Business law BBUS - Chapter 5: Business Ethics

BUSINESS LAW TEXT AND CASES Fourteenth Edition CLARKSON MILLER CROSS ◆ © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ◆ ◆ Ethics: The application of moral principles and values to social behavior. ◆ “Ethics” and “morals” are identical terms. ◆ Business Ethics: Moral principles and values applied to situations that arise in a business setting. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2 ◆ Why Is Business Ethics Important? Traditionally, and until very recently, the only goal or duty of a corporation was to maximize profits. Today, many people view this idea as greedy or inhumane but the rationale for the profit-maximization theory is still valid. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3 ◆ Profit Maximization: In an ideal world, if all firms strictly adhere to the goal of profit maximization, it would lead to the most efficient allocation of scarce resources ◆ Proponents Argue: Focusing on profit pulled most of the world out of poverty, more than all other efforts combined. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4 ◆ The Rise of Corporate Citizenship: Many investors and others now consider a corporation’s triple bottom line—its profits, its impact on people, and its impact on the planet. ◆ Companies are ranked on their environmental impact and ethical decisions and are viewed as “citizens” that are expected to help better communities and society. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 ◆ Importance of Ethics in Making Business Decisions: Businesses should evaluate these factors when making ethical decisions: The legal implications of each decision. The public relations impact. The safety risks for consumers and employees. The financial implications. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 ◆ Importance of Ethics in Making Business Decisions: Corporate executives and employees have to distinguish between short-run and long-run profit maximization. CASE IN POINT 5.1: UNITED STATES V. PURDUE FREDERICK CO. (2007). © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ◆ Impact of the Internet: The Internet increases potential for damage to a corporation’s reputation or loss of profits through negative publicity. The courts generally consider such publicity to be an expression of opinion protected by the First Amendment and not defamatory speech. © 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.