Transcript Chapter 007 - Ethics & Social Responsibility of Business

Chapter 42
Ethics and Social Responsibility of
Business
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Businesses and Ethics
• Businesses organized in the United
States are subject to its laws.
• They are also subject to the laws
of other countries in which they
operate.
• Business persons owe a duty to
act ethically in the conduct of
their affairs.
• Businesses owe a social
responsibility not to harm society.
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Business Ethics
• A set of moral principles or values
that governs the conduct of an
individual or a group.
• What is lawful conduct is not
always ethical conduct.
– The law may permit something
that would be ethically wrong.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Moral Theories and Business Ethics
Ethical
Fundamentalism
Utilitarianism
Ethical Relativism
Rawls’s Social
Justice Theory
Kantian Ethics
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Ethical Fundamentalism
• When a person looks to an outside
source for ethical rules or
commands.
• Critics argue that ethical
fundamentalism does not permit
people to determine right and
wrong for themselves.
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Utilitarianism
• A moral theory that dictates that
people must choose the action or
follow the rule that provides the
greatest good to society.
• This does not mean the greatest
good for the greatest number of
people.
• Has been criticized because it is
difficult to estimate the “good”
that will result from different
actions.
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Kantian Ethics
• A moral theory that says people
owe moral duties that are based
on universal rules.
• Based on the premise that people
can use reasoning to reach
ethical decisions.
• This theory would have people
behave according to the
categorical imperative:
“Do unto others as you would
have them do unto you.”
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Kantian Ethics (continued)
•
Deontology’s universal rules are
based on two important
principles:
1. Consistency – all cases are
treated alike with no
exceptions.
2. Reversibility – the actor must
abide by the rule he or she
uses to judge the morality of
someone else’s conduct.
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Kantian Ethics (continued)
• If you are going to make an
exception for yourself, that
exception becomes a universal
rule that applies to all others.
• A criticism of this theory is that it is
hard to reach a consensus as to
what the universal rules should be.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Rawls’s Social Justice Theory
• A moral theory that says each
person is presumed to have
entered into a social contract,
with all others in society, to obey
moral rules that are necessary for
people to live in peace and
harmony.
• Fairness is considered the essence
of justice.
• Rawls proposed that the least
advantaged much receive
special assistance to allow them
to reach their potential.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Rawls’s Social Justice Theory
(continued)
– The principles of justice should
be chosen by persons who do
not yet know their station in
society.
– This “veil of ignorance” would
permit the fairest possible
principles to be selected.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Rawls’s Social Justice Theory
(continued)
•
There are two major criticisms of
this theory:
1. Establishing the blind “original
position” for choosing moral
principles is impossible in the
real world.
2. Many persons in society
would choose not to
maximize the benefit to the
least advantaged persons in
society.
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Ethical Relativism
• A moral theory that holds that
individuals must decide what is
ethical based on their own
feelings as to what is right or
wrong.
• There are no universal ethical rules
to guide a person’s conduct.
• If a person meets his or her own
moral standard in making a
decision, no one can criticize him
or her for it.
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Ethical Relativism (continued)
• A criticism of this theory is that an
action usually thought to be
unethical would not be unethical
if the perpetrator thought it was in
fact ethical.
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Summary of Theories
Theory
Description
Ethical
fundamentalism
Persons look to an outside
source or central figure for
ethical guidelines.
Persons choose the
alternative that would
provide the greatest good
to society.
A set of universal rules
establishes ethical duties.
The rules are based on
reasoning and require (1)
consistency in application
and (2) reversibility.
Utilitarianism
Kantian ethics
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Summary of Theories (continued)
Theory
Description
Rawls’s social Moral duties are based on an
justice theory implied social contract. Fairness
is justice. Rules are established
from an original position.
Individuals decide what is
Ethical
ethical based on their own
relativism
feelings as to what is right or
wrong.
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Social Responsibility of Business
• Business does not operate in a
vacuum.
• Decisions made by business have
far-reaching effects on society.
• In the past, many business
decisions were made solely on a
cost-benefit analysis.
– “Bottom line” impact.
• Such decisions may cause
negative externalities for others.
• Corporations owe some degree of
social responsibility.
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Theories of Social Responsibility
Maximizing
Profits
Moral
Minimum
Corporate
Citizenship
Stakeholder
Interest
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Maximizing Profits
• A theory of social
responsibility that says a
corporation owes a duty to
take actions that maximize
profits for shareholders.
• The interests of other
constituencies are not
important in and of
themselves.
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Moral Minimum
• A theory of social responsibility that
says a corporation’s duty is to make a
profit while avoiding harm to others.
• As long as business avoids or corrects
the social injury it causes, it has met its
duty of social responsibility.
• The legislative and judicial branches
of government have established laws
that enforce the moral minimum of
social responsibility on corporations.
– Occupational safety laws
– Consumer protection laws for product
safety
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Stakeholder Interest
• A theory of social responsibility
that says a corporation must
consider the effects its actions
have on persons other than its
stockholders.
• This theory is criticized because it is
difficult to harmonize the
conflicting interests of
stakeholders.
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Other Stakeholders of a Business
Employees
Suppliers
Customers
Creditors
Local
Community
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Corporate Citizenship
• A theory of responsibility that says
a business has a responsibility to
do good.
• Business is responsible for helping
to solve social problems.
• Corporations owe a duty to
promote the same social goals as
do individual members of society.
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Corporate Citizenship (continued)
• This theory argues that
corporations owe a debt to
society to make it a better place.
– This duty arises because of the
social power bestowed on
corporations.
• A major criticism of this theory is
that the duty of a corporation to
“do good” cannot be expanded
beyond certain limits.
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Summary of Theories
Theory
Social Responsibility
To maximize profits for
Maximizing profits
stockholders.
To avoid causing harm and to
Moral minimum
compensate for harm
caused.
Stakeholder interest To consider the interests of
all stakeholders, including
stockholders, employees,
customers, suppliers,
creditors, and local
community.
Corporate
citizenship
To do good and solve social
problems
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