Business Ethics

1. Business Ethics “Doing the Right thing, and Making the Good Life Better”

2. Overview of Ethics • What is Business Ethics? • Some moral theories • Moral Development • Professional Standards/Industry Paradigms • Moral Decision Making • Specific Cases

3. Vocabulary: “Business Ethics” • What is “Business” ? • What is “Ethics” ?

4. Business is inherently social • Business has its own culture • Enron, Paypal, your office • Business Transforms Culture • Mutual of Omaha, FNB, community outreach • Business is about relationships • Insurance business is about relationships

5. Business: Its purpose/goal • Lone Ranger/I am an Island View: The purpose of business is to make me money, and increase stockholder value (Milton Friedman)

6. Alternate Stakeholder View: • Business should make money, but it has many stakeholders– groups/individuals who have a stake in what the business does. Owners are not the only one’s with a stake (Freeman)

7. Your business makes the world Better or Worse for people by: • The way you treat your customers • The way you treat your employees or coworkers • The way you treat your boss/company • The way you contribute to the local community

8. Responsibilities in Business: • To your employer • To Customers • To employees • To boss/es • To your community • To your family • To your God

9. The challenge: Balancing Responsibilities

10. What is ethics?

11. “Ethics” isn’t “legal” Difference between the Law and Ethics: • Some legal issues are neither ethical or unethical. • Some ethical issues have no laws to support them. • Law often tries to encourage ethical behavior: • Federal Sentencing Guidelines • Sarbanes-Oxley Act (SOX) • Better to have self-regulation than more gov’t regulations

12. Many think Ethics is just about what to NOT do: “Don’t do __!!”

13. But ethics is more than just what not to do • Minimal: What we shouldn’t do • Don’t steal, don’t kill, don’t lie • Better: What we should do (justice) • Be fair, Be honest, Fulfill duties, work hard • Best: What we could do to make things excellent for all of us… • Mutual of Omaha Project, Real Estate

14. Business can help create an excellent life • Example of this mindset: Midland National Life insurance mission: "To make life better for individuals and families… to afford security, trust, superior value, and peace of mind to those we serve… to offer the best in financial resources and services.“

15. How does Business make life better? Table discussion (5 min) • How do you make life better for your community through your business? • What are positive things you do for the benefit of the many through your work? • Do you see these things you do for others as being ethical?

16. The Point is: Realize the good you do in society! • Businesses do have an effect on society and culture. Business is not just about making money.

17. Moral Psychology WHY DO PEOPLE DO WRONG THINGS?

18. Question: Why do Soccer mom’s sometimes drive like jerks?

19. Question: Why do people forge signatures and documents?

20. Why do people stretch or edit the truth, or exaggerate?

21. Moral Development: Why do people do unethical things? • Why did the soccer mom drive like a jerk? • Why did my student cheat on the exam? • Why did people at Enron do unethical things? • Why do insurance professionals cut corners?

22. Some reasons people do wrong: • Ignorant • In a hurry • Thoughtless • Didn’t plan ahead • Financial difficulties • Pressure from organization • Not clear communication from management • Lazy • Want a quick buck • They are a Bad evil wicked person

23. More Moral Psychology: WHY DO PEOPLE DO THE RIGHT THINGS?

24. Kohlberg’s theory of moral development • Stage 1: Obedience and Punishment • Stage 2: For self-benefit • Stage 3: For sake of reputation (good boy) • Stage 4: Maintain Social order • Stage 5: Contractual-Legalistic orientation • Stage 6: Conscience/Principle Orientation

25. moral dilemma • In Europe, a woman was near death from a special kind of cancer. There was one drug that the doctors thought might save her. It was a form of radium that a druggist in the same town had recently discovered. the drug was expensive to make, but the druggist was charging ten times what the drug cost him to make. He paid $400 for the radium and charged $4,000 for a small dose of the drug. The sick woman's husband, Heinz, went to everyone he knew to borrow the money and tried every legal means, but he could only get together about $2,000, which is half of what it cost. He told the druggist that his wife was dying, and asked him to sell it cheaper or let him pay later. But the druggist said, "No, I discovered the drug and I'm going to make money from if." So, having tried every legal means, Heinz gets desperate and considers breaking into the man's store to steal the drug for his wife.

26. Kohlberg’s theory of moral development • Stage 1: Obedience and Punishment • Stage 2: For self-benefit • Stage 3: For sake of reputation (good boy) • Stage 4: Maintain Social order • Stage 5: Contractual-Legalistic orientation • Stage 6: Conscience/Principle Orientation

27. Part 2: Ethical Principles, and how to use them Brief explanation of the 5 classic ethical theories: • Egoism: • Social Contract Theory • Utilitarianism • Duty-Based • Virtue Ethics

28. Egoism • People should always do what is in their own self-interest. (ex: do what it takes to get repeat business)

29. Social Contract Theory • Make concessions to others, but try to get what you can • Obey the law, respect others because you want to be respected, etc • When driving, slow down near other schools, not just your own kid’s school

30. Utilitarian:Outcome-Based • Do what benefits the greatest number the most • Jump on the grenade if it benefits the most. • Do what is right if it will make for a better society in the long run, even if you could have short term maximization right now • I can save my client on this insurance premium by under-reporting risks, but in the long run this will cause the insurance company and other clients to be at considerable risk.

31. We can lose our moral conscience and concern! • “Capacity for the nobler feeling is in most natures a very tender plant, easily killed, not only by hostile influences, but by mere want of sustenance; and in the majority of young persons it speedily dies away if the occupations to which their position in life has devoted them, and the society into which it has thrown them, are not favourable to keeping that higher capacity in exercise.”

32. John Stuart Mill: • “Men lose their high aspirations as they lose their intellectual tastes, because they have not time or opportunity for indulging them; and they addict themselves to inferior pleasures, not because they deliberately prefer them, but because they are either the only ones to which they have access, or the only ones which they are any longer capable of enjoying.”

33. Principle/Duty-Based: • Only act in a way that you could make your act a universal law • Should I lie? Would I make lying a universal law? No. Then don’t lie! • Should I cheat on my taxes? Would I want everyone to do that? No. Then don’t!

34. Principle #2 • Treat others always as an end, not as a means to an end. • Don’t treat checkout person as humanoid ATM • Don’t treat other drivers as obstacles in your path • Don’t treat customer as a just a means to money

35. Virtue Ethics/Nebraska Ethics What is the GOOD life, and how do we achieve that? Aim for excellence • Moderation/Balance -- Vice Virtue ++Vice (Too little) (just right) (too much) Coward Courage Foolhardy

36. Being Virtuous: • Does depend on the situation • When to be witty • Does depend on the individual • Child ‘Maestro’ • Is something we must constantly strive to upkeep, work at • We can lose our touch! • It helps to have roll models: WWJD?

37. Virtues • Honesty • Integrity • Responsibility • Respect/Caring • Truthfulness

38. Moral Principles for Living and Working • Banker Friend: “look in the mirror rule” • Showgirl from Las Vegas: Grandma rule • Golden Rule: do unto others… • Silver Rule: do no harm… • What rules do you use?....

39. Guiding Questions • Questions to help decide if the situation or decision has ethical dimensions • Is it legal but unethical? • Is it necessary? • Does it involve a core ethical principle such as honesty, integrity, truthfulness, etc.?

40. Guiding Questions: Info • Information gathering questions • Who are the stakeholders and what are their rights? • Consider the source, reliability, and accuracy of all relevant information. • Who should be involved in this decision? • Do I have enough information to make a sound ethical decision? If not, how do I get it?

41. Guiding Questions: Options • Questions to help identify and evaluate alternatives • Am I rationalizing to justify what I want to do? • Am I using anyone for my own personal gain? (Who will be injured and how) • Are there conflicting loyalties to stakeholders? • What would result in the long run if everyone did this?

42. Guiding Questions: Conclusion • Questions that help in reaching a decision • Could I defend my position before the Board of Directors, the CEO, or the media? • What would ______________________ do? (Fill in the name of the best role model you know.) • Will this seem to be the right decision a year from now? Five years from mow? • Do I have the moral courage to take the more ethical course of action? (Am I willing to pay the price for my convictions?)

43. Case: Simple situation • In discussing a premium quote with a customer, you ask them to remind you how far they drive to work each way. “20 miles”, they say. “Oh, I put down 5-- I’d better change that”, you say. The client says, “No, lets just leave it”. • How do you handle this?

44. Final Thoughts • Usually, doing the right thing is clear, even if its not easy • We tend to cut corners for short-term apparently inconsequential issues, but this can come back to haunt us • Having Ethical Habits takes practice, and some thoughtfulness.

45. Summary: What have we covered? • What is Business Ethics? • Some moral theories • Moral Development • Moral Decision Making

46. The End