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Chapter: Business Science - Business Ethics, Corporate Social Responsibility and Governance - Ethics Theory and Beyond

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Analysis of Ethical Problems in Management

Ethics are not relevant in business, beyond the normal standards not to lie, cheat, or steal. All that is necessary is to maintain price-competitive markets and recognize the full costs of production in those prices, and then the market system will ensure that scarce resources are used to optimally satisfy consumer needs.

Analysis of Ethical Problems in Management

 

Economic Analysis (Pareto Optimality)

 

Ethics are not relevant in business, beyond the normal standards not to lie, cheat, or steal. All that is necessary is to maintain price-competitive markets and recognize the full costs of production in those prices, and then the market system will ensure that scarce resources are used to optimally satisfy consumer needs. A firm that is optimally satisfying consumer needs, to the limit of the available resources, is operating most efficiently and most profitably. Consequently, business managers should act to maximize profits, while following legal req uirements of no conclusion and equal opportunity and adhering to personal standards of truthfulness and honesty. Profit Maximization leads automatically from the satisfaction of individual consumer wants to the generation of maximum social benefits. Profit maximization is the only moral standard needed for management.

 

If we look at microeconomic theory as an ethical system of belief, explaining our responsibility to others within the company and within the society - to employees, customers, suppliers, distributors, and residents of the local area - then is simply falls apart because of the unlikely assumptions about human nature and human worth.

 

Legal Analysis

 

The law can be defined as a consistent set of universal rules that are widely published, generally accepted, and usually enforced. These rules describe the ways in which people are required to act in their relationships with others within a society. They are requirements to act in a given way, not just expectations or suggestions or petitions to act in that way.

 

The law is a guide to managerial decisions and actions, but it is not enough. And certainly, the absence of a law is not enough to excuse some of those decisions and actions.

Ethical Analysis

 

Philosophic analysis, based on rational thought processes. The view is that a manager should always act in accordance with either a single principle of behavior or a single statement of belief that is "right" and "proper" and "just" in and by itself. This is "moral reasoning": logically working from a first principle through to a decision on the duties we owe to others.

 

Philosophy is the study of thought and conduct. Normative philosophy is the study of proper t hought and conduct; that is, how we should behave. Morality refers to the standards of behavior by which people are judged, and particularly to the standards of behavior by which people are judged in their relationships with others. Ethics, on the other hand, encompasses the system of beliefs that supports a particular view of morality. The difference between morality and ethics is easy to remember if one speaks of moral standards of behavior and ethical systems of belief.

 

Ethical Relativism - Are there objective universal principles upon which one can construct an ethical system of belief that is applicable to all groups in all cultures at all times? Fortunately there is one principle that does seem to exist across all groups, cultures, and times and that does form part of every ethical system; that is the belief that members of a group do bear some form of responsibility for the well-being of other members of that group.

 

Five Major Systems with Relevance to Managerial Decisions

 

Managers should use ALL FIVE systems to think through the consequences of our actions on multiple dimensions.

 

Eternal Law - Moral standards are given in an Eternal Law, which is revealed in Scripture or apparent in nature and then interpreted by religious leaders or humanist philosop hers; the belief is that everyone should act in accordance with the interpretation. (Too many interpretations.)

 

Utilitarianis m: A Teleological Theory - Moral standards are applied to the outcome of an action or decision; the principle is that everyone should act to generate the greatest benefits for the largest number of people. Differs from the economic concept of cost/benefit analysis in that the distribution of the costs and benefits has to be included as well. (Utilitarianism fails because we can probab ly all agree that there are some actions that are simply wrong, despite great apparent net benefits for a huge majority.)

 

Universalis m: A Deontological Theory - The reverse of teleological theory. Moral standards are appliedto the intent of an action or decision; the principle is that everyone should act to ensure that similar decisions would be reached by others, given similar circumstances. (Immoral acts can be justified by persons who are prone to self-deception or self- importance, and there is no scale to judge between "wills".

 

Distributive Justice - Moral standards are based upon the primacy of a single value, which is justice. Everyone should act to ensure a more equitable distribution of benefits, for this promotes individual self-respect, which is essential for social cooperation. (Dependent upon acceptance of the proposition that an equitable distribution of benefits ensures social cooperation.)

 

Contributive Liberty - Moral standards are based upon the primacy of a single value, which is li berty. Everyone should act to ensure greater freedom of choice, for this promotes market   exchange, which is essential for social productivity. (Dependent upon the acceptance of the proposition that a market system of exchange ensures social productivity.)

 

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