Dynamic business law 4e kubasek 4e CH02

Chapter 2
Business Ethics

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Overview

• LO2-1: What are business ethics and the social responsibility of business?
• LO2-2: How are business law and business ethics related?
• LO2-3: How can we use the WPH framework for ethical business
decisions?

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Chapter 2 Discussion
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Chapter 2 of the textbook cites The Golden Rule as a guideline for ethical decision-making, noting the following ways to interpret
this principle:

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Do unto others as you want them to gratify you;
Be considerate of others' feelings as you want them to be considerate of yours;
Treat others as persons of rational dignity like you;
Extend brotherly or sisterly love to others, as you would want them to do to you;
Treat others according to moral insight, as you would have others treat you;
Do to others as God wants you to do to them.

Is it truly possible to follow The Golden Rule and operate a business successfully? For example, would this principle require you to
extend brotherly or sisterly love to a business competitor or a government regulator? Can a business owner be considerate of
others' feelings and simultaneously seek to maximize profits?

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Chapter 2 Hypothetical Case 1
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As hiring coordinator for Hennessey Networking Solutions, Inc. (Hennessey), Andrea Templeton knew that her position was of utmost importance to her company in
terms of hiring candidates who were well-qualified, and who would best contribute to the company's overall success. On her desk was the employment application and
resume of Timothy Carraway. Templeton had just finished her interview of Carraway, who was the last in a long line of interviewees who had applied for an entry-level
information technology (IT) position at Hennessey. Hennessey only had one opening available. During Carraway's interview, the candidate revealed that seven years ago,
he had been tried and convicted in federal court for selling a significant amount of cocaine. Carraway had also revealed the conviction on his employment application.
Carraway went to great lengths to explain to Templeton that he sincerely regretted the indiscretions of his youth, and that he had spent the last seven years of his life
paying penance, and reforming his life. After serving three years in federal penitentiary, Carraway had earned his bachelor's degree in Information Technology, graduating
with honors.

Carraway's interview had gone very well. In fact, Andrea felt that in terms of his personality and education, he was the best fit for the position. Templeton was obviously
concerned about Carraway's criminal background, but she was also concerned about the young man should he not find an employment opportunity after graduating
from college. Without a legitimate employment option, would Carraway revert back to his criminal ways?

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Does Hennessey have an ethical obligation to hire Timothy Carraway? Should Templeton's hire decision be based exclusively on Carraway's qualifications for the job? Why
or why not?

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Chapter 2 Hypothetical Case 2
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What is the best source for ethical business practices: the individual employee, or the business organization
itself? To what extent should individual employees be allowed to lend input in the creation of a code of
ethics for a business organization? In the event that an individual employee's ethical standards differ from
his/her employer's code of ethics, what can/should be done to resolve those differences?

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What Is Business Ethics?

• Ethics: The study and practice of decisions about what is good or right
• Business ethics: The use of ethical principles to solve business dilemmas
• Ethical dilemma: A question about how a person should behave that requires the
person to reflect about the advantages and disadvantages of the optional choices for
various stakeholders

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Business Ethics and
Social Responsibility

• Social responsibility of business: The responsibility of firms doing business within a
community to meet the expectations that the community imposes on them

• Firms always subject to the implicit threat that legislation will impose social
obligations on them

• Firms acting outside the prevailing ethical norms risk ill will and damage to their
reputations, profits, and continued existence.

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How Business Law and
Business Ethics Are Related

• Law and business ethics serve as an interactive system—informing and assessing
each other

• Business ethics builds on business law
• Business law provides a floor for business ethics, telling business leaders the
minimally accepted course of action

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WPH Process of Ethical Decision Making: W—WHO
(Stakeholders)

• Consumers
• Owners or investors
• Management
• Employees
• Community
• Future generations
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WPH Process of Ethical Decision Making: P—PURPOSE (Values)

• Freedom
• Security
• Justice
• Efficiency

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Primary Values and Business Ethics: Freedom

• To act without restriction from rules imposed by others
• To possess the capacity or resources to act as one wishes
• To escape the cares and demands of this world entirely

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Primary Values and Business Ethics: Security

• To possess a large enough supply of goods and services to meet basic needs
• To be safe from those wishing to interfere with your property rights
• To achieve the psychological condition of self-confidence to such an extent that risks
are welcome

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Primary Values and Business Ethics: Justice

• To receive the products of your labor
• To treat all humans identically, regardless of race, class, gender, age, and sexual
preferences

• To provide resources in proportion to need
• To possess anything that someone else is willing to grant you

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Primary Values and Business Ethics: Efficiency

• To maximize the amount of wealth in society
• To get the most from a particular output
• To minimize costs

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WPH Process of Ethical Decision Making: H—HOW (Guidelines)

• Public disclosure
• Universalization
• Golden Rule

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Chapter 2 Hypothetical Case 3
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Yogo Apparel, a manufacturer of women's athletic wear, has seen explosive growth in sales of its most popular yoga pant over the
past two months, thanks to some very flattering publicity. Sales are so strong, in fact, that the company's U.S.-based supplier
cannot keep up with demand. The company's president, Susan Keough, receives a bid from an offshore supplier that promises to
make the pants in its own facilities at 10 times the capacity of the U.S. supplier and at two-thirds of the cost.

Keough asks one of her managers, Steven Little, to investigate the offshore suppliers' history of workers'-rights complaints. The
news is not good: Little reports that the supplier has been accused of multiple instances of worker abuse, including forced
overtime, sexual harassment, and suppression of organized labor. Keough and Little approach several other vendors, but none can
produce the quantity Yogo needs at the price it is able to pay.

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Chapter 2 Hypothetical Case 3 (cont'd)
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Imagine that you are in Keough's situation. Apparel stores and Yogo's own website are inundated with orders for the yoga pants.
Yogo cannot keep up with the demand without looking elsewhere. Yogo's stock has risen dramatically as a result of the surge in

sales, and shareholders expect the growth to continue. What are the possible ramifications for Yogo if Keough chooses to use this
supplier? What type of exposure does Yogo have—legally, in terms of potential damage to its reputation, and in terms of risk to
profit?

What if you are in Little's position, and Keough chooses to move forward with the offshore supplier? What would you do?

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