hi welcome back now in this second module of the course we're going to talk about obligations the obligations that we have simply as members of society these are not obligations that we've consented to or that we've contracted for instead these are the obligations that exist solely because we are members of a society and so we're going to start with probably the most important obligation that exists that we have again not contracted to and that has to do with ethics so in this lecture we're going to take up the question of business ethics business societal and
ethical context of the law now ethics consist of the moral principles that guide decisions between right and wrong now ethics and the law are not always aligned that sometimes the legal Choice may not be the ethical Choice while at the same time the ethical Choice may not be the legal choice so there is an overlap between law and ethics but they exist in different environments and so businesses will often times face the this problem of deciding between the legal but ethical choice and the wrong but legal choice now there are guidelines that exist to assist
businesses in resolving this conlict we will talk about some of the ethical decisionmaking Frameworks that exist but this is a deep topic and we're only going to be talking about very surface level introductions so in this lecture we're going to examine the complicated relationship between the law and ethics and we're going to focus on why it matters to businesses starting with this idea of solving ethical challenges how do we solve an ethical dilemma that we are presented with and there are multiple relationships that exist between business law and E ethics there are multiple aspects to
this that we need to consider first of all is morals morals those widely accepted standards of what is right and what is wrong we tend to live in a very moralistic society in which society has decided that certain things are right and certain things are wrong now when we discuss ethical Norms we're talking about the accepted standards for Behavior within a society or Community I was taking a flight the other day on Southwest Airlines and if you're familiar with Southwest you have to line up according to your number and I noticed one woman had lined
up much earlier than what her number said and one of the other passengers called her out on it to say that this is not the right plays for you and and she replied that those numbers are just suggestions they are just possibilities maybe you want to be here maybe not and unless you have a gate attendant who really really cares it's quite likely that you could be a lower number and bored with a higher relationship now that is not illegal but it definitely seems to violate an ethical Norm if you are waiting in line at
a restaurant or for an amusement park ride and one person is standing in line and then suddenly five of their friends or family show up and they join them in the line again not illegal but it certainly seems like it's violating an ethical Norm the other aspect of Ethics that we've talked about is this idea that businesses will experience a tension between the moral choice and the legal Choice what is the right choice and what is the legal Choice and then of course right implies some level of understanding who is it right for who benefits
from this choice so ethical decision making for long-term business success and societal well-being is essential to the survival of a business let's talk about three different approaches to ethics focusing mainly on the first two now the first approach that you will see whenever you study ethics is what's called a principles based approach which means that it's going to rely on moral principles and what it says is these principles exist regardless of the context and therefore we should follow these rules regardless of the consequences of our action now this principles based approach can draw its principles
from different sources for instance religion it could be based on religious principles such as the Old Testament or the Quran one thing I've noticed over the years is that many many many people many politicians will add advocate for the Ten Commandments The Ten Commandments to be posted in every school room in the country for instance this is the idea that these are rules that came from God so they must be the most important rules and that you should follow these rules at because God has said to follow these rules now there are other ways of
approaching principles and one of which is virtue and when we look to Virtue we to say that ethical decisions are based on whether the conduct promotes good behavior do you feel good about yourself after having made the decision that would be a virtue based approach there are natural law principles natural law principles means that there's a higher law in place it may derive from God but it could also derive simply from nature and what the natural law philosophers believed was that we can use reason to ascertain what are our moral rights and duties those duties
which are Timeless and Universal so for instance we could rely on the Ten Commandments Thou shalt not kill or that sh not steal however we could also approach it from a reason based approach which is to say if everyone killed or if everyone had the freedom to steal that would be bad for society therefore those principles don't kill people don't steal from people they exist in nature we don't need God to tell us those principles we can sort them out ourselves now the final principles based approach is the idea of Duty based which is ENT
essentially a a sense of dignity uh a sense of Duty to human dignity which means an action is moral if everyone should act the same way if we as a society want everyone to take this step to take this approach to an ethical dilemma now the second approach to dis ethical decisionmaking is what we call a consequences based approach and a conse quences based approach as opposed to the principle based approach the consequences the consequences based approach focuses on the outcome of the decision and not the decision itself what would be the outcome of making
this decision and this approach is generally referred to as utilitarianism and it is the belief that an ethical choice is the one that provides the greatest good for the greatest number of people with the least harmful consequences to the community meaning Which choice is going to yield the greatest good for the greatest number of people and that is how we make an ethical decision we don't focus on the decision itself but we focus on the consequences of the decision a case in your book this is a very famous case or maybe Infamous case depending on
how you look at it called Grimshaw versus Ford Motor Company Ford Motor Company back in the 1970s introduced a small car small fuel efficient car called the pinto the uh during this late 1970s many automobile manufacturers were attempting to get fuel efficient cars on the market because of the gas embargo that had taken place which had driven up prices for gasoline and the pinto was Ford's solution to that problem now shortly after the pinto was introduced Ford discovered that because the gas tank was located in the rear the very rear of the vehicle that if
it was involved in an accident involving a rear end collision the vehicle tended to explode to blow up Ford realizes that most people are not going to get into rearend collisions and that of those who do get into rear end collisions there may not be a sizable number of pintos that explode and and of those pintos that explode they won't harm everyone they won't kill everyone and so what for did was to utilize a utilitarian approach a consequences based approach that they decided that in the overall scheme of things it would have cost more to
redesign the pinto to recall the PIN that were out there and to create a new design it would cost more to do that than it would simply to pay out those lawsuits in which Ford was sued and so this case really represents the problem with utilitarianism that on the one hand you can say this is a decision that's going to yield the greatest good for the greatest amount of people but when you are making a decision that has literally life or death consequences perhaps we need more than simply a consequences based approach now the third
approach uh outlined in your book is called the cont contract based approach and this relies on essentially what is called the veil of ignor ignorance when no one knows their position in society then each will negotiate ethical principles that would be fair to everyone the ethical Choice according to this approach to solving legal challenges is that choice that is focused on maximizing the prospects of the least well off now the contracts based approach receives a great deal less attention than the first two so I think you really need to concent you need to focus on
the principles based approach and the consequences based approach here's a term that you may have heard in recent years it has become a concept that increasingly important for businesses and it's the concept of corporate social responsibility and corporate social responsibility which is usually abbreviated CSR it's it's more than simply ethics instead Corporate social responsibility focuses on what is the role of a corporation who does a corporation owe duties to does it owe duties to those beyond the shareholders of the corporation does the corporation which is a fictional person does it have its own responsibility to
society or is its only responsibility that of its shareholders maximizing profit to its shareholders now if you are to adopt CSR as a philosophy for a corporation it includes things like social concerns and environmental concerns the argument behind corporate social responsibility is that a corporation should take these into account that a corporation has an obligation to society CSR involves a critique of business organizations and practices it is a um it is a rebuttal to that idea of maximizing shareholder value that in fact a corporation has a broader group of stakeholders that go far beyond simply
the owners of the corporation CSR recognizes there are multiple stakeholders the shareholders are one but the society in which the business the company does business is one the area the region that they do business and of course responsibility to the world as a whole for things such as climate change now there are three views of corporate social responsibility and again these are outlined in your book starting with what we refer to as a narrow View and this is the Milton freedan view which says that the job of a corporation is to maximize shareholder value that
the obligations of a corporation are to the owners of that Corporation and not to society as a whole so taking this View the corporation doesn't owee a duty to the area in which it's doing business or to the world as a whole instead the corporation's greatest duty is to maximize shareholder value now perhaps that shareholder value can be maximized by taking approaches to Social and environmental problems but that is not a good in and of itself the good comes out of the increase in value that taking that position would yield to shareholders now the moderate
view is to follow the law essentially but to leave most social issues to the government a corporation doesn't have a responsibility to take a stand on social issues according to the moderate view leave that to the government follow the law whatever the law is so a corporation need not have a view on things like same-sex marriage or abortion rights instead leave those social issues to the government and simply follow whatever the law says if the law requires that you as a corporation provide um insurance that includes uh contraception to your employees then do that that's
what the law says you don't have to look to some greater principle um in in terms of deciding how to solve that challenge and finally there is the broad view of CSR which is probably a dominant View today which is to say that good corporate citizenship is important and that a corporation cons could should consider all stakeholders not simply the shareholders but additional stakeholders as well and you often hear this referred to as keeping an eye on the triple bottom line which is to say what is best for people what is best for the planet
and what is best for profit so that's a very broad view of corporate social responsibility your book has a case discussed in which Brooks Brothers the clothing manufacturer sues a cancer survivor whose last name is Brooks who creates a bubble solution that she uh sells primarily to those Afflicted with cancer now Brooks brother group sues her for trademark infringement on their Brooks Brothers uh trademark Brook the goal of trademark law is to avoid cons confusion and there's this belief that one has to zealously defend your trademarks in order to ensure that those trademarks continue to
exist that those remain unique to you now we don't know how this case would have been resolved it was settled before trial but one might wonder what was the appropriate ethical approach here for Brook's brother uh group should they in fact uh zealously defend their trademark rights or which would probably be the best for their shareholders or should they uh do the right thing and allow this cancer survivor to sell her product which has nothing to do with their prod let's talk a bit about ma values management and compliance Department values management involves aligning employee
Behavior with organizational values which is to say the organization has values itself and the organization will also will often produce a code of ethics and the code of ethics is a tool that should be used by managers within the organization the code of ethics allow provide some guidelines for managers to use compliance departments compliance is a huge area of the law right now certainly a huge area of business because there are a host of laws that must be complied with and so one of the ways we do that is to have a separate Department that
is focused on ensuring compliance with the law as well as compliance with ethical standard for standards that exist so that for a compliance for a a company a company need not rely Ry on the business managers who are focused on making a profit instead we have another department that serves that role of ensuring uh adherence to the law and also ensuring adherence to ethical standards now there are a number of challenges for a business when it comes to profit making to doing business starting with balancing profit with ethics what is the right decision here versus
what decision will provide the company with the most money businesses also have to create a culture of Integrity that it's important to create a culture of Integrity so that in the future ethical challenges don't have to produce these dilemas if you believe that you have already addressed this issue and you know how the decision should be made finally we talk about ethical decision making Frameworks now there are many of these Frameworks that exist and they are all designed to yield the ethical decision we're not going to spend a lot of time talking about how the
of the different Frameworks but we will mention essentially what all of the these Frameworks combine starting with defining the Dilemma defining what is the challenge that needs to be resolved to identify the impact to apply ethical standards to develop choices and discuss impact with stakeholders to implement these ethical decisions that have been made to evaluate the decisions once they have been made and to continue to monitor the decision so these ethical Frameworks you can read more about them in your book however this is generally the guidelines they use they are a flowchart of sorts designed
to ensure the ethical decision uh is accurate it's the one that's being made finally we'll talk about communitybased nonprofits and benefit corporations this is an innovation in corporate structure that we have seen in recent Years starting with the idea of community-based nonprofits these entities are tax exempt entities and the reason why is they serve the community so even though they may be engaged in business activities those business activities are designed to serve the community as as a whole and so therefore they are rewarded with certain tax advantages we also have benefit corporations these is this
is a a relatively recent phenomenon these are corporations in which within the corporate charter itself the corporation acknowledges that it has a duty Beyond simply a duty to its shareholders that instead it should balance the idea of profits with social and environmental goals and so these corporations these benefit corporations the idea is that when one invests in one of these corporations you should know that the goal is not maximizing shareholder value it is maximizing shareholder value while being concerned with social and environmental issues so in conclusion what did we learn in this lecture we learn
that ethics consist of the moral principles that guide decisions between right and wrong that law and ethics are not always aligned and that businesses can face situations in which an ethical choice is not legal or a legal choice is not ethical thanks a lot for listening if you have any questions let me know otherwise we'll see you in the next one
