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Chapter 3

COB 218 Chapter Notes - Chapter 3: Corporate Sustainability, Jeremy Bentham, Making False Statements

College of Business
Course Code
COB 218
David Parker

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Chapter 3: Business Ethics
I. The Need for Business Ethics (what constitutes right or wrong in the business world)
a. Why is Studying Business Ethics Important?
i. Profit Maximization
1. Corporations focus on strengths while entities better suited to
deal with social problems specialize in those activities
2. Profit maximization leads to most efficient allocation of scarce
ii. The Rise of Corporate Citizenship
1. Look beyond profit maximization theory
2. Triple bottom line
a. Corporatio’s profits
b. Impact on people
c. Impact on the planet
b. The Importance of Ethics in Making Business Decisions
i. When making decisions, evaluate:
1. The legal implications of each decision.
2. The public relations impact.
3. The safety risks for consumers and employees.
4. The financial implications.
ii. Long-Run Profit Maximization
1. Unethical coduct will cause profits to suffer in long-run
2. Most common reason for ethical problems in business =
overemphasis on short-term profit maximization
iii. The Internet Can Ruin Reputations
1. Negative information/opinions can become widely known
2. Defamatory
a. Assertions that may be unfounded or exaggerated
b. Most courts regard online attacks as expression of opinion;
a form of free speech protected by 1st Amendment
3. Results of bad publicity
a. Expensive marketing campaigns to thwart bad PR
b. Legal costs (if complaint leads to litigation)
iv. Image Is Everything
1. Unethical decisions making can negatively affect suppliers,
consumers, community, society
a. can have negative impact on company
c. The Relationship of Law and Ethics
i. Moral Minimum: compliance with the law
1. Lowest ethical level society will tolerate
ii. Ethics and Company Codes of Ethics
1. Internal code of ethics attempts to link ethics and law
a. Company codes are not law
b. Rules that a company can enforce
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c. Outlie opa’s poliies o issues ad ho eploees
should act
2. Industries have developed code of ethics
a. American Institute of Certified Public Accountants (AICPA)
i. Code of Professional Conduct
b. American Bar Association
i. Model rules of professional conduct for attorneys
c. American Nurses Association
i. Code of ethics that applies to nurses
d. Violations of industry code of ethics can result in employee
discipline or sanctions against a company
e. Internal codes are NOT laws
i. Effectiveness is determined by commitment of
industry to enforce
iii. Ethial Uertait ad Gre Areas
1. Ethics are highly subjective and subject to change over time
without any formal process; ethics are less certain than law
a. Ethics is based more on judgement than research
2. Grey Areas= when law is uncertain
II. Business Ethics and Social Media
a. Hiring Procedures
i. Employer asks candidate for list of references
ii. Employer likely to conduct Internet searches to discover more
information about candidate
1. Sometimes people are rejected due to lack of social media
2. Some consider these practices to be unethical
b. The Use of Social Media to Discuss Work-Related Issues
i. Some companies provide strict guidelines about what is appropriate and
what is not when making posts on social media
ii. Companies have fired employees due to critical posts regarding co-
1. Now illegal to do so
iii. National Labor Relations Board (NLRB): federal agency that investigates
unfair labor practices
1. Ruled that employees can freely converse/associate in person and
on social media regarding workplace issues without employer
c. Ethics in Reverse
i. Some consider NLRB to be too lenient towards employees and too
stringent towards management
ii. Ogoig deate aout ho to alae eploees’ right to free
epressio agaist eploers’ right to preet iaurate egatie
statements on Internet
III. Approaches to Ethical Reasoning (application of morals and ethics to a situation)
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