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MGMT 1040 Chapter Notes -Pareto Efficiency, Friendly Society, Mattel


Department
Management
Course Code
MGMT 1040
Professor
William(bill) Woof

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The Ethics of Management – Hosmer 7 th
Edition
Chapter 1
Accounts of corporate wrong-doing have always been with us
Ex. Enron had deliberately modified the balance sheet to report greater profit
Today, the nature of moral problems has shifted from senior executives for
personal gain to the managers in an increasingly competitive global environment
Financial performance of a firm (profit) is often in conflict with its social
performance (overall well-being of those associated with firm)
3 requirements can be used for solving this conflict:
i. Recognize that moral problems in business are complex and difficult to
resolve – mixture of rights exercised and rights denied
ii. Moral standards differ between people; must be objective rather than
subjective – moral standards depend upon personal goals, norms, beliefs,
and values
iii. Not enough for manager to reach a decision that is fair and proper
balance of benefits and harms; they must be able to convincingly explain
why the decision is best. This is based on (a) determining economic
outcomes, (b) considering legal requirements, (c) evaluating ethical duties
The 7 elements needed to make a convincing (objective) decision will be looked
in detail
Understand the Different Standards
Moral standards of behaviour are our intuitive gauges for decisions and actions
Moral standards of behaviour are subjective/personal
Lying to a friend may be acceptable; lying to stockholders is a major moral
problem
Moral standards are not a good framework for decision, since they are subjective
They vary by individual, group, region, country, culture, time

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Moral standards of behaviour differ between people due to goals, norms, beliefs,
values
Goals, norms, beliefs, and values differ due to variations in religious and cultural
traditions and the economic and social situations
Personal goals – Goals are our expectations of outcomes. They are things we want
out of life and expect others want out of life as well. Include material possessions
(cars), lifestyle preferences (money) personal goods (health), and social aims
(equality). GOALS  OUTCOMES
Personal norms – Norms are our expectations of behaviour. They are ways we
expect to act and the ways in which we expect others to act in a given situation.
They are not right or wrong. Norms are different from moral standards. Norms are
expectations of behaviour, while morals are judgement on behaviour. NORMS 
EXPECTATIONS OF BEHAVIOUR, MORALS  JUDGEMENT
Personal beliefs – Beliefs are our expectations of thought. They are ways we
expect to think, and the ways we expect others to think about given situations.
Beliefs generally support our norms, and norms usually lead toward our goals. Ex. I
believe smoking is bad and causes cancer (belief), and I expect you not to smoke in
my presence (norm) because I want good health (goal).
Personal values – Values are our order to goals, norms, and beliefs. Most people
do not consider that all of their goals, norms, and beliefs are of equal importance.
But, there are times where one is more “valued” than others.
Cultural and religious traditions of people living in North America differ
from those living in the developing regions of Asia and Africa
The economic situation includes relative income and living standards of
the individual
The social situation refers to a person’s membership in different
organizations that can influence his/her goals, norms, beliefs, and values, thus
moral standards
The importance is to connect different moral standards, and arrive at a
unified ethical solution that is morally acceptable by everyone involved in the
decision or action
Recognize the Moral Impacts
Moral problems are complex; benefits for some and harms for others

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The impacts are the relative outcomes that people think about when
deciding on action
It is recommended that we start our analysis by identifying who is going to
be benefited and who is going to be harmed, and who’s rights will be exercised
and who’s denied
Therefore, everyone in the moral problem must understand what’s
happening
State the Moral Problem
To reach a solution, you want to get everyone to fully understand your
view of the issue
Always reveal the consequences of a decision before acting on it
Determine the Economic Outcomes
Refers to the net balance of benefits over costs for the full society, given
that the values of the benefits and costs are determined by the people within the
society
This concept is known as Pareto Optimality
This concept is that no one could be made better off without making
someone worse off
However, it is good when more people are benefited that people who are
harmed
The method of “economic outcomes” is expressed as:
i. More is better than less
ii. Specifically, more is better than less when that “more” consists of what people
really want, as expressed through their preferences in the product markets
iii. Even more specifically, the more of what people want is better than less when
that “more” is produced as efficiently as possible
Consider the Legal Requirements
Refers to the laws adopted by members of society to regulate behaviour of
members
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