Business Law: Text & Exercises (MindTap Course List)
SOLUTION MANUAL
Business Law: Text & Exercises (MindTap Course List)
10th Edition by Roger LeRoy Miller, William E.
Hollowell
1
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
Chapter 1
Table of Contents
Purpose and Perspective of the Chapter................................................................................................................ 2
Cengage Supplements .................................................................................................................................................. 2
List of Student Downloads ...................................................................................................................................... 2
Chapter Objectives ......................................................................................................................................................... 2
Key Terms ........................................................................................................................................................................... 2
What's New in This Chapter ........................................................................................................................................ 3
Chapter Outline ............................................................................................................................................................... 4
Discussion Questions ..................................................................................................................................................... 8
Additional Resources .................................................................................................................................................. 10
Cengage Video Resources ................................................................................................................................... 10
Appendix ......................................................................................................................................................................... 10
Generic Rubrics......................................................................................................................................................... 10
Standard Writing Rubric ....................................................................................................................................... 10
Standard Discussion Rubric ................................................................................................................................. 12
2
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
Purpose and Perspective of the Chapter
The purpose of this chapter is to examine the relationship between law and ethics. The chapter
presents issues involved to determining the ethical responsibilities of businesses and provides
students a framework for analyzing and making ethical decisions.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
PowerPoint Deck
List of Student Downloads
Students should download the following items from the Student Companion Center to complete
the activities and assignments related to this chapter:
PowerPoint Deck (without teaching notes, activities, or answers)
Chapter Objectives
The following objectives are addressed in this chapter:
1. Discuss how business can discourage unethical behavior
2. Explain the relationship between law and ethics
3. Compare duty-based ethics and utilitarian ethics
4. Identify ethical problems in the global context
Key Terms
business ethics: Ethics in a business context; a consensus of what constitutes right or wrong
behavior in the world of business and the application of moral principles to situations that arise
in a business setting.
categorical imperative: A concept developed by the philosopher Immanuel Kant as an ethical
guideline for behavior. In deciding whether an action is right or wrong, or desirable or
undesirable, a person should evaluate the action in terms of what would happen if everybody
else in the same situation, or category, acted the same way.
corporate social responsibility (CSR): The concept that corporations can and should act
ethically and be accountable to society for their actions.
cost-benefit analysis: A decision-making technique that involves weighing the costs of a given
action against the benefits of the action.
duty-based ethics: An ethical philosophy rooted in the idea that every person has certain duties
to others, including both humans and the planet. Those duties may be derived from religious
principles or from other philosophical reasoning.
ethical reasoning: A reasoning process in which an individual links his or her moral convictions
or ethical standards to the particular situation at hand.
3
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
ethics: Moral principles and values applied to social behavior.
moral minimum: The minimum degree of ethical behavior expected of a business firm, which is
usually defined as compliance with the law.
outcome-based ethics: An ethical philosophy that focuses on the impacts of a decision on
society or on key stakeholders.
outsourcing: The practice by which a company hires an outside firm or individual to perform
work rather than hiring employees.
principle of rights: The principle that human beings have certain fundamental rights (to life,
freedom, and the pursuit of happiness, for example). A key factor in determining whether a
business decision is ethical under this theory is how that decision affects the rights of others,
such as employees, consumers, suppliers, and the community.
stakeholders: Groups, other than the company’s shareholders, that are affected by corporate
decisions. Stakeholders include employees, customers, creditors, suppliers, and the community
in which the corporation operates.
triple bottom line: The idea that investors and others should consider not only corporate
profits, but also the corporation’s impact on people and on the planet in assessing the firm. (The
bottom line is people, planet, and profits.)
utilitarianism: An approach to ethical reasoning in which ethically correct behavior is related to
an evaluation of the consequences of a given action on those who will be affected by it. In
utilitarian reasoning, a ―good‖ decision is one that results in the greatest good for the greatest
number of people affected by the decision.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
New chapter title and chapter-opening introduction scenario discussing recent
technology scandal involving finger-prick blood test kits
New chapter organization and subheads throughout (including new headings for
―outsourcing‖ and ―corruption‖)
New section on Making Ethical Business Decisions and new materials on Systematic
Approach: IDDR (―I desire to do right‖) that will be used throughout the text to analyze
ethics, including in all of the new ―A Question of Ethics‖ problems in the remaining
chapters.
o New ―Application of the IDDR Approach‖ subsection with step-by-step discussion
and sample scenario.
1 New Exhibit 3–1: An Analysis of Ethical Approaches to the
SampleDilemma (for new IDDR Approach)
o 1 New Term & Concept
outsourcing
1 New Ethics Today feature—
4
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
o Applying the IDDR Framework
Retained and Updated Digital Update feature—
o Should Employees Have a Right of Disconnecting? (Discussing overtime rules
anddigital connectivity of employees through smartphones and other devices.)
1 New Case:
o Case 3.1: Al-Dabagh v. Case Western Reserve University (2015)—on a
university’s discharge of a student for failure to meet professionalism standards
because he sexually harassed other students, was late for classes, and convicted
of a DUI
o New Case 3.2: Watson Laboratories, Inc. v. State of Mississippi (2018)—on
short-term profit maximization when drug manufacturer lied to Medicaid to
obtain overpayment for its drugs.
5 New Case in Points
o 2014 case on the moral minimum
o 2017 case on Volkswagen diesel-gate
o 2015 Morgan Stanley case on sales contests
o 2015 case on Gandhi furniture on unethical conduct with customer
o 2015 case on defective Takata Corp. airbags in cars
7 New Examples
o On Fraud Reduction and Data Analytics Act.
o On Dodd-Frank Wall Street Reform and Consumer Protection Act.
o On Google’s code of conduct.
o On Costco’s Code of Ethics.
o On Google’s popular corporation social responsibility policies
o On a garment worker who claimed that Nike abused workers in Thai factory by
withholding wages and forcing them to work 16 hours a day.
o On Chinese factory supplier making Apples products violated environment
standards.
Reworked material on Corporate Social Responsibility, including expanded discussion on
the social and corporate aspects of CSR.
1 New Business Scenario
3 New Case Problems (based on 2012 and 2017 cases)
1 New ―A Question of Ethics‖ applying all-new IDDR Approach (based on 2016 case)
1 New Time-Limited Group Assignment on corporate social responsibility
[return to top]
Chapter Outline
I. The Importance of Business Ethics
5
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
a. The Relationship of Law and Ethics – The law does not codify all ethical
requirements.
i. Ethics can be subjective and changeable. In the law, too, there are many
―gray areas‖ in which it is difficult to predict how a court will rule. A
company is more likely to succeed in a legal dispute if it can show that it
acted ethically, responsibly, and in good faith.
II. Setting the Right Ethical Tone
a. Ethical Leadership: Having ethical leadership is likely to lead to employees
acting ethically themselves.
b. Ethical Codes of Conduct: one of the most effective ways of setting the tone of
ethical behavior is to create an ethical code of conduct.
c. Corporate Compliance Programs: in large corporations other components of an
ethics program include an ethics committee, ethical training programs, and
internal audits.
d. Conflicts and Trade-offs: The duties of many groups (shareholders and
employees) may conflict causing management to face ethical issues.
III. Sarbanes-Oxley Act
a. Public Company Accounting Oversight Board-
i. Oversees the audit of companies, or issuers, whose securities are sold to
public investors in order to protect the interest of investors and the public
ii. To register public accounting firms that prepare audit reports for issuers
b. Enforcement and Penalties-
i. Board can inspect registered public accounting firms
ii. Investigate firms that violate the act
iii. Discipline those firms by imposing sanctions ranging from temporary or
permanent suspensions to civil penalties up to $15 million.
iv. The Act also prohibits falsifying or destroying records with the intent to
obstruct or influence a federal investigation- violations may result in a fine
and imprisonment for up to 20 years
IV. Business Ethics and the Law
a. Moral minimum- minimum acceptable standard for ethical business behavior
(simply obeying the law).
b. Laws Regulating Business- most business firms are subject to extensive
government regulation- from hiring and firing personnel to selling products in
the marketplace.
c. Gray Areas in the Law- while legality of a decision is usually relatively clear, the
ethical position is somewhat grayer. Business should be prepared to defend their
actions.
V. Approaches to Ethical Reasoning
a. Duty-Based Ethics - Duty-based ethics are derived from religious authorities or
philosophical reasoning. These standards are focused on concepts of right and
wrong, of duties owed and rights to be protected.
6
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
i. Religious Ethical Principles - Religious standards dictate how one should
treat others (―Do unto others as you would have them do unto you‖) and
are generally absolute. For businesses, religious principles can—
(1) Unify employees and increase employee motivation.
(2) Alienate those with different religious backgrounds or social or
political beliefs.
(3) Cause negative publicity and even protests or boycotts.
ii. The Principle of Rights - According to the principle that persons have
rights (to life and liberty, for example), a key factor in determining
whether a business decision is ethical is how that decision affects the
rights of others, including employees, consumers, suppliers, the
community, and society.
(1) Conflicting Rights- Which takes priority?
(2) Resolving Conflicts- Should whichever right is stronger take
priority?
iii. Kantian Ethical Principles - Immanuel Kant believed that people should
be respected because they are qualitatively different from other physical
objects.
(1) People are not a means to an end - Treating human beings as a
means to an end (profit, for example) denies their basic humanity.
Empowered employees share solutions and are more productive.
(2) Categorical imperative- Kant’s categorical imperative is that
individuals should evaluate their actions in light of the
consequences that would follow if everyone acted the same way.
b. Outcome-Based Ethics - Utilitarianism focuses on the consequences of an
action, not its nature or a set of moral values or religious beliefs.
i. Cost-Benefit Analysis - An action is morally correct, or ―right,‖ when it
produces the greatest amount of good for the greatest number of
individuals. Applying this theory requires—
(1) A determination of who will be affected.
(2) A cost-benefit analysis—an assessment of the negative and
positive effects on those affected.
(3) A choice among alternatives that will produce the maximum
societal utility (the greatest positive benefits for the greatest
number of individuals).
ii. Problems with the Utilitarian Approach - An act that produces the
greatest good for the most may not seem to be the most ethical.
c. Poll Activity: 1 minute total. Asks students about their own ethical philosophy.
d. Corporate Social Responsibility - Corporate social responsibility (CSR) involves
incorporating a commitment to good citizenship, with a commitment to making
ethical decisions, improving society and minimizing environmental impact.
i. The Corporate Aspects of CSR- Any socially responsible activity—relevant,
significant, and related to a corporation’s business—can benefit the firm
7
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
in terms of increasing goodwill and sales, decreasing operating costs, and
more impressive, committed, and long-term employees.
ii. The Social Aspects of CSR- Corporations can actively promote social goals
and move toward solving social problems. Some companies publish
annual corporate social responsibility—or sustainability, or citizenship—
reports to highlight their activities.
iii. Stakeholders and CSR- Stakeholders include employees, customers,
creditors, suppliers, advocacy groups, and the community in which a
business operates. It is sometimes said that duties to these groups should
be weighed against the duty to a firm’s owners.
e. Think Pair Share Activity (2) PPT Slide: 10 minute(s) total. Have students
break into pairs or small groups and consider the following: Alexander, the CEO
of Westwind Baby Furnishings, received a report from one of his quality
inspectors about a possible defect in the Baby Sleeptime Crib Westwind had just
started to market. The report said the bed was not safe for older babies, because
there was a chance it would collapse if the baby climbed up onto the railing.
Westwind had manufactured 20,000 Baby Sleeptime Cribs and would lose a great
deal of money ifit could not market the cribs.
Who are all the stakeholders in the decision whether or not to recall the cribs?
(Answer: The students should identify at minimum: customers, shareholders (if
any)or owners, employees of the company such as officers, quality inspectors,
etc.
Students may also identify government agencies such as Consumer
ProtectionAgencies (state or federal).
VI. Social Media
a. The use of social media in hiring decisions- Some employers review job
candidates’ Facebook pages, blogs, and tweets. Some may reject candidates
who do not participate in social media. Judging a job candidate based on what
she or he does outside of the workplace can be seen as unethical
b. The use of social media to discuss work-related issues
i. The responsibility of employers- Companies that fire employees
for criticizing other employees or managers in social media outlets
may violate federal labor law.
ii. The responsibility of employees- Is it ethical for an employee to
post negatively about his or her employer in social media?
V. Business Ethics on a Global Level
a. World Religions, Cultural Norms, and Ethics – Global businesses need to be
conscious of the impact of different religious principles and cultural norms on
ethics. For instance, in certain countries the consumption of alcohol is forbidden
for religious reasons. It would be considered unethical for a U.S. business to
produce alcohol in those countries and employ local workers to assist in alcohol
production.
b. Monitoring the Employment Practices of Foreign Suppliers - Concerns
include the rights and the treatment of foreign workers who make goods
8
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
imported and sold in the United States by U.S. businesses. U.S. firms usually
refuse to deal with certain suppliers or arrange to monitor their workplaces to
make sure that the workers are not being mistreated.
a. Wages and Working Conditions - Allegations that a U.S. business allows
its foreign suppliers to engage in unethical practices with employees and
working environments hurt that firm’s reputation and goodwill.
b. Corporate Watch Groups - Today, few companies can assume that their
actions overseas and in other nations will go unnoticed by ―corporate
watchdogs‖ that uncover and then publicize unethical corporate behavior.
Thus, U.S. businesses take steps to avoid such publicity.
c. Avoiding Corruption - Under the Foreign Corrupt Practices Act, U.S. businesses
are prohibited from making payments to (bribing) foreign official to secure
favorable business contracts. Corruption is widespread in some nations, however,
and it can be the norm to make so-called side payments in private business in
certain locations. Companies must take care when doing business in countries
where corruption is common.
d. Discussion Activity: 5-10 minutes total.
As a class, discuss the following: Corporate Officers and Directors for a large
company are aware that the company is producing harmful discharges into a
waterway, in violation of environmental laws. They have calculated that paying
themaximum daily fine for the violation is more economical that the cost it would
taketo install equipment needed to remedy the pollution plus the production
downtime and lost profits.
What are the legal obligations and ethical obligations of these parties? (Answer:
Students should be able to identify responsibilities to various stakeholders and
determine whether profit maximization should be the ultimate right to be
protectedover other ethical obligations. A follow up question for the class may be
whether laws like this (which allow a wrongdoer to continue to do wrong so long
as they have the financial means to cover their fines, should be permitted?)
[return to top]
Discussion Questions
You can assign these questions several ways: in a discussion forum in your LMS; as whole-class
discussions in person; or as a partner or group activity in class.
1. In negotiating a business deal, is ―strategic misrepresentation‖ permissible? From a
duty-based ethics viewpoint, in an absolute sense, it would unethical not to disclose information
on which the negotiator knows the other side might hinge its decisions. In contrast, a
negotiator owes an ethical duty to negotiate in the best interests of whomever he or she is
negotiating for. When one ethical duty conflicts with another, a decision has to be made as to
which duty is more fundamental. Frequently, questions faced by businesspersons do not have
clear-cut answers, but involve choices between arguably equally good alternatives. A thoughtful
9
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
consideration of an ethical issue and the choices for resolving it, the decision to act on one of
those choices, and a careful review of its results can lead to more effective—and profitable—
practices by any businessperson.
It has been suggested that business is a game and deception is an important element of
negotiation, just as poker is a game in which bluffing plays an important part. The better an
individual is at deception, the more successful he or she will be at negotiation. Those who do
not anticipate deceit are fooling themselves. One of the problems with this suggestion is that
there is no stated point at which deception is no longer acceptable. By comparison, in poker, it is
acceptable to attempt to confuse other players as to the cards you have been dealt but it is not
acceptable to bribe the dealer to deal you better cards. Also, if deception were widely practiced,
the expense of protecting against it would increase for business and society.
2. How does a corporation’s investment in a political or social agenda affect its duty to
its shareholders? People invest in business to make a profit, and a company’s shareholders
may have such a variety of political and social views that the company’s pursuing a particular
political or social goal may be divisive. Diverting corporate funds reduces the amount available
for dividend payments. Diverting other resources reduces what is available to produce goods
and services for sale. Investors may also be less likely to invest in a company that engages in
behavior seen as unethical out of fear of consumer hostility toward the company.
3. To whom might a corporation owe a duty? A corporation may owe a duty to its
shareholders, its employees and their families, its customers, and society as a whole. What
must a corporation do if it finds itself subject to conflicting duties? There is no law that says
which of these duties comes first or how much weight should be given to each in the balance.
When there is no conflict between duties, the question of how best to fulfill a single duty
involves trade-offs. When these duties overlap, a balance must be struck. Determining which
duty takes precedence involves difficult trade-offs.
4. Because business controls so much wealth and power, what duty does it arguably
have to society? It has been argued that business owes a duty to society to use its wealth and
power in beneficial ways—promoting human rights, striving for equal treatment of minorities in
the workplace, acting to safeguard the environment, and eschewing profits from activities that
society deems unethical. Generally, business has been responsive to social needs, donating to
programs that benefit society.
[return to top]
10
website, in whole or in part.
SOLUTION MANUAL
Business Law: Text & Exercises (MindTap Course List)
10th Edition by Roger LeRoy Miller, William E.
Hollowell
1
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
Chapter 1
Table of Contents
Purpose and Perspective of the Chapter................................................................................................................ 2
Cengage Supplements .................................................................................................................................................. 2
List of Student Downloads ...................................................................................................................................... 2
Chapter Objectives ......................................................................................................................................................... 2
Key Terms ........................................................................................................................................................................... 2
What's New in This Chapter ........................................................................................................................................ 3
Chapter Outline ............................................................................................................................................................... 4
Discussion Questions ..................................................................................................................................................... 8
Additional Resources .................................................................................................................................................. 10
Cengage Video Resources ................................................................................................................................... 10
Appendix ......................................................................................................................................................................... 10
Generic Rubrics......................................................................................................................................................... 10
Standard Writing Rubric ....................................................................................................................................... 10
Standard Discussion Rubric ................................................................................................................................. 12
2
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
Purpose and Perspective of the Chapter
The purpose of this chapter is to examine the relationship between law and ethics. The chapter
presents issues involved to determining the ethical responsibilities of businesses and provides
students a framework for analyzing and making ethical decisions.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
PowerPoint Deck
List of Student Downloads
Students should download the following items from the Student Companion Center to complete
the activities and assignments related to this chapter:
PowerPoint Deck (without teaching notes, activities, or answers)
Chapter Objectives
The following objectives are addressed in this chapter:
1. Discuss how business can discourage unethical behavior
2. Explain the relationship between law and ethics
3. Compare duty-based ethics and utilitarian ethics
4. Identify ethical problems in the global context
Key Terms
business ethics: Ethics in a business context; a consensus of what constitutes right or wrong
behavior in the world of business and the application of moral principles to situations that arise
in a business setting.
categorical imperative: A concept developed by the philosopher Immanuel Kant as an ethical
guideline for behavior. In deciding whether an action is right or wrong, or desirable or
undesirable, a person should evaluate the action in terms of what would happen if everybody
else in the same situation, or category, acted the same way.
corporate social responsibility (CSR): The concept that corporations can and should act
ethically and be accountable to society for their actions.
cost-benefit analysis: A decision-making technique that involves weighing the costs of a given
action against the benefits of the action.
duty-based ethics: An ethical philosophy rooted in the idea that every person has certain duties
to others, including both humans and the planet. Those duties may be derived from religious
principles or from other philosophical reasoning.
ethical reasoning: A reasoning process in which an individual links his or her moral convictions
or ethical standards to the particular situation at hand.
3
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
ethics: Moral principles and values applied to social behavior.
moral minimum: The minimum degree of ethical behavior expected of a business firm, which is
usually defined as compliance with the law.
outcome-based ethics: An ethical philosophy that focuses on the impacts of a decision on
society or on key stakeholders.
outsourcing: The practice by which a company hires an outside firm or individual to perform
work rather than hiring employees.
principle of rights: The principle that human beings have certain fundamental rights (to life,
freedom, and the pursuit of happiness, for example). A key factor in determining whether a
business decision is ethical under this theory is how that decision affects the rights of others,
such as employees, consumers, suppliers, and the community.
stakeholders: Groups, other than the company’s shareholders, that are affected by corporate
decisions. Stakeholders include employees, customers, creditors, suppliers, and the community
in which the corporation operates.
triple bottom line: The idea that investors and others should consider not only corporate
profits, but also the corporation’s impact on people and on the planet in assessing the firm. (The
bottom line is people, planet, and profits.)
utilitarianism: An approach to ethical reasoning in which ethically correct behavior is related to
an evaluation of the consequences of a given action on those who will be affected by it. In
utilitarian reasoning, a ―good‖ decision is one that results in the greatest good for the greatest
number of people affected by the decision.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
New chapter title and chapter-opening introduction scenario discussing recent
technology scandal involving finger-prick blood test kits
New chapter organization and subheads throughout (including new headings for
―outsourcing‖ and ―corruption‖)
New section on Making Ethical Business Decisions and new materials on Systematic
Approach: IDDR (―I desire to do right‖) that will be used throughout the text to analyze
ethics, including in all of the new ―A Question of Ethics‖ problems in the remaining
chapters.
o New ―Application of the IDDR Approach‖ subsection with step-by-step discussion
and sample scenario.
1 New Exhibit 3–1: An Analysis of Ethical Approaches to the
SampleDilemma (for new IDDR Approach)
o 1 New Term & Concept
outsourcing
1 New Ethics Today feature—
4
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
o Applying the IDDR Framework
Retained and Updated Digital Update feature—
o Should Employees Have a Right of Disconnecting? (Discussing overtime rules
anddigital connectivity of employees through smartphones and other devices.)
1 New Case:
o Case 3.1: Al-Dabagh v. Case Western Reserve University (2015)—on a
university’s discharge of a student for failure to meet professionalism standards
because he sexually harassed other students, was late for classes, and convicted
of a DUI
o New Case 3.2: Watson Laboratories, Inc. v. State of Mississippi (2018)—on
short-term profit maximization when drug manufacturer lied to Medicaid to
obtain overpayment for its drugs.
5 New Case in Points
o 2014 case on the moral minimum
o 2017 case on Volkswagen diesel-gate
o 2015 Morgan Stanley case on sales contests
o 2015 case on Gandhi furniture on unethical conduct with customer
o 2015 case on defective Takata Corp. airbags in cars
7 New Examples
o On Fraud Reduction and Data Analytics Act.
o On Dodd-Frank Wall Street Reform and Consumer Protection Act.
o On Google’s code of conduct.
o On Costco’s Code of Ethics.
o On Google’s popular corporation social responsibility policies
o On a garment worker who claimed that Nike abused workers in Thai factory by
withholding wages and forcing them to work 16 hours a day.
o On Chinese factory supplier making Apples products violated environment
standards.
Reworked material on Corporate Social Responsibility, including expanded discussion on
the social and corporate aspects of CSR.
1 New Business Scenario
3 New Case Problems (based on 2012 and 2017 cases)
1 New ―A Question of Ethics‖ applying all-new IDDR Approach (based on 2016 case)
1 New Time-Limited Group Assignment on corporate social responsibility
[return to top]
Chapter Outline
I. The Importance of Business Ethics
5
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
a. The Relationship of Law and Ethics – The law does not codify all ethical
requirements.
i. Ethics can be subjective and changeable. In the law, too, there are many
―gray areas‖ in which it is difficult to predict how a court will rule. A
company is more likely to succeed in a legal dispute if it can show that it
acted ethically, responsibly, and in good faith.
II. Setting the Right Ethical Tone
a. Ethical Leadership: Having ethical leadership is likely to lead to employees
acting ethically themselves.
b. Ethical Codes of Conduct: one of the most effective ways of setting the tone of
ethical behavior is to create an ethical code of conduct.
c. Corporate Compliance Programs: in large corporations other components of an
ethics program include an ethics committee, ethical training programs, and
internal audits.
d. Conflicts and Trade-offs: The duties of many groups (shareholders and
employees) may conflict causing management to face ethical issues.
III. Sarbanes-Oxley Act
a. Public Company Accounting Oversight Board-
i. Oversees the audit of companies, or issuers, whose securities are sold to
public investors in order to protect the interest of investors and the public
ii. To register public accounting firms that prepare audit reports for issuers
b. Enforcement and Penalties-
i. Board can inspect registered public accounting firms
ii. Investigate firms that violate the act
iii. Discipline those firms by imposing sanctions ranging from temporary or
permanent suspensions to civil penalties up to $15 million.
iv. The Act also prohibits falsifying or destroying records with the intent to
obstruct or influence a federal investigation- violations may result in a fine
and imprisonment for up to 20 years
IV. Business Ethics and the Law
a. Moral minimum- minimum acceptable standard for ethical business behavior
(simply obeying the law).
b. Laws Regulating Business- most business firms are subject to extensive
government regulation- from hiring and firing personnel to selling products in
the marketplace.
c. Gray Areas in the Law- while legality of a decision is usually relatively clear, the
ethical position is somewhat grayer. Business should be prepared to defend their
actions.
V. Approaches to Ethical Reasoning
a. Duty-Based Ethics - Duty-based ethics are derived from religious authorities or
philosophical reasoning. These standards are focused on concepts of right and
wrong, of duties owed and rights to be protected.
6
website, in whole or in part.
, Business Law: Text & Exercises (MindTap Course List)
i. Religious Ethical Principles - Religious standards dictate how one should
treat others (―Do unto others as you would have them do unto you‖) and
are generally absolute. For businesses, religious principles can—
(1) Unify employees and increase employee motivation.
(2) Alienate those with different religious backgrounds or social or
political beliefs.
(3) Cause negative publicity and even protests or boycotts.
ii. The Principle of Rights - According to the principle that persons have
rights (to life and liberty, for example), a key factor in determining
whether a business decision is ethical is how that decision affects the
rights of others, including employees, consumers, suppliers, the
community, and society.
(1) Conflicting Rights- Which takes priority?
(2) Resolving Conflicts- Should whichever right is stronger take
priority?
iii. Kantian Ethical Principles - Immanuel Kant believed that people should
be respected because they are qualitatively different from other physical
objects.
(1) People are not a means to an end - Treating human beings as a
means to an end (profit, for example) denies their basic humanity.
Empowered employees share solutions and are more productive.
(2) Categorical imperative- Kant’s categorical imperative is that
individuals should evaluate their actions in light of the
consequences that would follow if everyone acted the same way.
b. Outcome-Based Ethics - Utilitarianism focuses on the consequences of an
action, not its nature or a set of moral values or religious beliefs.
i. Cost-Benefit Analysis - An action is morally correct, or ―right,‖ when it
produces the greatest amount of good for the greatest number of
individuals. Applying this theory requires—
(1) A determination of who will be affected.
(2) A cost-benefit analysis—an assessment of the negative and
positive effects on those affected.
(3) A choice among alternatives that will produce the maximum
societal utility (the greatest positive benefits for the greatest
number of individuals).
ii. Problems with the Utilitarian Approach - An act that produces the
greatest good for the most may not seem to be the most ethical.
c. Poll Activity: 1 minute total. Asks students about their own ethical philosophy.
d. Corporate Social Responsibility - Corporate social responsibility (CSR) involves
incorporating a commitment to good citizenship, with a commitment to making
ethical decisions, improving society and minimizing environmental impact.
i. The Corporate Aspects of CSR- Any socially responsible activity—relevant,
significant, and related to a corporation’s business—can benefit the firm
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in terms of increasing goodwill and sales, decreasing operating costs, and
more impressive, committed, and long-term employees.
ii. The Social Aspects of CSR- Corporations can actively promote social goals
and move toward solving social problems. Some companies publish
annual corporate social responsibility—or sustainability, or citizenship—
reports to highlight their activities.
iii. Stakeholders and CSR- Stakeholders include employees, customers,
creditors, suppliers, advocacy groups, and the community in which a
business operates. It is sometimes said that duties to these groups should
be weighed against the duty to a firm’s owners.
e. Think Pair Share Activity (2) PPT Slide: 10 minute(s) total. Have students
break into pairs or small groups and consider the following: Alexander, the CEO
of Westwind Baby Furnishings, received a report from one of his quality
inspectors about a possible defect in the Baby Sleeptime Crib Westwind had just
started to market. The report said the bed was not safe for older babies, because
there was a chance it would collapse if the baby climbed up onto the railing.
Westwind had manufactured 20,000 Baby Sleeptime Cribs and would lose a great
deal of money ifit could not market the cribs.
Who are all the stakeholders in the decision whether or not to recall the cribs?
(Answer: The students should identify at minimum: customers, shareholders (if
any)or owners, employees of the company such as officers, quality inspectors,
etc.
Students may also identify government agencies such as Consumer
ProtectionAgencies (state or federal).
VI. Social Media
a. The use of social media in hiring decisions- Some employers review job
candidates’ Facebook pages, blogs, and tweets. Some may reject candidates
who do not participate in social media. Judging a job candidate based on what
she or he does outside of the workplace can be seen as unethical
b. The use of social media to discuss work-related issues
i. The responsibility of employers- Companies that fire employees
for criticizing other employees or managers in social media outlets
may violate federal labor law.
ii. The responsibility of employees- Is it ethical for an employee to
post negatively about his or her employer in social media?
V. Business Ethics on a Global Level
a. World Religions, Cultural Norms, and Ethics – Global businesses need to be
conscious of the impact of different religious principles and cultural norms on
ethics. For instance, in certain countries the consumption of alcohol is forbidden
for religious reasons. It would be considered unethical for a U.S. business to
produce alcohol in those countries and employ local workers to assist in alcohol
production.
b. Monitoring the Employment Practices of Foreign Suppliers - Concerns
include the rights and the treatment of foreign workers who make goods
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imported and sold in the United States by U.S. businesses. U.S. firms usually
refuse to deal with certain suppliers or arrange to monitor their workplaces to
make sure that the workers are not being mistreated.
a. Wages and Working Conditions - Allegations that a U.S. business allows
its foreign suppliers to engage in unethical practices with employees and
working environments hurt that firm’s reputation and goodwill.
b. Corporate Watch Groups - Today, few companies can assume that their
actions overseas and in other nations will go unnoticed by ―corporate
watchdogs‖ that uncover and then publicize unethical corporate behavior.
Thus, U.S. businesses take steps to avoid such publicity.
c. Avoiding Corruption - Under the Foreign Corrupt Practices Act, U.S. businesses
are prohibited from making payments to (bribing) foreign official to secure
favorable business contracts. Corruption is widespread in some nations, however,
and it can be the norm to make so-called side payments in private business in
certain locations. Companies must take care when doing business in countries
where corruption is common.
d. Discussion Activity: 5-10 minutes total.
As a class, discuss the following: Corporate Officers and Directors for a large
company are aware that the company is producing harmful discharges into a
waterway, in violation of environmental laws. They have calculated that paying
themaximum daily fine for the violation is more economical that the cost it would
taketo install equipment needed to remedy the pollution plus the production
downtime and lost profits.
What are the legal obligations and ethical obligations of these parties? (Answer:
Students should be able to identify responsibilities to various stakeholders and
determine whether profit maximization should be the ultimate right to be
protectedover other ethical obligations. A follow up question for the class may be
whether laws like this (which allow a wrongdoer to continue to do wrong so long
as they have the financial means to cover their fines, should be permitted?)
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Discussion Questions
You can assign these questions several ways: in a discussion forum in your LMS; as whole-class
discussions in person; or as a partner or group activity in class.
1. In negotiating a business deal, is ―strategic misrepresentation‖ permissible? From a
duty-based ethics viewpoint, in an absolute sense, it would unethical not to disclose information
on which the negotiator knows the other side might hinge its decisions. In contrast, a
negotiator owes an ethical duty to negotiate in the best interests of whomever he or she is
negotiating for. When one ethical duty conflicts with another, a decision has to be made as to
which duty is more fundamental. Frequently, questions faced by businesspersons do not have
clear-cut answers, but involve choices between arguably equally good alternatives. A thoughtful
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consideration of an ethical issue and the choices for resolving it, the decision to act on one of
those choices, and a careful review of its results can lead to more effective—and profitable—
practices by any businessperson.
It has been suggested that business is a game and deception is an important element of
negotiation, just as poker is a game in which bluffing plays an important part. The better an
individual is at deception, the more successful he or she will be at negotiation. Those who do
not anticipate deceit are fooling themselves. One of the problems with this suggestion is that
there is no stated point at which deception is no longer acceptable. By comparison, in poker, it is
acceptable to attempt to confuse other players as to the cards you have been dealt but it is not
acceptable to bribe the dealer to deal you better cards. Also, if deception were widely practiced,
the expense of protecting against it would increase for business and society.
2. How does a corporation’s investment in a political or social agenda affect its duty to
its shareholders? People invest in business to make a profit, and a company’s shareholders
may have such a variety of political and social views that the company’s pursuing a particular
political or social goal may be divisive. Diverting corporate funds reduces the amount available
for dividend payments. Diverting other resources reduces what is available to produce goods
and services for sale. Investors may also be less likely to invest in a company that engages in
behavior seen as unethical out of fear of consumer hostility toward the company.
3. To whom might a corporation owe a duty? A corporation may owe a duty to its
shareholders, its employees and their families, its customers, and society as a whole. What
must a corporation do if it finds itself subject to conflicting duties? There is no law that says
which of these duties comes first or how much weight should be given to each in the balance.
When there is no conflict between duties, the question of how best to fulfill a single duty
involves trade-offs. When these duties overlap, a balance must be struck. Determining which
duty takes precedence involves difficult trade-offs.
4. Because business controls so much wealth and power, what duty does it arguably
have to society? It has been argued that business owes a duty to society to use its wealth and
power in beneficial ways—promoting human rights, striving for equal treatment of minorities in
the workplace, acting to safeguard the environment, and eschewing profits from activities that
society deems unethical. Generally, business has been responsive to social needs, donating to
programs that benefit society.
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