Chapter 02: Business ethics

Chapter 2 Business Ethics

and Social

Responsibility

cc licensed ( BY NC ND ) flickr photo by Stephen Wu: http://flic.kr/p/tZ1LP

cc licensed ( BY ) flickr photo by Robert Couse-Baker: http://flic.kr/p/dBYAqq

Ford Pinto

• Developed by Ford in response to

popularity of small imports

• Developed in 25 months (usually 43)

• Limits of 2,000

– <2,000 lbs

– <$2,000.00

VW Beetle, ©carblueprints.info

Ford Pinto

• 40 crash tests >25mph: all ruptured fuel tank without modification

• Ford owned a patent on a safer fuel tank design

• Cost-benefit analysis:

– Life = $200,000

– Cost of modification = $11

– 180 deaths/180 burn injuries: $49.5M

– 11M cars, 1.5M trucks: $137M

Ethics: How do we know what is

right?

• Outcome-based: Utilitarianism

• Duty/responsibility-based: Deontology

• Categorical Imperative

• Religion: The Golden Rule

Stakeholders

• Customers

• Suppliers

• Employees

• Investors/owners

• Society

Duties/Responsibilities? • Customers?

– Safe products – Accurate information

• Suppliers? – Honesty – Payment

• Investors? – Disclosure – Profit

• Employees? – Equal treatment – Safety

• Society? – Externalities

externalities

http://en.wikipedia.org/wiki/User:Mikm

conflict of interest

Generally: when someone is involved in

multiple interests, one of which could

possibly corrupt the motivation for an act

in the other

Specifically: any situation in which someone

is in a position to exploit a professional or

official capacity in some way for their

personal benefit

en.wikipedia.org/wiki/Conflict_of_interest

ethical fallacies

cc licensed ( BY NC SA ) flickr photo by Avi: http://flic.kr/p/6KT6aR

If I don't do it, someone else

will.

cc licensed ( BY NC ) flickr photo by Brook Ward: http://flic.kr/p/dW4c2G

I have a duty to my family.

Entitled to own opinion but not

own facts • Use the facts given in the case

• Do not change facts to suit your

conclusion

• Conclusion must follow from facts

Holland Hardware Case 1. What decision does Matt have to make?

2. Who are the stakeholders?

3. Do their interests conflict?

4. What externalities are involved?

5. What duties does Matt have?

6. Does Matt have a conflict of interest?

7. What is it?

8. What system of ethical reasoning should Matt use?

9. Why?

10. What decision should Matt make, and why?