MGSC14H3 Chapter 1: Chapter 1 The Ethics Environment

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Management (MGS)
Peter P Constantinou

Chapter1TheEthicsEnvironment I. Ethics Environment for Business Trends: Expectations for companies to serve the needs of shareholders and the society (other stakeholders) Causal factors: 1. Environmental concerns: Public pressures to improve safety standards due to the understanding of environmental threats to personal safety An effective environmental protection program can be used as an adequate due diligence defense 2. Moral sensitivity: Public pressures for more fairness and equity 3. Bad judgements Activist stakeholders: Business judgements are judged against ethical standards as well 1) Specific groups take offense at co.s bad judgements and make the MGT aware of their position 2) Ethical consumers investors: buyinvest in products that are producedmake profits in an ethical manner 4. Economic Competitive pressures: Pressure to survive (slippery slope) 5. Financial scandals: Expectation gap and credit gap (confidence crisis) in the capital MKT trigger review on corporate integrity, the accounting profession the corporate reporting process SarbanesOxley Act (SOX) 2002: reforms for corporate governance the accounting profession 6. Governance failures Risk assessment: Fiduciary failures of BoD led to reform in risk MGT, which starts to see ethics risk as an actual key factor 7. Increased accountability Transparency desired: Due to realization of unbridled greed of executives Result: 1. Reactive legislations U.S. Sentencing Guidelines of 1991 (executives personally accountable for not providing ethical guidance) Antibribery regime of OECD (extraterritorial legal actions on bribery) SOX of 2002 (corporate accounting and governance rules) 2. Global standards IFRS, Code of Ethics for Professional Accountants II. New Mandate for Business Focus on a stakeholderoriented set of achievements instead of merely shareholderoriented (Stakeholderoriented framework) Build recognition of stakeholder interests into the strategic planning exercise Ethical Behavior Developments in Business Ethics 1. Philosophical Approaches to Ethical Behaviors 1) Aristotle: the goal of life is happiness achieved through by leading a virtuous life in accordance w reason Integrity, honor, loyalty, courage, forthright 2) Immanuel Kant: ppl are ethical when they do not use others opportunistically and being hypercritical Co.s should live up to their own internallygenerated Code of Conduct 3) John Stuart Mill: the goal of society (business) is to max the net social benefit to all ppl 4) John Rawls: society should be constructed so that there is fair distribution of rights benefits Businesses should not have discriminatory prices hiring systems serve some customers at the expense of others (pollution) 2. Corporate Social Contract: Companies takes into account stakeholder interests when generating profits which engenders their support 3. Ethical Decision Making Approaches 1) Philosophical Techniques: Consequentialism: ethical decisions have good consequences Deontology: ethical acts depends on the duty, rights and justice involved Virtue ethics: ethical acts demonstrate the virtues expected by stakeholders
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