Business ethics: principles, practices, and organizational impact

Business Ethics

Identify three companies in the news or which you are familiar with that operate ethically. What are the reasons these companies/organizations are ethical?

Procter & Gamble, Cisco and Southwest Airlines are all noted for high rankings in corporate ethics. These companies are ethical because they focus not just on financial responsibility, but they also target social responsibility as a goal by emphasizing a good environment for their employees, responsible relations with the community and quality products for their customers.

Is stealing another company's employees a fair competitive practice? Use the Pespsi-Coca-Cola battle as an example. Make a list of "ethical" principles in business that are quite clearly not part of the legal system. Should these principles be made into law?

Yes, recruiting an employee away from a competitor is a perfectly reasonable practice in a free market economy provided that the employee has not signed legal documents saying they would not work for a competitor and the state law recognizes these agreements. The practice only become unfair if the hired away employee divulges information that is proprietary to his or her former employer (product prices, contract terms and conditions, production plans or product technical information).

Companies should responsibly consume scarce natural resources. This should be a law because it presents a negative externality where its actions result in a cost accruing to an external party that did not consent to the impact.

Employers should not dismiss employees without appropriate cause. This should be made into law because being an employee at will (as is the case in most states) means that it's too easy for companies to arbitrarily treat their employees unfairly. The employee counts on the employer for their subsistence and perhaps their family's support as well.

Companies should have money-back guarantees for customers who are not satisfied. This should not be a law because the customer can and should easily find another company to do business with in today's competitive world. For cases where there is significant monetary dispute, courts adequately handle these situations already.

Read Chapters 5 and 6 in the text.

2. How does management tie in with morality?

Good leaders concentrate on doing the right thing in addition to just doing things right.

3. Is there such a thing as company loyalty? How does it tie in with morality?

Focus Questions for Chapter 6:

What did Adam Smith mean by the gospel of capitalism?

Smith believed that while human motives are often selfishand greedy, the competition in the free market would tend to benefit society. Given the proper incentives -- the ability to profit from hard work and risk taking -- people will strive to do well.

Give two or three examples of business competition in which everybody wins. What are the defining characteristics of such games (if any)? Could all (or business activities consist of such games?

There are situations where one firm lowers its prices, competitors are likely to follow and everyone will see less profits. or, a competitor might hold its price to gain market share. They all stand to gain only by setting prices where everyone earns profits and has a stable market share.

These firms face a prisoner's dilemma where acting in one's self-interest does not serve one's self-interest. Another example of the prisoner's dilemma exists in the fishing industry, where the rate of catches has increased faster than the ability of the fish to reproduce. The result is a depletion of supply. The optimal strategy for each fisher is to cooperate with each other by restraining the volume of their catches. All business activities do not consist of such games because of lack of prior experience with the competitor that makes it difficult to play the game and situations where competitors do not behave rationally. and, of course, there are situations where cooperation does not equally benefit both parties.

Focus Questions for Chapter 7:

1. Define rationality and place it within a framework of business ethics.