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Chapter 1

MGSC14H3 Chapter Notes - Chapter 1: John Stuart Mill, Immanuel Kant, Virtue Ethics

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Peter P Constantinou

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Chapter 1 The Ethics Eviroet
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 effetie eioetal potetio poga a e used as a adeuate due diligee defese
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) “peifi goups take offese at o.’s ad judgeets ad ake the MGT aware of their position
2) Ethical consumers & investors: buy/invest in products that are produced/make 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
→ “aaes-Oxley 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
1. Reactive legislations
- U.S. Sentencing Guidelines of 1991 (executives personally accountable for not providing ethical guidance)
- Anti-bribery 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 stakeholder-oriented set of achievements instead of merely shareholder-oriented (Stakeholder-oriented
framework) → Build eogitio 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 lie up to thei o iteally-generated 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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