Chapter 1

Why Ethics Matter

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Summary

The first steps are to ask ourselves how we define success and to understand that integrity calls on us to act in a way that is consistent with our words. The three normative theories of ethical behavior allow us to apply reason to business decisions as we examine the result (utilitarianism), the means of achieving it (deontology), and whether our choice will help us… All the company’s stakeholders benefit from managers’ ethical conduct, which also increases a business’s goodwill and, in turn, supports profitability. Ethics sets the standards that govern our personal and professional behavior.

Key terms

ethics

the standards of behavior to which we hold ourselves in our personal and professional lives

deontology

a normative ethical theory suggesting that an ethical decision requires us to observe only the rights and duties we owe to others, and, in the context of business, act on the…

integrity

the adherence to a code of moral values implying trustworthiness and incorruptibility because there is unity between what we say and what we do

utilitarianism

a normative theory of ethics suggesting that an ethical act is the one whose consequences create the greatest good for the greatest number of people

goodwill

the value of a business beyond its tangible assets, usually including its reputation, the value of its brand, the attitude of its workforce, and customer relations

stakeholders

individuals and entities affected by a business’s decisions, including customers, suppliers, investors, employees, the community, and the environment, among others

compliance

the extent to which a company conducts its business operations in accordance with applicable regulation and statutes

Chapter 2

Ethics from Antiquity to the Present

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Summary

He believed a person’s actions determined whether he or she was virtuous, and the point of the virtuous life was happiness, or eudaimonia Aristotle considered phrónēsis , or prudence, the most important virtue, because of its practical application Aristotle focused on the role of virtue in developing individual character and social stability. Moral virtues were acquired through habit and built character by helping someone pursue what is beneficial and avoid what is harmful in daily life.

Key terms

eudaimonia

the happiness or human flourishing that results from virtuous activity; it is more than contentment or satisfaction

li

the proper order of the universe and the customs and rituals that support order and harmony on Earth

phrónēsis

prudence or practical wisdom; the intellectual virtue Aristotle considered most important

categorical imperative

Kant’s unconditional precept that we must “act only according to that maxim whereby you can, at the same time, will that it should become a universal law”; to act on the basis of…

consequentialism

an ethical theory in which actions are judged solely by their consequences without regard to character, motivation, or absolute principles of good and evil and separate from…

original position

in Rawls’s justice theory, a hypothetical situation in which rational people can arrive at a contractual agreement about how resources are to be distributed in accordance with…

social contract theory

a theory that holds the natural state of human beings is freedom, but that human beings will rationally submit to some restrictions on their freedom to secure their mutual safety…

utility function

a measure, in “utils,” of the value of a good, service, or proposed action relative to the utilitarian principle of the greater good, that is, increasing happiness or decreasing…

Chapter 3

Defining and Prioritizing Stakeholders

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Summary

Such classifications may include enabling stakeholders, normative stakeholders, functional stakeholders, and diffused stakeholders. There are three approaches to stakeholder theory: the descriptive approach, the instrumental approach, and the normative approach. The normative approach takes the most comprehensive view of the organization and its stakeholders and is the fundamental basis of stakeholder theory. Organizations can analyze stakeholder claims by classifying them on the basis of their intensity and impact on the firm, as well as on the basis of their relationship to the firm.

Key terms

diffused stakeholder

a stakeholder with an interest in a company’s decisions and whose impacts on a firm can be large even if the relationship is generally weaker than other types

normative approach

a theory that considers stakeholders as ends unto themselves rather than means to achieve a better bottom line

instrumental approach

a theory proposing that good management of stakeholders is important because it can help the bottom line

descriptive approach

a theory that views the company as composed of various stakeholders, each with its own interests

enabling stakeholder

a stakeholder who permits an organization to function within the economic and legal system

functional stakeholder

a stakeholder whose relationships influence or govern an organization’s inputs and outputs

normative stakeholder

a stakeholder in the organization’s industry who influences its norms or informal rules

stakeholder claim

a particular stakeholder’s interest in a business decision

Chapter 4

Three Special Stakeholders: Society, the Environment, and Government

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Summary

Despite the ongoing ethical debate, being a good corporate citizen is a goal toward which most contemporary corporations strive. Adopting sustainability as a strategy means protecting the environment. While some argue that corporations have a primary duty to maximize profits for the benefit of shareholders, others assert that businesses have a duty to the society in which they operate, a duty that serves as the… Many court cases have addressed the issue, but it has not been conclusively resolved

Key terms

sustainability

a long-term approach to the interaction between business activity and societal impact on the environment and other stakeholders

good corporate citizen

a goal toward which most contemporary corporations strive

business judgment rule

the principle that officers, directors, and managers of a corporation are not liable for losses incurred when the evidence demonstrates that decisions were reasonable and made in…

corporate personhood

the legal doctrine holding that a corporation, separate and apart from the people who are its owners and managers, has some of the same legal rights and responsibilities enjoyed…

Commerce Clause

an enumerated power listed in the Constitution giving the federal government the right to regulate commerce between states

fiduciary duty

a very high level of legal responsibility owed by those who manage someone else’s money, which includes the duties of care and loyalty

Sarbanes-Oxley

legislation passed in 2002 that mandates reporting transparency by businesses in areas ranging from finance to accounting to supply chain activities

states’ rights

a view that states should have more governing authority than the federal government, based on the Tenth Amendment, which reserves to the states any right not specifically…

Chapter 5

The Impact of Culture and Time on Business Ethics

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Summary

With increasingly diverse domestic and global markets and the spread of consumerism, companies must consider the ethical implications of outsourcing production and resist the temptation to look the other way when their… Technology is a driving force in ethical shifts, as we can see in tracing changes from the age of mercantilism to the Industrial Revolution to the postindustrial era and the Information Age. Culture has a tremendous influence on ethics and its application in a business setting. In fact, we can argue that culture and ethics cannot be separated, because ethical norms have been established over time by and make sense to people who share the same background, language, and customs.

Key terms

mercantilism

the economic theory that global wealth is static and prosperity comes from the accumulation of wealth through extraction of resources or trade

consumerism

a lifestyle characterized by the acquisition of goods and services

localization

the process of adapting a product for non-native environments and languages, especially in other nations and cultures

humanistic business model

a business model for balancing profitability and responsibility fairly, especially with regard to stakeholders

moral agency

the self-awareness, freedom, and ability to make choices based on one’s perception of right and wrong

enculturation

the process by which humans learn the rules, customs, skills, and values to participate in a society

universal values

ethical principles that apply everywhere despite differences in time, geography, and culture

acculturation

the cultural transmission and socialization process that stems from cultural exchange

Chapter 6

What Employers Owe Employees

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Summary

There is a financial payoff in that a well-treated workforce is also a productive one A company and its managers need to provide a workplace at which employees want to work, free of safety hazards and all types of harassment. Perks and benefits also make the company an attractive place to work. Yet another factor is managers who make employees feel valued and respected.

Key terms

employment at will

a legal philosophy that holds that either the employee or the employer may dissolve the employment arrangement at will (i.e., without cause and at any time unless an employment…

pay ratio

the number of times greater the average executive’s salary is than the average worker’s

business purpose exception

an exception to the Electronic Communications Privacy Act of 1986 that permits employers to monitor all oral and electronic communications, assuming they can show a legitimate…

closed shop

a union environment that requires new hires to be automatically enrolled in the labor union and union dues to be automatically deducted from their pay

consent exception

an exception to the Electronic Communications Privacy Act of 1986 that allows employers to monitor employee communications provided employees have given their consent

EEOC

the Equal Employment Opportunity Commission, created by the U.S. Civil Rights Act of 1964 and which attempts to eliminate discrimination in the workplace based on race, gender…

OSHA

the Occupational Safety and Health Act, which governs workplace safety, and the Occupational Safety and Health Administration, which administers the act at the federal level

Chapter 7

What Employees Owe Employers

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Summary

Internal marketing is one process by which a company instills employee commitment to the brand and builds loyalty in its workforce. Employees have a duty to be loyal to the brand and treat customers well. Ethical employees accept their role in creating a workplace that is respectful, safe, and welcoming by getting along with coworkers and doing what is best for the company. They also comply with corporate codes of conduct, which cover a wide range of behaviors, from financial dealings and bribery to sexual harassment.

Key terms

bribe

a payment in some form (cash or noncash) for an act that runs counter to the legal and ethical culture of the work environment

internal marketing

the process of getting employees to believe in the company’s product and even to buy it

brand

a type of product or service marketed by a particular company under a particular name

Foreign Corrupt Practices Act

an amendment to the Securities and Exchange Act of 1934; its main purpose is to make it illegal for companies and their managers to influence or bribe foreign officials with…

insider trading

the buying or selling of stocks, bonds, or other investments based on nonpublic information that is likely to favorably affect the price of the security being traded

nondisclosure agreement

an agreement to prevent the theft of trade secrets, most of which are protected only by a duty of secrecy and not by federal intellectual property law

intellectual property

the manifestation of original ideas, protected by legal means such as patent, copyright, or trademark

Chapter 8

Recognizing and Respecting the Rights of All

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Summary

Diversity may also bring some initial challenges, and some employees can be reluctant to see its advantages, but committed managers can deal with these obstacles effectively and make diversity a success through inclusion To accommodate religious beliefs, the absence of formal religious faith, or disabilities, businesses should make every reasonable accommodation they can to allow workers to contribute to the company. Successful companies will not only follow the applicable law but also develop ethical policies to send a clear message that they are interested in job skills and abilities, not sexual orientation or personal life choices Income inequality has grown sharply while the U.S.

Key terms

reasonable accommodation

a change or adjustment to a job or other aspect of the work environment that permits an employee with a disability or other need to perform that job

income inequality

the unequal distribution of income among the participants of an economy

inclusion

the engagement of all employees in the corporate culture

undue hardship

a difficulty or expense to the firm significant enough that reasonable accommodation may not be required

diversity dividend

the financial benefit of improved performance resulting from a diverse workforce

animal rights

the entitlement of nonhuman animals to ethical treatment

Chapter 9

Professions under the Microscope

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Summary

The opportunities to create a company, be your own boss, make a dramatic impact on business, establish an entrepreneurial culture that will be adopted by others, and possibly become rich in the process certainly all… Still, the entrepreneurial lifestyle is challenging, and the success rate for start-ups is exceptionally low. The atmosphere surrounding entrepreneurs and their start-ups can provide a dizzying rush. Interpersonal conflicts are prevalent in start-up environments, and entrepreneurs who seek to stay true to their vision and ethical values face a difficult road.

Key terms

entrepreneurial lifestyle

challenging, and the success rate for start-ups is exceptionally low

entrepreneur

a business leader willing to take on the risk of starting a new company and offering a product or service in the hope of a profit

entrepreneurial culture

the combination of personality and management style with which entrepreneurs shape the initial business practices and ethical environment of their firm

multipayer health care system

a means of providing health care in which the patient and others such as an employer and a private health insurance company all pay for the patient’s care

single-payer health care system

a means of providing health care in which state or national tax revenues would pay for citizens’ medical care, with the government being the sole payer

universal health care system

a means of providing health care to all, funded through taxes and overseen by the central or federal government

psychological appeal

advertising intended to bolster consumers’ self-esteem if certain products or services are purchased

advertising

commercial messages urging the purchase of new or improved products or services that reach us in every medium: print, online, digital, television, radio, and outdoor

Chapter 10

Changing Work Environments and Future Trends

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Summary

Some challenges of telecommuting for the manager are maintaining the privacy of the firm’s data, transmitting corporate culture, defining performance objectives, and encouraging collaboration. Companies often benefit from the higher productivity and lower turnover of telecommuting employees, and they can also provide a social benefit by permitting employees to avoid commuting, reducing traffic congestion and… Remote workers save themselves the time and cost of a commute and are better able to balance work and home life. Employees have the challenge of remaining focused on work when they are working elsewhere.

Key terms

telecommuting

working from a remote location (home or other space) by means of electronic connections

manager

maintaining the privacy of the firm’s data, transmitting corporate culture, defining performance objectives, and encouraging collaboration

access economy

a nontraditional business model in which consumers participate on both sides of a transaction, sometimes facilitated by a third party

artificial intelligence (AI)

the branch of science that uses computer algorithms to replicate human intelligent behavior by machines with minimal human intervention

gig economy

an environment in which individuals and businesses contract with independent workers for the completion of short-term assignments, engagements, or projects, offering few or no…

robotics

a field of research that includes computer science, mechanical and electronics engineering, and science process with the objective to produce robots, or related forms of…

job sharing

the use of two or more employees to perform the work of one full-time position

flextime

a work schedule in which employees can select their own start and finish time

Chapter 11

Epilogue: Why Ethics Still Matter

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Summary

Not only does the world seem to have shrunk, but the twenty-first century pace of change seems to have sped up time itself. As the world becomes smaller and faster and companies adapt their practices to fit new conditions, the core of business ethics that guides corporate behavior remains the same, directed, as always, by shared values and… Rajat Gupta grew up in India, earned an MBA from Harvard, and prospered for years as managing director of McKinsey & Company, a preeminent management consulting firm. A respected business leader and cofounder of the Indian School of Business and the American Indian Foundation, Gupta served on many corporate and philanthropic boards.