavior on its fairness to him or her.
• Stage of reciprocity – “you scratch my back, I scratch yours”
• EX: salesperson in US works at company where gift giving is against company policy. That salesperson has to go to foreign company for work. Decides that not giving a gift may put him in a disadvantage b/c gifts are considered part of a person’s pay in that country’s culture.
3. Mutual Interpersonal Expectations, Relationships, & Conformity (Emphasizes others
rather than themselves)
• Emphasizes others rather than themselves
• Considers well being of others
• Ethical motivation still derived from obedience to rules
• EX: Production Manager obeys upper managements order to speed up an assembly line if he believed that it would generate more profit for the company and thus save employee jobs. He considers is own well-being in obeying upper-management’s order, but also puts himself in upper-mgt and employee’s shoes.

4. Social System and Conscience Maintenance
• Right is determined by considering one’s duty to society, not just to other people
• Focal points include: duty, respect for authority, and maintaining social order
• EX: Managers consider it a duty to society to protect privacy and refrain from monitoring employee conversations.

5. Prior Rights, Social Contract, and Utility
• Concern for upholding the basic rights, values, & legal contracts of society
• EX: President of a company decides to establish an ethics program b/c it will provide a buffer against legal problems and the firm is perceived as responsible contributor to society

6. Universal Ethical Principles
• Right is determined by universal ethical principles that everyone should follow
• Justice and equality are deemed universal
• More concerned with social ethical issues and not rely on business organization for ethical direction
• EX: businessperson argues for discontinuing a product that has caused death and injury b/c the right to life makes killing wrong, regardless of the reason. Thus, company profits not justification for continued sale of product.

Back 23

Discuss Kohlberg’s six steps of cognitive moral development.

Front 24

people make decisions in similar ethical situations b/c they are in different stages of development

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Kohberg’s Model of Cognitive Moral Development

Front 25

• People continue to change their decision priorities after their formative years.
• As people progress through stages of cognitive moral development, they will likely change their values and ethical behavior
• Time, education, and experience can affect cognitive moral development
• An individual’s moral development can be influenced by corporate culture, especially ethics training.

Back 25

what conclusions do Kohlberg’s model suggest

Front 26

decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels of the organization
• Stress formal rules, policies, and procedures, backed up with elaborate control systems.
• Suited for organizations who make high risk decisions and whose lower-level managers are not highly skilled in decision-making.
• Suited for organizations where production process is routine and efficiency is important
• Each worker knows his job and what is expected.

Back 26

Centralized organizations

Front 27

, decision-making authority is delegated as far down the chain of command as possible.
• Relatively few formal rules, and coordination and control are usually informal and personal
• Adaptability and early recognition of external change. This allows managers to react quickly to changes in the environment.

Back 27

Decentralized organizations

Front 28

Ethical issues that may arise in centralized organizations

Back 28

• Blame shifting or “scapegoating”—people may try to transfer blame for their actions to others who are not responsible.
• Specialization and significant division of labor may keep employees from understanding how their actions affect the overall organization.
• Because there is very little upward communication, top-level managers may not be aware of problems and unethical activity.
• Poor communication between a company and its subcontractors may cause problems.

Front 29

Ethical issues that may arise in decentralized organizations:

Back 29

• Difficulty in responding quickly to changes in policy & procedures established by top management
• Employees have extensive decision-making authority

Front 30

an assembly of individuals that has an organized structure accepted explicitly
by the group.

Back 30

Formal Groups

Front 31

Discuss the ethical issues that may arise in formal groups.

Back 31

Formal groups—Committees, Work Groups, and Teams
 Committees – formal group of individuals assigned to a specific task
• Decisions are to some extent legitimized b/c of agreement of majority rule.
• Minority views on ethical issues pushed aside through majority’s authority.
• Bring diverse values into decision making process, which may yield greater number of alternatives considered.
• **Take longer to reach a decision than an individual would**
• Tend to be more conservative than those made by individuals and may be based on unnecessary compromise rather than on identifying best alternative.
• Lack of individual responsibility
• Because of diverse structure of group, members not committed or willing to assume responsibility for “group” decision.
• Committees misused if established for legitimizing MGT’s ethical standards on an issue.
o EX: committees assembled for political purposes – to make a symbolic decision on event occurred within company.
 Manager selects committee who will produce predetermined outcome org doesn’t resolve issues in long run.
• Committee members fail to understand their role or function.
o Apply own personal ethics to complex issues, resolving ethical isues may be difficult.
o Committee experiences conflict, b/c most people’s personal ethics differ.
o Enforce personal beliefs instead of organization’s standards on ethical issues.

 Work Groups– subdivide duties within specific functional area of a company
• EX: Auto assembly line – one work group installs seats and, while another group installs dash instruments.
• Production supervisors specialize in specific area and provide expert advice to work groups.

 Teams – Bring together functional expertise of employees from several different areas of
organization
• EX: Finance, Marketing, and Production – single project – ie developing new product.
• Team members come from different functional areas.
o Each member has particular role and has limited interaction with other members
o Members encounter different ethical issues in own area and may bring different viewpoints when team faces issue.
 EX: Production Quality Control employee wants side-impact air bags to be standard on all cars, while Marketing member of the team may say cost to add air bags would force company to raise prices beyond customer’s reach.
---Then production employee says it is unethical to not include safety feature that could save lives.
o Persons in legitimate power are in a position to influence ethics-related activities.

Front 32

-- set of conditions that limit unfavorable behavior or reward favorable behavior.
Rewards may be:
• Internal
• External

Unethical person who is rewarded / not punished –is likely to continue to act unethically.
Whereas a person who is punished / not rewarded for behaving unethically—is less likely to repeat behavior.

Conflict occurs when---there is a question as to which goals/values take precedence in a situation:
• Those of the individual
• Those of the organization
• Those of society

Back 32

Opportunity

Front 33

-arises when person’s philosophies or methods for reaching desired goal differ from those of organization.
(Especially for new employees who have not been socialized into the organization)
• Persons whose values do not coincide w/ those of others in their profession might leave the company.
• EX: Person who doesn’t believe in drinking gets hired on to a company where after-work meetings are at a bar occur regularly.

Back 33

Personal-organizational conflict

Front 34

----develops when person’s values differ from those of society.
• When society feels that a particular activity is unethical yet legal, new laws may be enacted to help redefine the minimum level of ethical behavior.

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Personal-societal conflict

Front 35

occurs when norms and values of organization are opposed to those of society in general.
• Marketing of new products often brings business into conflict with society, especially when those products raise moral issues for certain groups.
• EX: Advertising violent video games and movies deliberately to children as young as 12.

Back 35

Organizational-societal conflict

Front 36

Discuss the role of opportunity and conflict in ethical decision-making

Back 36

Opportunity and conflict both play important roles in influencing ethical decision-making.

When opportunity presents itself, ethical dilemma may arise regarding exploitation of that company.

EX: Low cost labor in developing countries represents a business opportunity; it conflicts with paying low wages to workers. ----Wal-Mart clothing sewn in Honduras at low wages and close to what it costs to survive in that country. These workers have never heard of Wal-Mart Code of Conduct. ----Wal-Mart ranked one of most admired companies in Fortune magazine.


Both opportunity and conflict affect ethical decisions in interpersonal relations.

Opportunity -- set of conditions that limit unfavorable behavior or reward favorable behavior.
Rewards may be:
• Internal
• External

Unethical person who is rewarded / not punished –is likely to continue to act unethically.
Whereas a person who is punished / not rewarded for behaving unethically—is less likely to repeat behavior.

Conflict occurs when---there is a question as to which goals/values take precedence in a situation:
• Those of the individual
• Those of the organization
• Those of society

Personal-organizational conflict----arises when person’s philosophies or methods for reaching desired goal differ from those of organization.
(Especially for new employees who have not been socialized into the organization)
• Persons whose values do not coincide w/ those of others in their profession might leave the company.
• EX: Person who doesn’t believe in drinking gets hired on to a company where after-work meetings are at a bar occur regularly.

Personal-societal conflict----develops when person’s values differ from those of society.
• When society feels that a particular activity is unethical yet legal, new laws may be enacted to help redefine the minimum level of ethical behavior.
• EX:

Organizational-societal conflict----occurs when norms and values of organization are opposed to those of society in general.
• Marketing of new products often brings business into conflict with society, especially when those products raise moral issues for certain groups.
• EX: Advertising violent video games and movies deliberately to children as young as 12.

Front 37

– comprehensive, consists of general and inspirational statements that serve as basis for rules of conduct.
o Specifies methods for reporting violations, disciplinary action, and a structure of due process.
o (Explains what an organization expects of its employees.)
---Without uniform policies and standards, employees have difficulty determining what is acceptable behavior in the company

Back 37

Code of Ethics

Front 38

– manages organizations’ ethics and legal compliance programs.
o Assesses needs and risks that ethics program must address
o Developing/distributing code of conduct or ethics
o Conducting training programs for employees
o Making sure that company is in compliance w/ gov’t regulations
o Answers questions about ethical issues.

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Ethics officer

Front 39

2.High-level personnel who are responsible for ethics compliance programs.

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Ethics officer

Front 40

1. Standards and procedures, (Code of Ethics) that are reasonably capable of detecting and preventing misconduct

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Code of Ethics

Front 41

o Risk Assessment
o Self-Monitor Process
o Deterrence—aggressively work to deter unethical behavior

Back 41

3 Objectives of the Federal Sentencing Guidelines

Front 42

Key to successful ethics training

Back 42

 Help employees identify ethical dimensions of a business decision
 Give employees a means to address ethical issues
 Help employees understand the ambiguity inherent in ethical situations

Front 43

Establishment of systems to monitor, audit, and report misconduct

Back 43

• Role playing exercises to view how you handle ethical dilemmas
• Questionnaires --- employees fill out to view their ethical perceptions
• Internal systems for reporting misconduct---help lines or help desks to give support for employee ethical concerns

Front 44

credit for having effective compliance programs can reduce fines

Back 44

Federal Sentencing Guidelines for Organizations

Front 45

Describe the minimum requirements for ethical compliance programs

Back 45

1. Standards and procedures, (Code of Ethics) that are reasonably capable of detecting and preventing misconduct.
• Code of Ethics – comprehensive, consists of general and inspirational statements that serve as basis for rules of conduct.
o Specifies methods for reporting violations, disciplinary action, and a structure of due process.
o (Explains what an organization expects of its employees.)
---Without uniform policies and standards, employees have difficulty determining what is acceptable behavior in the company.

2. High-level personnel who are responsible for ethics compliance programs.
• Ethics officer – manages organizations’ ethics and legal compliance programs.
o Assesses needs and risks that ethics program must address
o Developing/distributing code of conduct or ethics
o Conducting training programs for employees
o Making sure that company is in compliance w/ gov’t regulations
o Answers questions about ethical issues.

3. No substantial discretionary authority given to individuals with a tendency for misconduct.
• EX: Putting someone who has the tendency to lie about the amount of actual hours worked in a position where his/her hours are more flexible.

4. Standards and procedures communicated effectively via ethics training programs
• Keys to successful ethics training:
 Help employees identify ethical dimensions of a business decision
 Give employees a means to address ethical issues
 Help employees understand the ambiguity inherent in ethical situations

5. Establishment of systems to monitor, audit, and report misconduct.
• Role playing exercises to view how you handle ethical dilemmas
• Questionnaires --- employees fill out to view their ethical perceptions
• Internal systems for reporting misconduct---help lines or help desks to give support for employee ethical concerns.

6. Consistent enforcement of standards, codes, and punishment.

7. Continue improvement of the ethical compliance program.
• Goes w/ having an effective ethics program.
o They have a goal—to have a central system to design and create predictability or make it predictable on how employees behave.
• Framework – some established by Federal Sentencing Guidelines for Organizations----credit for having effective compliance programs can reduce fines



• 3 Objectives:
o Risk Assessment
o Self-Monitor Process
o Deterrence—aggressively work to deter unethical behavior

• Important to assess and customize
o Assess key risk areas in your company
o Customize a compliance program that will meet key criteria for effectiveness

• How is effectiveness determined?
o By program’s program design and program implementation

• The program has to become part of the corporate culture.

Front 46

Describe the six steps to effective implementation of a code of ethics.

Back 46

1. Consider areas of risk and state the values as well as conduct necessary to comply with laws and regulations. Values are an important buffer in preventing serious misconduct.

2. Identify values that specifically address current ethical issues.

3. Consider values that link the organization to a stakeholder orientation. Attempt to find overlaps in organizational and stakeholder values.

4. Make the code understandable by providing examples that reflect values.

5. Communicate the code frequently and in language that employees can understand.

6. Revise the code every year with input from organizational members and stakeholders.

Front 47

Common Mistakes in Designing and Implementing an Ethics Program

Back 47

• Deter and detect unethical behavior
• Gain competitive advantage through improved relationships w/ customers and employees
• Link employees through a unifying and shared corporate culture

2. Not setting realistic and measurable program objectives
• Once objectives determined, companies should solicit input through
o Interviews
o Focus groups
o Survey instruments

3. Senior MGT’s failure to take ownership of the ethics program.
• CEO’s must support and uphold ethics himself
o EX: Enron – recording sales that never took place

4. Developing program materials that do not address the needs of average employee.
• Complex, confusing material that is hard for average employee to understand.
o Should try to get feedback from firm
o EX: Q and A , checklists, illustrations

5. Transferring and “American” program to a firm’s international operations
• Should involve overseas personnel as soon as possible in process
• Develop inventory of common global MGT practices and examine standards of conduct.

6. Designing a program that is little more than a series of lectures
• Participants typically recall less than 15% the day after lecture.
• More practical solution: Allow employees to practice the skills they learn through case studies or small group exercises (hands-on).

Front 48

Discuss five of the ethical issues around the globe.

Back 48

1. Sexual and Racial Discrimination
2. Human Rights
3. Price Discrimination
4. Bribery
5. Harmful Products

6. Pollution
7. Telecommunications Issues
8. Intellectual Property Rights

Front 49

• Various US and European laws prohibit businesses from discriminating on the basis of sex, race, religion, or disabilities in their hiring, firing, and promotion decisions. However, problem of discrimination is still reality around the world
o South East Asian countries – biracial children are heavily discriminated.
o Russia – Job advertisements specify age and gender of potential employee
o Middle East – not accepting females in business systems – it is rare. Some countries require women to wear special clothing and cover faces.
 Because some countries prescribe non-business roles for women, companies negotiating with Middle Eastern firms have problems when they use women sales representatives
• Reducing Discrimination
o Businesses around the world can realize specific benefits.
 Decrease employee turnover – employees loyal
 Reduce cost of hiring/training new employees
 Improved productivity – most qualified persons fill job
 Diverse work force – employees enjoy goodwill and support of communities surrounding facility
 Receive favorable support from stakeholder groups (labor and women’s rights)
 Favorable reputation of firm and brand name

Back 49

Sexual and Racial Discrimination

Front 50

• US law prohibits American companies from discrimination in employment, discrimination in other countries is often justified on basis of cultural norms and values.
o Emerged in 1990s as news stories depicting opportunistic use of:
 Child labor
 Payment of low wages
 Abuses in foreign factories
• Understanding each countries culture can help MNCs make improvements.
• 3 Guidelines that managers should consider to advance human rights
o Encourage open dialogue between workers and management
o Companies need to be aware of human rights issues in each county they do business.
o Companies should adopt the prevailing legal standard but work to improve and embrace a “best practices” approach and standard

Back 50

Human Rights

Front 51

• Changing different prices to different groups of customers
• Differential pricing is legal if it does not substantially reduce competition or it can be justified on basis of costs
o EX: Costs of taxes and import fees associated w/ bringing products into another country
• Illegal when:
o Practice violates either country’s laws
o Market cannot be divided into segments
o Cost of segmenting market exceeds the extra revenue from legal price discrimination
o Practice results from extreme customer dissatisfaction

• Two Major Issues
o Gauging
 Increasing prices beyond level to meet costs of the additional expenses.
 Charging excessive rates for a limited time to exploit situational shortages
 Most countries prohibit gauging for life-saving products
o Dumping
 Selling products in home markets at high prices and selling products internationally at lower prices and doesn’t cover the full costs of exporting.
 Several reasons:
• Charging low prices allow company to enter market quickly and capture large market share
• Domestic market to small to support an efficient level of production
• Disposal of obsolete products – products that are no longer salable in origin country “dumped” overseas.

Back 51

Price Discrimination

Front 52

• Acceptable in may countries
o Mexico, S. Africans, Middle East, India, Pakistan, Germans, Italy
• But U.S. Foreign Corrupt Practices Act (FCPA) prohibits American business from offering or providing payments to government officials to obtain or retain business
o Enacted in mid-1970s – when SEC revealed that 400 US firms admitted to making bribes in excess of $300 million
o Violators – company executives – 5 yrs prison / $10,000 in fines
o Problem: Only applies to US businesses – which may put US in disadvantage when doing business abroad and other countries use “bribes”
• Omnibus Trade and Competitiveness (OTC) Act (1988)
o Reduced FCPA in certain areas and repealed the Eckhardt Amendment
 Prevented senior managers from using agents or employees as scapegoats when bribes were given

Back 52

Bribery

Front 53

• Governments in advanced industrialized nations have banned the sale of certain products considered harmful. However, companies in those nations continue to sell such products in other countries where they remain legal.
o EX: Genetically engineered products – controversial in US and Europe
• Prevent marketing of genetically engineered products until long-term safety testing shows that they are not harmful to humans, animals, or environments
• Sale of Tobacco
o Cigarette sales declining in US – stricter regulations, health concerns, etc..
o US sales decline, so tobacco companies increase marketing efforts to other countries, particularly less developed ones where they are viewed as good b/c they provide jobs and stimulates economy
• Products in some countries become harmful to consumers in other countries b/c of illiteracy, unsanitary conditions, or cultural values.
o EX: 1970s – Nestle’ Corporation – infant formulas introduced to African countries as alternative to breast-feeding. Infant mortality rates rose dramatically, b/c many mothers weren’t able to read instructions. Also, water used to mix w/ formula was often unsafe.
• Nestle criticized for aggressive promotion of formula. Nestle used “milk nurses” who promoted formulas as safer alternative.

Back 53

Harmful Products

Front 54

create WPA – Works Progress Administration. He created programs that both helped the American people and created an infrastructure that is still used today

Back 54

Franklin D Roosevelt

Front 55

o Right to safety
o Right to choose
o Right to be heard

Back 55

“Consumers’ Bill of Rights

Front 56

criticized auto industry (GM) for putting profit and style ahead of safety.

Back 56

Ralph Nadar

Front 57

– organization’s obligation to maximize positive impact on stakeholders and minimize negative impact.

Back 57

social responsibility

Front 58

focused interest on ethics in government

Back 58

Nixon’s Watergate scandal

Front 59

was passed making it illegal to bribe gov’t officials of other countries.

Back 59

Jimmy Carter - Foreign Corrupt Practices Act

Front 60

o Guide corporate support for ethical conduct
o Drafted principles for guiding business ethics and conduct.
o 50 members

Back 60

Defense Industry Initiative on Business Ethics and Conduct (DII)

Front 61

– self-regulation, not regulation by gov’t, was in public’s interest

Back 61

Reagan/Bush era

Front 62

o Reward organizations for taking action to prevent misconduct (developing ethical compliance programs)
o If company lacks effective program and employees break the law, it can incur severe penalties
o Company must develop corporate values, enforce own code of ethics, and strive to prevent misconduct.

Back 62

Federal Sentencing Guidelines for Organizations (FSGO)

Front 63

– 2002 Congress passed act that made securities fraud a criminal offense and stiffened penalties for corporate fraud.

Back 63

Sarbanes-Oxley Act

Front 64

 Requires corporations to establish code of ethics for financial reporting.
 Requires top executives to sign off firm’s financial reports, and risk jail time and fines if they represent their companies’ financial position.
 Requires executives to disclose stock sales immediately and prohibits companies from giving loans to top executives.

Back 64

Sarbanes-Oxley Act

Front 65

believe that more pleasure is better

Back 65

Quantitative hedonists

Front 66

it is possible to get too much of a good thing (pleasure)

Back 66

Qualitative hedonists

Front 67

pleasure is one aspect of “the good life”
o View things like education, knowledge, or helping others, as contributing to own self-interest.

Back 67

Pluralists (non-hedonists

Front 68

– put self-interest first, but allow for well-being of others as long as own self interest doesn’t suffer
• Ex: McDonalds, IBM do charitable-type work. (allow benefit of others but still get something out of it.

Back 68

Enlightened Egoists

Front 69

– concerned with consequences like egoism—but seeks greatest
good for the greatest number of people.
----Make decisions that achieve the greatest benefit for all those affected by a
decision

Back 69

Utilitarianism

Front 70

“rules should determine which actions produce greatest value” EX: Bribery is wrong

Back 70

Rule Utilitarians

Front 71

Looks at act, rather than rule, to determine greatest utility for greatest utility.
• Rules such as “Bribery is wrong” serve only as guideline.
---They agree that bribery is wrong, but not because there is anything wrong with bribery, but because total amount of utility decreases when one person’s interest is placed ahead of those in a society.

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Act Utilitarians

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– formal group of individuals assigned to a specific task

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Committee

Front 73

subdivide duties within specific functional area of a company

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Work Groups

Front 74

Bring together functional expertise of employees from several different areas of
organization

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Teams

Front 75

-- set of conditions that limit unfavorable behavior or reward favorable behavior.
Rewards may be:
• Internal
• External

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Opportunity

Front 76

comprehensive, consists of general and inspirational statements that serve as basis for rules of conduct.

Back 76

Code of Ethics

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– manages organizations’ ethics and legal compliance programs

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Ethics officer

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3 Guidelines that managers should consider to advance human rights

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o Encourage open dialogue between workers and management
o Companies need to be aware of human rights issues in each county they do business.
o Companies should adopt the prevailing legal standard but work to improve and embrace a “best practices” approach and standard

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Two Major Issues of Price Discrimination

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o Gauging
 Increasing prices beyond level to meet costs of the additional expenses.
 Charging excessive rates for a limited time to exploit situational shortages
 Most countries prohibit gauging for life-saving products
o Dumping
 Selling products in home markets at high prices and selling products internationally at lower prices and doesn’t cover the full costs of exporting.
 Several reasons:
• Charging low prices allow company to enter market quickly and capture large market share
• Domestic market to small to support an efficient level of production
• Disposal of obsolete products – products that are no longer salable in origin country “dumped” overseas.

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prohibits American business from offering or providing payments to government officials to obtain or retain business

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U.S. Foreign Corrupt Practices Act (FCPA)

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o Reduced FCPA in certain areas and repealed the Eckhardt Amendment
 Prevented senior managers from using agents or employees as scapegoats when bribes were given

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Omnibus Trade and Competitiveness (OTC) Act (1988)