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ETHICAL ENVIRONMENT OF BUSINESS
ASSIGNMENT: Select one of the issues outlined below and answer the questions. There
is no page minimum or limit, but your grade will be based on the depth of analysis, (i.e.,
is your answer supported by thoughtful reasoning?). Please call or email if you have any
questions or concerns.
ISSUE 1: Does blowing the whistle violate company loyalty?
Is blowing the whistle a breach of loyalty to the employer or is attempting to stop unethical
company activities the very definition of company loyalty? (Whistleblowing is an employee’s
disclosure to government authorities, upper-level managers, or the media that the employer is
engaged in unsafe or illegal activities.)
Discussing the Issue
1.
Is blowing the whistle acting in…[explain why or why not for each of the following]
a. the best interests of the public?
b. the best interests of the individual (the whistleblower)?
c. a manner that is least harmful to the company?
d. the best interests of the employer?
ISSUE 2: Is employer monitoring of employee social media justified?
Although an employer needs to be respectful of their employees’ privacy, it also has the
responsibility to avoid negligent hiring and negligent retention. Monitoring of an employee’s, or a
potential employee’s, social media is a viable way to avoid these potentially serious problems.
Discussing the Issue
1.
Negligent hiring and retention is an issue if a company knew or should have known an
employee was dangerous or could pose a risk for the company to employ in whatever
capacity they held. Do these concerns justify employers accessing workers social
networking personas and to what extent? Is there an equal danger of over and under
reaction?
2.
Do you consider social networking sites in the context of current or future employment?
Are you careful to ensure that appropriate privacy settings are in place, or are you
generally unconcerned about protecting your privacy?
ETHICAL ENVIRONMENT OF BUSINESS
ISSUE 3: Is CEO compensation justified by performance?
This issue takes on the debate over excessive compensation for corporate leaders. The media
has focused attention on a few instances in which CEO pay has been excessive. These reports
have highlighted instances in which executives were extravagantly rewarded while their
companies went bankrupt or became embroiled in huge corporate scandals. In general, the pay
of the CEO tracks the company’s performance, so in general CEOs are simply paid to do what
they were hired to do–bring up the price of the stock to increase shareholder wealth.
Discussing the Issue
1.
Are compensation packages deservedly high due to the unique nature of executive
talent? Are CEOs truly taking a significant financial risk when they choose to lead one
company rather than another competing for their services?
2.
In a country with great income inequality, such as the United States, are there some
people who deserve to earn tens of millions of dollars each year? Is there something
wrong, or distasteful, about these levels of wealth?
ISSUE 4: Are sweatshops an inhumane business practice?
It seems reasonable to speak out on behalf of the countless workers around the world who are
subjected to dreadful working conditions and pitiful wages, and yet the situation is perpetuated
daily by business practices that many feel are actually defensible. According to the World Bank,
about one-fifth of the world’s population lives below the international poverty line. Many of these
people work for either multinational companies or the subcontractors for those companies.
Discussing the Issue
1. Should multinational corporations be held to our developing world standards in their
treatment of employees in nations with lower standards?
2. Does a company have a duty to act in socially or politically beneficial ways?
3. When the news media expose the sweatshop practices of a leading manufacturer, should
we immediately rally around the story and let the corporation know that we soundly
disapprove of such practices, i.e., is it the consumers’ responsibility? Imagine that our
major corporations were to tell us, “OK, we will continue to use the labor resources in
developing countries, and we will improve their working conditions and provide better
hourly wages, but you, the consumer will have to pay higher prices (perhaps much higher
prices) for our products.” What do you think the consumer response would be?
Chapter 3: Ethics in Business Chapter Summary: Ethics in Business
Book Title: The Legal Environment Today
Printed By: Matthew Lab (sdlawyer@yahoo.com)
© 2020 Cengage Learning, Inc., Cengage Learning, Inc.
Chapter Review
Chapter Summary: Ethics in Business
Ethics and the Role of
Business
1. The relationship of law and ethics—The
government has created some ethical rights and
duties through the passage of laws and
regulations. Many laws are designed to prevent
fraudulent conduct, including the Dodd-Frank Wall
Street Reform and Consumer Protection Act and
the Sarbanes-Oxley Act. Lawful behavior is the
moral minimum. The law has its limits, though,
and some actions are legal but not ethical. Most
large firms and industries have ethical codes or
policies to help employees determine whether
specific actions are ethical.
2. The role of business in society—The public
perception of corporations has changed from
entities that primarily generate profits for their
owners to entities that participate in society as
corporate citizens. Whether one believes in profit
maximization or corporate citizenship, ethics is
important in making business decisions—such as
by looking to the triple bottom line.
3. Ethical issues in business—A fundamental
ethical issue for business is developing integrity
and trust. Businesspersons should exhibit
integrity in their dealings with other people in the
company, other businesses, clients, and the
community.
4. The importance of ethical leadership—
Management’s commitment and behavior are
essential in creating an ethical workplace.
Management’s behavior, more than anything else,
sets the ethical tone of a firm and influences the
behavior of employees.
Ethical Principles and
Philosophies
1. Duty-based ethics—Ethics based on religious
beliefs; philosophical reasoning, such as that of
Immanuel Kant; and the basic rights of human
beings (the principle of rights). A potential
problem for those who support this approach is
deciding which rights are more important in a
given situation. Management constantly faces
ethical conflicts and trade-offs when considering
all those affected by a business decision.
2. Outcome-based ethics (utilitarianism)—Ethics
based on philosophical reasoning, such as that of
Jeremy Bentham and John Stuart Mill. Applying
this theory requires a cost-benefit analysis,
weighing the negative effects against the positive
and deciding which course of action produces the
better outcome.
3. Corporate social responsibility (CSR)—
Combines a commitment to good citizenship with
a commitment to making ethical decisions,
improving society, and minimizing environmental
impact. Although there are different theories, the
basic idea is that corporations can and should act
ethically and be accountable to society for their
actions.
Sources of Ethical Issues in
Business Decisions
1. Short-term profit maximization—Executives
should distinguish between short-run and long-run
profit goals and focus on maximizing profits over
the long run. An overemphasis on short-run profit
maximization is perhaps the most common
reason that ethical problems occur in business.
2. Social media—Advances in technology have
created new ethical problems for companies.
Issues involving social media include how to use
social media in the hiring process and how to
monitor employees’ online activities.
3. Awareness—Whatever the context,
businesspersons must be aware of the possibility
that ethical issues will arise.
4. Rationalization—Sometimes, businesspersons
make a decision that they know is not particularly
ethical but that will benefit them or their company.
After the fact, they rationalize their bad behavior
and unethical decision.
5. Uncertainty—When making a business decision,
businesspersons may be uncertain as to what
they should do, what they should have done, or
whether an ethical issue or breach is even
involved. Such uncertainty is unavoidable, but it
should be treated as an indicator of a potential
ethical problem.
Making Ethical Business
Making ethical business decisions is crucial in today’s
Decisions
legal environment. Business decisions can be complex.
Several frameworks exist to help businesspersons make
ethical decisions. One such framework is the four-step
IDDR (“I Desire to Do Right”) approach.
1. I = Inquiry—Involves identifying the ethical
problem and all of the stakeholders, gathering the
relevant facts, and considering which ethical
theories can help in analyzing the problem.
2. D = Discussion—Involves making a list of
possible actions and evaluating the strengths and
weaknesses of each option, including its ethical
and legal consequences.
3. D = Decision—Involves crafting a consensus
decision or a company’s plan of action. Decision
makers should use the analysis from Step 2 to
articulate the reasons behind the decision.
4. R = Review—Involves reviewing the decision
outcome to determine whether the solution was
effective and satisfied the stakeholders. The
results of this evaluation may be used in making
future decisions.
Business Ethics on a Global
Global businesses need to be conscious of the impact of
Level
different religious principles and cultural norms on ethics.
In addition, ethical concerns may arise in the areas of
outsourcing, avoiding corruption, and monitoring the
employment practices of foreign suppliers.
Chapter 3: Ethics in Business Chapter Summary: Ethics in Business
Book Title: The Legal Environment Today
Printed By: Matthew Lab (sdlawyer@yahoo.com)
© 2020 Cengage Learning, Inc., Cengage Learning, Inc.
© 2021 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means graphic, electronic, or mechanical, or in any other manner – without the written permission of the copyright holder.

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