Review Ethics Exam V Part 1

Summary

In this review, Mary Schecter Butler discusses the importance of business ethics and the Sarbanes-Oxley Act. She explains the distinction between law and ethics, emphasizing that legality is the minimum standard while ethics guide moral behavior in business. The Exxon Valdez case illustrates the consequences of unethical decisions. Butler introduces deontological and utilitarian ethical philosophies, highlighting their impact on business decisions. She stresses the significance of corporate social responsibility and the role of stakeholders in ethical decision-making, concluding with the necessity for corporate leaders to uphold ethical standards.

Takeaways

• 📚 Business ethics help make better decisions by understanding previous decisions and applying moral principles in a business setting.
• ⚖️ Law is considered the moral minimum in business decisions, and ethics come into play after determining legality.
• 💼 Ethical decisions in business involve evaluating legal implications, public relations, safety risks, and financial impacts.
• 🛢️ The Exxon Valdez case illustrates how ethical lapses can lead to severe environmental and financial consequences, with Exxon punished for ignoring known risks.
• 🔨 Punitive damages in legal cases serve as a punishment and deterrent, as seen with Exxon's reduced $2.5 billion penalty for reckless actions.
• 🤝 Two main ethical frameworks in business are Kantian (duty-based) and utilitarian (outcome-based), which focus on fulfilling duty and maximizing happiness, respectively.
• 🌍 Stakeholders in ethical business decisions include not only the company, employees, and customers but also communities, countries, and the global environment.
• 🏢 Corporate social responsibility means businesses must act ethically and be accountable to all stakeholders, beyond just pursuing profit.
• 👔 Ethical leadership starts at the top of organizations, with directors, officers, and managers expected to make responsible decisions.
• 📝 The Sarbanes-Oxley Act of 2002 was enacted to ensure ethical behavior in publicly traded companies, adding accountability for corporate leadership.

Q & A

What is the primary reason for studying business ethics?

The primary reason for studying business ethics is to make better decisions and to understand the decisions people have made previously within a business context.

How does law relate to business ethics?

Law represents the moral minimum, and it is the first step in deciding whether or not to undertake an action. If an action is legal, the next question is whether it is ethical.

Why is it important to make ethical decisions in business?

It is important to make ethical decisions in business to evaluate the legal implications, public relations impact, safety risks for consumers and employees, and financial implications.

What are the consequences of ethical lapses in the judiciary?

Ethical lapses in the judiciary can lead to findings of bad faith and the award of punitive damages.

Can you provide an example of punitive damages from the script?

The Exxon Valdez case is an example where punitive damages were awarded. Originally, it was $5 billion against Exxon, which was later reduced to $2.5 billion.

What are the two basic kinds of ethics discussed in the script?

The two basic kinds of ethics discussed are deontological ethics (Kantian ethics) and utilitarian ethics.

What is deontological ethics and how does it relate to business?

Deontological ethics is based on duty, regardless of the consequences. It generally arises from religious beliefs or philosophical reasoning. In business, if a corporation fulfills its duty to its customers, it is considered ethical according to deontological ethics.

How does utilitarian ethics differ from deontological ethics?

Utilitarian ethics focuses on the consequences of actions, without regard to the underlying concept of duty. It is outcome-based and considers the greatest good for the greatest number.

What is the concept of utility in utilitarian ethics?

In utilitarian ethics, utility is equated to happiness. Every unit of happiness and unhappiness is considered, and decisions are justified when they create the most utility for the most people.

What is corporate social responsibility as discussed in the script?

Corporate social responsibility means that corporations and businesses are citizens of the communities they are in and should act ethically and be accountable to stakeholders for their actions.

What are stakeholders in the context of business ethics?

Stakeholders include the corporation itself (stockholders or owners), the people who work in the business, directors, officers, customers, suppliers, and communities.

Why did Congress enact the Sarbanes-Oxley Act of 2002?

Congress enacted the Sarbanes-Oxley Act of 2002 to ensure that officers and directors of publicly traded companies are ethical and to prevent corporate and accounting fraud.

Outlines

00:00

💼 Introduction to Business Ethics and Legal Implications

This paragraph introduces the topic of business ethics, explaining its purpose to help individuals make better decisions and understand past choices. It distinguishes between law and ethics, stating that while the law provides a moral minimum, ethics requires a deeper evaluation of actions beyond legality. Businesses need to consider legal implications, public relations, consumer safety, and financial impacts when making decisions. The example of Exxon Valdez oil spill in 1989 illustrates the severe consequences of unethical behavior, with Exxon being penalized for its role in an environmental disaster.

05:01

📜 Kantian Ethics and Duty-Based Decision Making

This paragraph discusses Kantian ethics, which emphasizes duty-based ethics. In this approach, fulfilling one's duty is considered ethical, regardless of the outcome. The example of Apple refusing to release customer data during a terrorism investigation illustrates this philosophy. Despite the controversy, Apple upheld its duty to protect customer privacy. Stakeholders, including the company, employees, communities, and nations, all play a role in ethical decision-making. Kantian ethics supports the idea that as long as duties are fulfilled, ethical behavior is achieved.

10:03

⚖️ Utilitarianism and Outcome-Based Ethics

This section explores utilitarianism, a form of outcome-based ethics that evaluates the consequences of actions to determine their ethical value. The philosophy is guided by the principle of 'the greatest happiness for the greatest number,' even extending to animals. The example of building housing for people versus saving frogs demonstrates utilitarianism's focus on overall happiness. Additionally, the idea of distributing happiness to more people, even if the individual impact is minimal, is explored. The philosophy contrasts with older corporate practices that prioritized profits over social responsibility.

🌍 Corporate Social Responsibility and Ethical Leadership

This paragraph covers the importance of corporate social responsibility (CSR), emphasizing that businesses are part of the communities they operate in and must act ethically, considering all stakeholders. Corporations are no longer solely focused on maximizing profits but are also responsible for societal interests. Ethical leadership starts with corporate officers, directors, and managers, and their actions set the tone for the entire organization. Laws like the Foreign Corrupt Practices Act and Sarbanes-Oxley Act were enacted to ensure corporate accountability and ethical behavior in global business practices.

Keywords

💡Business Ethics

Business ethics refers to the consensus on what constitutes right and wrong behavior in a business setting and the application of moral principles in business decisions. The video emphasizes the importance of making ethical decisions not only based on legality but also considering the broader societal impact, such as in the case of environmental disasters like the Exxon Valdez oil spill.

💡Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 is a law enacted by Congress to ensure the ethical behavior of officers and directors of publicly traded companies. It is referenced as a response to unethical decisions by corporate leadership, highlighting how legal regulations are implemented to safeguard against unethical practices in corporate governance.

💡Moral Minimum

The term 'moral minimum' is used to describe the law as the basic threshold for ethical behavior. In the video, it's stated that corporations first check if an action is legal before considering if it is ethical, illustrating the distinction between adhering to the law and going beyond it to make morally sound decisions.

💡Punitive Damages

Punitive damages are monetary penalties awarded to punish a defendant for particularly harmful behavior. In the video, the example of the Exxon Valdez case is given, where Exxon and its captain were punished for reckless behavior with significant punitive damages, meant to serve as a deterrent to other corporations.

💡Stakeholders

Stakeholders are individuals or groups affected by a company's actions, including employees, customers, communities, and society at large. The video discusses how ethical decisions in business should consider the interests of all stakeholders, not just the company's stockholders, emphasizing the broader social responsibility of corporations.

💡Utilitarianism

Utilitarianism is an ethical philosophy that focuses on the consequences of actions and aims to maximize overall happiness or utility. The video contrasts this approach with duty-based ethics, using the example of whether Apple should have provided customer data to the government for national security purposes. Utilitarianism would justify such actions based on the greatest benefit for the most people.

💡Duty-based Ethics

Duty-based ethics, associated with Kantian philosophy, focuses on the idea that ethical decisions should be made based on one's duties and principles, regardless of the consequences. The video uses the example of Apple's refusal to share customer data as an illustration of duty-based ethics, where the company prioritizes its obligation to customer privacy over potential security concerns.

💡Corporate Social Responsibility

Corporate social responsibility (CSR) refers to the idea that businesses should act ethically and be accountable to their stakeholders, including society, for their actions. The video highlights how modern businesses are expected to go beyond profit-maximization to consider their impact on the environment and society, such as in cases of environmental protection or harmful product creation.

💡Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from bribing foreign officials to obtain or retain business. It is mentioned in the video as an example of laws that enforce ethical standards in international business dealings, ensuring that corporations do not engage in corrupt practices, even in countries with less stringent regulations.

💡Exxon Valdez Oil Spill

The Exxon Valdez oil spill is a significant case study mentioned in the video, where millions of gallons of oil were spilled off the coast of Alaska due to the reckless actions of the captain and Exxon. This case serves as an example of how ethical lapses and environmental neglect by corporations can have catastrophic consequences, resulting in punitive damages and lasting environmental and social harm.

Highlights

Business ethics is about understanding right and wrong behavior in a business setting, involving the application of moral principles.

Law serves as the moral minimum in business decisions—businesses first check if an action is legal, and then determine if it is ethical.

Four important factors to consider when making ethical decisions: legal implications, public relations impact, safety risks for consumers and employees, and financial implications.

Exxon Valdez case: An oil spill that led to massive environmental damage and punitive damages, demonstrating corporate responsibility for ethical behavior.

Kantian ethics (duty-based ethics) focuses on fulfilling duty regardless of the outcome, like in the case of Apple refusing to release private data despite government pressure.

Utilitarianism (outcome-based ethics) assesses decisions based on the greatest happiness for the greatest number, without considering duty.

Stakeholders in business ethics include not only customers, employees, and shareholders but also communities, society, and the world at large.

Corporate social responsibility (CSR) requires businesses to act ethically, considering the impact on society and stakeholders rather than just focusing on profits.

The importance of ethical leadership in corporate behavior: Ethical decision-making starts with corporate leadership, including officers and directors.

Congress enacted the Sarbanes-Oxley Act of 2002 to ensure corporate transparency and accountability, particularly in publicly traded companies.

Punitive damages, such as in the Exxon Valdez case, are designed to punish and prevent future reckless behavior by corporations.

The Foreign Corrupt Practices Act prohibits bribery of foreign officials, holding corporations accountable for ethical behavior abroad.

The Exxon Valdez case highlighted how corporate negligence can lead to severe environmental and economic consequences, serving as a warning to other companies.

Utilitarianism in business ethics also considers the impact on animals, treating them as part of the 'units of happiness' when making decisions.

Sarbanes-Oxley was a response to unethical practices by corporate directors and officers, aimed at restoring trust in corporate governance.

Transcripts

hi everyone this is Mary Schecter Butler

and this is the review for exam 5

business ethics sarbanes-oxley so why do

we study ethics in business to make

better decisions to understand the

decisions people have made previously

and business ethics is a consensus of

what constitutes right and wrong

behavior and the application of moral

principles in a business setting now

we're no law what does business ethics

have to do with law well law is the

moral minimum moral principles and

values applied to social behavior but

law is the moral minimum that means if

you are a corporation and you're

deciding whether or not to do an action

you look to see is it illegal that's the

first step is it legal or illegal if

it's legal then there's another question

to ask is it ethical it's important to

make ethical decisions for 4 different

reasons

when doing it you need to evaluate the

legal implications of every decision the

public relations impact the safety risks

for consumers and employees and the

financial implications as well for

example ethical lapses in the judiciary

create findings of bad faith and the

award of punitive damages now we've

discussed punitive damages those are

damages that are meant to punish a

defendant from doing the same thing

again for example an in Ray Exxon Valdez

the Exxon Valdez case is a 1989 case

where an oil tanker ran aground off the

coast of Alaska spilling millions of

gallons of oil into the Prince William

Sound the oil tanker spilled 20% of its

cargo into the water off of a layout

Alaska's Coast which was 11 million

gallons of oil thousands of animals and

hundreds of birds died and tourism

suffered the people who fish

I had oil all over their boats their

fish a property and wildlife were

destroyed why did it run aground while

well the ship's captain Joseph Hazelwood

left the bridge and instructed the third

mate Gregory Cousins to take the wheel

cousins guided the ship incorrectly and

hit a reef one of the questions was

whether captain Hazelwood who was an

alcoholic was under the influence of

alcohol when he left the bridge and the

problem was the captain had a history of

alcohol abuse which was known to Exxon

but Exxon permitted him to maintain his

position originally the plaintiffs were

awarded 287 million dollars in

compensatory damages compensatory to

compensate them for their actual

injuries the courts later reduced that

to 20 million and both captain Hazelwood

and Exxon were determined to have been

reckless and they awarded punitive

damages to the plaintiffs 5,000 and

punitive against Hazelwood and 5 billion

against Exxon now that 5 billion was

reduced to 2.5 billion later on but you

can see the problem for a corporation

when a corporation ignores environmental

concerns ignores issues with their

employees and as a result drastic

economic and environmental effects were

caused now they punished Exxon but in

punishing Exxon they also sent a signal

to all the other oil companies beware we

are not going to let permit you to ruin

our environment to ruin our businesses

along the coasts you better follow the

laws that you part of me that apply to

your industry otherwise we're going to

hold you accountable now we're going to

learn about two different basic kinds of

ethics and I'm not going to go into all

the details of these ethical

philosophies this is not a philosophy

class but you do need to know these two

canto nyan philosophy can Tony and

ethics and utilitarian is our now again

I'm going to go into just certain

aspects of these philosophies those of

you who are philosophy majors can add a

great deal to this but these are the

basics that we need to know for this

class there are Duty based ethics which

is Ken Tony and philosophy ethics based

on an underlying concept of duty

regardless of the consequences

they generally arise from religious

beliefs or philosophical reasoning and

basically this would be the law is a as

long as we follow the law then we are

doing the ethical thing the outcome

doesn't matter as long as you have

fulfilled the duty so if a corporation

has a duty to their customers and they

fulfill the duty then that's all they

need to do to comply with can Tony and

ethics an example of this would have

been the recent Apple case where there

were terrorists who had Apple phones and

Apple would not release the information

on their phones to the United States

government Apple claimed that had

privacy contracts with its Apple

ultimately gave up the information but

not without a fight

based on can't only and can't own Ian's

philosophy Apple had the right to refuse

to give out its customers private

information however you could see why

people would be up in arms about that

because these stakeholders that were

involved and stakeholders include the

customers the company the employees but

it also includes the communities the

world because in this case we were

talking about terrorism terrorism

affects not only the people who were

killed or hurt by the terrorists but

also the communities and the United

States

and the world community so when we look

at state stakeholders we look at all

things the company the company's

employees the customers the communities

the United States the world and see if

they apply and then we look and we go to

what we call ethics part of me outcome

based ethics which includes and in this

case we're going to talk about

utilitarianism outcome based ethics look

at the consequences of the action

without any regard to the underlying

concept of duty

so sometimes it's recall called as

situational ethics or the end justifies

the means

the end justifies the means and for the

APPL example people argued that the end

was getting rid of terrorists and

terrorism and the government needed the

information on those terrorist cell

phones because they needed to find out

if there was a terrorist cell still

working if these people worked by

themselves with other groups where they

connected nationally or internationally

so according to utilitarianism

well according to outcome based ethics

the information should have been given

up specifically utilitarian

to utilitarianism sorry states that a

decision is justified when it creates

the most utility for the most people

utility is equated to happiness so for

every unit of happiness we look at every

unit of unhappiness utilitarianism is

unique because it counts people and

animals as part of that count so for

example if there were a thousand frogs

and a sow and five hundred people

in a community and the community needed

more housing but in order to build more

housing for 500 people a thousand frogs

would be killed

based on utilitarianism each frog counts

as a unit so that's a thousand units of

happiness if if the buildings are not

built and then we have 500 people which

each one is a unit of happiness so that

would be 500 units of unhappiness if the

housing was not built well under

utilitarian utilitarian ethics the

housing unit would not be built because

the thousand frogs create a thousand

units of happiness and the people only

have 500 units of unhappiness so the

frogs outweigh the people as well if Joe

gets a million dollars or a million

people get $1 okay what would be better

do we give Joe the million dollars or do

we give a million people one dollar now

one dollar to a million people is not

that much happiness

well utilitarianism doesn't take into

account the amount of happiness only

that there's a positive reaction so if

we give a million dollars to Joe he's

gonna be a static but he's only one

person if we give a million million

people one dollar each each person will

be happy to have the dollar but not a

static in any case utilitarianism says

give a million people one dollar and we

have a million units of happiness again

you may ask why do we care you know in

the old days corporations did what was

best for the corporation and what gave

them the most profit back in the oil

baron days we had that but nowadays

people care about corporate social

responsibility and corporate social

responsibility means that corporations

and business

our citizens of the communities that

they are in and that they should act

ethically and be accountable to the

stakeholders for their actions now I

said earlier on that stakeholders are

the corporation itself and that means

the stockholders so those are two

different s words stockholders are the

people who own stock in the corporation

it may be a business that doesn't have

stock and we'll talk about that we've

talked about different types of

businesses so the people who own the

business whether it be stockholders or

family members sole proprietorship and

then we need to talk about the people

who work in the business they are share

they are stakeholders as well and then

the directors and officers in a

corporation also a part of this we have

the customers we have the suppliers we

have the communities all of these people

are stakeholders and when we're talking

about ethics we need to take all of them

into account so consumers the United

States if that applies the world if that

applies society as a whole we need to

the corporations or the businesses need

to consider how they should act and they

need to act in furtherance of society

societal interests at the expense of the

corporation's own profit maximizing

behavior and that's what social

responsibility is we don't just get to

create whatever we want and ruin the

environment or create products that are

harmful corporations now have duties now

the ethics of the corporations start at

the top starts with the corporate

leadership with the officers directors

the managers and the behavior of the

managers and owners is important so

these are the people these are the

people you will be and you need to learn

to make ethical decisions now we've

heard of cases where people or

corporations or directors are not making

ethical

decisions so Congress has decided that

we have some laws that will take care of

those things for example we have the

Foreign Corrupt Practices Act that

prohibits bribery of high-ranking

foreign officials that means we don't

get to go into a third world country and

pay off the officials and do whatever we

want now to make sure that officers and

directors of publicly traded companies

are on the up-and-up

Congress enacted the sarbanes-oxley Act

of 2002