LAW, BUSINESS, &

SOCIETY
11th
Edition

McGraw-Hill

2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
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Learning Objectives

Describe some of the ethics issues

associated with Americas recent
banking and finance crisis
Discuss Americas current moral
climate
Discuss the leading ethical decisionmaking theories
Distinguish between teleological and
deontological ethical systems
2-2

Learning Objectives

Distinguish utilitarianism and formalism

Describe Kohlbergs theory of moral
development
Describe some of the forces that
encourage unethical behavior in the
workplace

2-3

Learning Objectives

Explain the general purpose of ethics

codes in the workplace
Explain the general requirements of
the Foreign Corrupt Practices Act
Discuss some of the risks and rewards
of whistle blowing

2-4

Introduction to Ethics

Current final crisis is a result of:

Inadequate government regulation
Easy credit, overextended borrowers
Real estate speculation, greed, and

collapsed housing market

2-5

Introduction to Ethics

Too big to jail

Americas big banks are untouched by

criminal prosecution
Money laundering, mortgage and foreclosure
fraud, and big rigging were discovered
Settlements and civil penalties were paid

Proving criminal wrongdoing and required

intent to commit a crime are difficult

2-6

Introduction to Ethics

Pattern of abuse
Subprime mortgage crisis
Savings and loan crisis of 1980s
Corporate greed of the Enron era
CEO Dennis Kozlowski stole millions of
dollars from Tyco
Bernard Madoffs colossal Ponzi scheme

2-7

Americas Moral Climate

Americans are questioning nations

moral health
Majority of people believe moral values
are declining

2-8

Americas Moral Climate

College students
Most of the business students admit they

cheated in college or high school

MBA Oath - Harvard students started a
voluntary campaign to promote ethical acts

Changing values
College experience strengthens certain

ethical values
Most young people are self-absorbed
2-9

Ethics Theories

Business ethics
Measurement of business behavior based

on standards of right and wrong

Jean-Paul Sartres philosophy

Standards of conduct cannot be objectively

discovered or rationally justified

Individuals are responsible for their moral
decisions
Existence precedes essence
2-10

Universal Truths?

Religion
Faiths feature efforts to build absolute and

universal standards
American managers believe in the Golden
Rule
Provides a foundation for a moral life

Libertarianism
Ethical theory rooted in personal liberty
Morality coincides with the maximization of

personal freedom

2-11

Universal Truths?

Virtue ethics
Key to good ethics lies in the classic notion

of character
One must focus on strategies for
encouraging desirable character traits
Person should cultivate the motivation to
do the right thing in daily conduct

2-12

Teleology

Concerned with the consequences of

an act rather than the act itself
Utilitarianism - Good is to be weighed
against evil to reach an ethical decision
Act-utilitarianism
Goal - To identify consequences of an act to
determine whether it is right or wrong
Rule-utilitarianism
One must follow rules that generate the
greatest value for society
2-13

Deontology

Directed toward what ought to be, what

is right
Principle is primary
Consequence is secondary or irrelevant

Formalism - Measured by the rightness

of rules and not by consequences
Categorical imperative - Every person

should act on principles that he or she

would prescribe as universal laws
Moral rule is categorical
2-14

Corporate Ethical Climate

Unfavorable public attitudes toward big

business
Businesses are more transparent and
accountable than ever before

2-15

Kohlbergs Theory of Moral

Development

Moral development evolves and

improves as a function of age and
education
Movement through distinct stages
Preconventional level
Stage 1 - Obey rules to avoid punishment
Stage 2 - Follow rules only if it is in own
interest

2-16

Kohlbergs Theory of Moral

Development
Conventional level
Stage 3 - Conform to meet the expectations
of others
Stage 4 - Doing right is ones duty
Post conventional or principled level
Stage 5 - Current laws and values are
relative
Stage 6 - Follow self-chosen universal ethical
principles

2-17

Feminine voice - Carol Gilligans

criticisms
Conceptions of morality are gender-based
Men take an impersonal view of morality
Women build morality based on care,
support, and responsiveness
Women are underscored in Kohlbergs

stages

2-18

Reason or Emotion?

Kohlberg and Gilligan theory

Moral decision making is controlled product

of analysis, deliberation, and experience

Emotion/intuition approach
Moral decision making is an automatic,

nonreflective process
Mind generates feelings of approval or
disapproval instantaneously when
confronted with a moral question

2-19

Reason or Emotion?

Moral decision making

Product of a dual process system
Employs both automatic emotions and

controlled reasoning

2-20

Moral Identity

Degree to which moral concerns are

central to ones sense of self
People with stronger moral identities
are likely to engage in good behavior

2-21

Organizational Forces

Individual character and organizational

culture influence corporate misconduct
Pressure to cheat is cited as an
evidence of an organizations ethical
culture

2-22

The Boss

Top corporate bosses in America were

disgraced by various scandals
Despite cynicism, bosses are crucial in
setting ethical climate in an
organization
Climate of integrity is vital to the
success of public company
Should be initiated from the top

management
2-23

Corporate/White Collar Crime

U.S. government struggles to curb

corporate crime
Deferred and non-prosecution
agreements
Contracts with the government
Company undertakes specified actions in
exchange for charges being dismissed or not
filed

2-24

Prevention or Enhanced
Punishment

SarbanesOxley Act (SOX), 2002

Confronts corporate crime by publicly

traded companies
Provisions
Establishes an independent board to oversee
accounting profession
Requires executives to personally certify the
accuracy of financial reports

2-25

Prevention or Enhanced
Punishment
Creates new crimes and raises penalties
Requires publicly traded companies to:
Establish internal control systems
Disclose whether they have adopted an ethics code
for senior financial management

2-26

Sentencing

Federal sentencing guidelines provide:

Ranges within which judges are advised to

impose sentences
Greater predictability and consistency in
punishment

Companies with effective compliance

programs may receive reduced
penalties in crimes

2-27

Global Bribery

Accepted as a necessary and lawful

way of doing business in many cultures
Foreign Corrupt Practices Act (FCPA)
Chief federal weapon against bribery

abroad
Considers bribery as a criminal conduct
Requires rigorous internal accounting
controls and careful recordkeeping

2-28

Global Bribery
Does not forbid payments for securing the

performance of a routine governmental

action

FCPA is controversial from the outset

Some consider that the act damages

competitiveness

Most industrial countries are moving

toward the zero tolerance of bribery

2-29

Whistle Blowing

False Claims Act

Rewards individuals who help stop fraud

involving government contracts

DoddFrank Wall Street Reform and

Consumer Protection Act
Include a cash reward for information that

leads to a recovery exceeding $1 million

Whistle blowers are entitled to 10 to 30

percent of the recovery
2-30

Whistle Blowing

Retaliation
Whistle blowers pay high price for

exercising consciences
DoddFrank forbids discharge, demotion,
and other forms of retribution against
securities law whistle-blowers

2-31