- all living organisms (systems) interact with, and are affected by, other forces in their host environments

- key to survival is the ability to adapt

- Violate laws

- Expose the business to lawsuits, which the business loses

- expose the business to costly litigation, - which the business wins

- violation of industry ethics norms/stds

- all of the above lead to bad PR

- establish justice

- ensure domestic tranquility

- provide for the common defense

- promote the general welfare

- lower profits for owners

- higher costs for consumers

- less competitive

- what is good for business is not always best for society/government, especially with externalities

- businesses, in quest for max profits, may not adequately address issues of public safety

- regs imposed for unethical conduct to serve as example and deter others from engaging in the same improper conduct

- an expense, or cost, incured in production, distribution or use of a product or service, which is not born by the business or consumer, but by the general public

-In a competitive market, the existence of externalities would cause either too much or too little of the good to be produced or consumed in terms of overall costs and benefits to society

- individuals have exclusive rights to personal property they purchase

-limited rights to own companies and 'public resources'

- rights to income-producing resources are typically assigned by the government, or owned by the government

- income inequality is thereby far less than US

- individuals voluntarily chose to be subservient to the collective society

- motivated by desire to contribute to the public interest

- centrally planned economies

- no market drive

- Adam Smith

- competition rewards the efficient producer

-results in delivery to consumer with the most efficient price

- profit is the incentive

- there should be limited government regulations

- corporations are in business only to make profits

- managers' duty is only to make profits

- a small elite within business and government dominate society

- perpetuate wealth for the few

- undemocratic

- leads to the theory of:

• a business can keep prices high, if it can keep competitors out
• can influence the law through lobbying and contributions
• a business may influence how its employees behave, even off the job
• businesses may affect the environment

Stakeholder Model

- any entity that is benefitted or burdened by the actions of a business or corporation

- primary and secondary

- companies only exist because the society and government have given them the right to exist, by creating rules

- as companies have gained more power, society expects more out of them

- those who are critical to the company's survival and success

- investors, creditors, employees, suppliers, wholesale distributors, retailers, customers

- other groups that have an interest in the corporation

- local communities, governments, public, social activist groups

- invention of new mfg techniques

- break up of small farms, in favor of urban cities w/ ready labor forces

- combination of capital and labor

- creation of new consumer markets

- Social Darwinism

- the most resourceful people will survive

-charity sucks

1. Industrial Revolution
2. Dominant Ideologies
3. Inequality in the distribution of wealth
4. Science and Technology
5. Natural Resources/Populations
6. Chance
7. Commerce & Communications
8. Evolving Goals of business

- production, servicing

- no 3rd party help, you do everything

-force the consumer to go to you only

Commerce 1.0 - Nation state engaged in trade

Commerce 2.0 - the rise of the corporation

Commerce 3.0 - communications empowers individuals

1. The economic environment
2. government set rules regarding employment
3. politics of regulation
4. environmental considerations
5. government reulates how businesses relate to and interact with other businesses

1. formal - government regulations, stockholder voting
2. economic - boycotts, protests
3. political - views on laws

1. an artificial person
2. it is owned by its stockholders
3. it has rights and responsibilities
4. it substitutes itself for its shareholders when 'doing business'
5. It is liable for its actions, but shareholders are not personally liable, except insofar as the value of their equity
6. board of directors elected by shareholders, responsible for corporate policy
7. board of directors hires officers, who run day-to-day operations
8. fundamental duty is to make money for stockholders/owners

• owner stakeholders
• employee stakeholders
• consumer stakeholders
• government as stakeholder
• environment as stakeholder
• community as stakeholder

- materical fact incorrectly stated

- induces other person to do something, relying on the false statement

- lie, material, rely, hurt

Why do ethical problems happen in business?

(4)

1. People act for personal gain
2. Competitive pressure
3. Business goals versus personal values
4. Cross cultural contradictions

1. To avoid punishment
2. To satisfy self-centered needs and elicit a positive external response
3. To conform to the group interest to please others in the group
4. To accept legal restrictions as being in the best interest of society
5. To accept legal restrictions balanced with individual rights as being in the best interests of society and the individual
6. To find satisfaction in being ethical and moral for personal reasons

Think of the steps in terms of a 'legal test'

1. Idenfifying the important facts and ethical issues
2. Who are the stakeholders that will be affected
3. Applying a utilitarian trade-off model
4. Articulate how different moral principles apply
5. Recognize and articulates personal biases

Categorical Imperative

- 'a person should not act unless he or she is willing to have the rule or conduct on which one acts become universal law.  The rational person would consider the consequences of this, and then act accordingly, based on how society (not just the individual) would be affected'

Focus on end result

- no universal ethical standards on which people around the world could agree

- ethics result of history and culture

'People should act so as to generate the greatest good to the greatest number'

-outcomes matter

-actual consequences hard to determine

- cost/benefit analysis

- every human has a right to life, freedom, and the pursuit of happiness

- anything that interferes with these rigths is immoral

- treat others the way you would want to be treated

Accounting ethics

(3)

1. The options fight
2. The battle over tort reform
3. The war over consulting

- proposed closing an accounting loophole that allowed companies to avoid recording stock options in b/s

- accountants caved to their clients' wishes, and lobbied against change