Fundamentals of Business Law, 10E: Roger Leroy Miller

FUNDAMENTALS OF
BUSINESS LAW, 10E

ROGER LEROY MILLER
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ETHICS AND BUSINESS
DECISION MAKING
CHAPTER 3
LEARNING OBJECTIVES
1. What is business ethics and why is it

important?
2. How can business leaders
encourage their companies to act
ethically?
3. How do duty-based ethical
standards differ from outcome-
based ethical standards?
LEARNING OBJECTIVES (CONT’D)
4. What are six guidelines that an

employee can use to evaluate
whether his or her actions are
ethical?
5. What types of ethical issues might
arise in the context of international
business transactions?
INTRODUCTION
• Although ethics is not defined as the

law, it can have a tremendous impact
on a firm’s finances and reputation.
• This chapter addresses the importance
of business ethics and its relationship to
the law. The philosophical bases for
making ethical decisions and the
application of business ethics to global
situations are also discussed.
BUSINESS ETHICS
• Business ethics focuses on what is

considered right or wrong behavior in
the business world and on how
businesspersons apply moral and
ethical principles to situations that arise
in the workplace.
• Business Ethics Are Important
• Profit maximization and the rise of
corporate citizenship are two important
factors.
BUSINESS ETHICS
• Ethical Business Decisions

• When making decisions, a business should
evaluate the following:
1. The legal implications of each decision.
2. The public relations impact.
3. The safety risks for consumers and employees.
4. The financial implications.
BUSINESS ETHICS
• Corporations should strive to make

ethical business decisions and
evaluate each decision carefully. They
should consider the benefits of long-
term profit maximization over short-
term profit maximization, how the
Internet can affect a company’s
reputation, and strategies to create a
favorable company image.
BUSINESS ETHICS
• The Law and Ethics

• Most large companies have internal codes
of conduct to help employees and
managers act ethically.
• It may be difficult, however, to always
determine whether particular actions are
legal, given the numerous and frequent
changes in the laws regulating business.
BUSINESS ETHICS
• Businesspersons must remember that

just because an action is legal does
not mean it is ethical.
• Compliance with the law is sometimes
called the moral minimum.
• The study of ethics goes beyond legal
requirements to evaluate what is right
for society.
BUSINESS ETHICS
• Ethics can be a difficult subject for

corporate officers to fully understand.
It is often highly subjective and subject
to change over time.
• Most companies attempt to link ethics
and law through the creation of
internal codes of conduct and ethics,
but company codes are not law.
BUSINESS ETHICS
AND SOCIAL MEDIA
• Hiring Procedures
• Businesses face ethical issues with respect
to social media platforms, such as
Facebook and Twitter.
• Employers today may conduct Internet
searches to see what job candidates have
posted on social media.
• Employers may also look at, but not
interfere with, the social media posts of
their employees.
BUSINESS ETHICS
AND SOCIAL MEDIA
• Work-Related Discussions
• Companies may have policies regarding
the use of social media by workers, but
must be careful when considering
disciplinary action for violations of these
policies.
• Employee Ethics
• An important issue: Is it ethical for
employees to make negative posts in
social media about other employees or
managers?
APPROACHES TO
ETHICAL REASONING
• Ethical reasoning is the process in which the
individual examines a situation in light of his
or her ethical standards.
• Two approaches business decision makers
use to decide what ethical standards should
apply to their firm are:
• Duty-based ethics, implying certain rights
• Outcome-based ethics, considering the
consequences of any given action
APPROACHES TO
ETHICAL REASONING
• Duty-Based Ethics
• Religious beliefs follow fundamental rules for moral
action.
• Philosophical reasoning, such as that of German
philosopher Immanuel Kant, who identified some
general guiding principles for moral behavior
based on what he believed to be the
fundamental nature of human beings.
APPROACHES TO
ETHICAL REASONING
• A potential problem for those who support a duty-
based 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: the firm’s owners,
employees, consumers of its products or services,
suppliers, the community in which it does business,
and society as a whole.
APPROACHES TO
ETHICAL REASONING
• Outcome-Based Ethics: Utilitarianism
• “The greatest good for the greatest number”
• 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.
APPROACHES TO
ETHICAL REASONING
• Corporate Social Responsibility
• Combination of duty-based and
outcome-based ethics
• Combines a commitment to good
citizenship with a commitment to making
ethical decisions, improving society, and
minimizing environmental impact.
APPROACHES TO
ETHICAL REASONING
• A number of theories based on the idea
that corporations can and should act
ethically and be accountable to society
for their actions.
• Social aspects—Corporations must demonstrate they are
promoting goals that society deems worthwhile and
moving toward solutions to social problems.
• Stakeholder approach—Consider all groups affected by
corporate decisions, not just shareholders.
• Corporate citizenship—Corporations demonstrate that
they are promoting goals that society deems worthwhile.
MAKING ETHICAL
BUSINESS DECISIONS
• To make ethical decision making more
structured and likely, employees can use six
widely accepted guidelines. Companies
once considered leaders in their industry,
such as Goldman Sachs, were brought
down by the unethical behavior of a few.
• Top management and owners should lead
by example and use a systematic approach
to reaching ethical decisions.
MAKING ETHICAL
BUSINESS DECISIONS
• Six Guidelines to Consider
• To help corporate employees judge their actions,
The George S. May International Company
provides six basic guidelines:
1. The law
2. Rules and procedures
3. Values
4. Conscience
5. Promises
6. Heroes
MAKING ETHICAL
BUSINESS DECISIONS
1. The law—Is the action you are considering
legal?
2. Rules and procedures—Does the action
follow company rules and procedures?
3. Values—Does the action follow laws and
company policies that reinforce society’s
values?
MAKING ETHICAL
BUSINESS DECISIONS
4. Conscience—Do you have a guilty
conscience about the action you plan?
5. Promises—Will the action live up to the
commitments you have made to others,
both inside and outside the business?
6. Heroes—Is what you are planning on
doing an action that one of your “heroes”
would take?
GLOBAL BUSINESS ETHICS
• Given the various cultures and religions

throughout the world, it is not surprising
that conflicts in ethics frequently arise
between foreign and U.S. businesses.
Notable differences relate to:
• The role of employment laws governing
workplace conditions
• The practice of bribing foreign officials to secure
favorable contracts
• Employment Practices of Foreign

Suppliers
• What if a foreign company exploits its workers—by
hiring women and children at below-minimum-
wage rates or by requiring its employees to work
long hours in a workplace full of health hazards?
• After its audits revealed numerous violations, in
2012 Apple released a list of its suppliers for the
first time.
• The Foreign Corrupt Practices Act

• In 1977 Congress passed the Foreign
Corrupt Practices Act5 (FCPA), which
prohibits U.S. businesspersons from bribing
foreign officials to secure advantageous
contracts.

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Fundamentals of Business Law, 10E: Roger Leroy Miller

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FUNDAMENTALS OF

BUSINESS LAW, 10E

1. What is business ethics and why is it

4. What are six guidelines that an

• Although ethics is not defined as the

• Business ethics focuses on what is

• Ethical Business Decisions

• Corporations should strive to make

• The Law and Ethics

• Businesspersons must remember that

• Ethics can be a difficult subject for

• Given the various cultures and religions

• Employment Practices of Foreign

• The Foreign Corrupt Practices Act

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