Lecture 1: Part 1 - Ethics and the world of business

Question 1

What are the two principles for moral reasoning?

Answer 1

1) Consequantalist

2) Categorical

Question 2

What does the consequentialist principle state?

What about the categorical principal?

Answer 2

The morality of an action is dependent on the CONSEQUENCE of the action
The morality of an action depends on the intrinsic quality of the act

Question 3

Who is a business’ loyalty owed to?

Answer 3

Shareholders (fiduciary relationship) 
Customers 
Suppliers 
employers 
Government 
Society

Question 4

What are the three levels of decision making?

Answer 4

1) Individual - relies on our own moral, standards and judgement
2) Organisation- replies on policies and procedures
3) Business systems - industry code of ethics, government regulation and economic reform (these are SYSTEMATIC PROBLEMS)

Question 5

What are some solutions to systematic problems?

Answer 5

Ethical displacement (addressing the issue at a different level than it occurs), industry wide ethical standards, reforms

Question 6

What happened in the Home Depot Case?

Answer 6

Hurricane struct, damaged homes, and in the devastation, prices for necessities and basic building materials prices were increased

• Home Depot initially kept prices consistent
• When wholesalers raised their prices - started selling at cost

Question 7

What are the three perspectives in relation to business and ethics?

Answer 7

Law, economics, ethics and morality

Question 8

What is the relationship between economics and ethics?

Answer 8

Utility maximisation - by perusing profit, businesses promote the welfare of society as a whole

Question 9

What is the issue for the economics argument?

Answer 9

Assumes perfect markets (fully competitive, moral restraints to prevent theft, fraud)

Question 10

What are the two schools of though in relation to ethics and law?

Answer 10

1) Conducting business within the laws is enough: Law sets the minimum standard, ethics are personal and optional
2) The law embodies the ethics of business

Question 11

Why is the first school (conducing business within the laws enough and ethics are personal) not true?

Answer 11

• Ethics is applicable in the public realm - business practices can be unethical
• Not everything that is legal is moral
• The law incorporates concepts that are not easily defined

Question 12

Why is the second school of thought (law embodies the ethics of business) not true?

Answer 12

• The law does not embody ethics (undeveloped legal systems, and no legal system can embrace the whole of morality)
• Law is slow to develop
• law is often unsettled

Question 13

What is morality and ethics?

What is the difference between morality and ethics?

Answer 13

What are they? Both are a description of human behaviour as wright or wrong
Morality: existence of rules and standards in society, specific to times, places and culture
Ethics: the philosophical study of morality

Question 14

What are the three reasons why individuals ethical mistakes?

Answer 14

1) Work in environment where they lack strong guidance and receive conflicting signals
2) Prone to rationalisation and can persuade themselves that a course of action is right in the circumstances
3) Psychological tendencies (biases and heursitics) that create poor decision making?

Question 15

What do biases do? What are the 10 we studies?

Answer 15

Biases: Shift our decisions in one direction or another

• Loss aversion:
• Framing effect
• Confirmation bias
• Cognigative dissonance
• Commitment and sunk costs
• Hindsight bias
• Causation Bias and Illusion of control
• Overoptimism and overconfidence
• Self interest
• Risk perception bias

Question 16

Explain the 10 biases

Answer 16

• Loss aversion: weigh losses more heavily than gains
• Framing effect: decisions are based on how situations are framed
• Confirmation bias: seek facts that confirm our existing beliefs
• Cognitive dissonance: Dismissing info that would disrupt their beliefs and attitudes
• Commitment and sunk costs: means people tend to persist in a course of action, even in light of new information
• Hindsight bias; people believe events are more predictable than they are
• Causation Bias and Illusion of control: People find casual patterns in random events - believe they are more controllable
• Overoptimism and overconfidence - people are overly confident in their own ideas
• Self interest - people act in their own interests
• Risk perception bias - people make poor judgements about risk

Question 17

What are heuristics?

What are the three that we have studied?

Answer 17

Rules of thumb methods that are applied in reasoning

1) Anchoring heuristic: Make an initial choice, and adjust in response to additional information, however final decision heavily impacted by our initial choices
2) Representativeness heuristic: Tenancy to use recent and vivid examples, rather than data
3) Availability heuristic: Make decisions based on available information, rather than new information

Question 18

What are the four reasons for errors in organisational decision making?

Answer 18

1) Decisions are made over time
2) Resulting commitments are difficult to stop
3) Difffusion of information
4) Fragmentation of responsibility

Question 19

What are the three types of justice that aristotle identified?

Answer 19

1) Distributive justice - deals with the distributions of benefits and burdens
2) Compensatory justice - is a matter for compensating persons for wrongs done to them
3) Retributive justice - punishment of wrongdoers

Question 20

What are the 5 stages of the markkula framework?

Answer 20

1) Recognise an ethical issue
2) Get the facts
3) Evaluate alternative decisions
4) Make a decision and test it
5) Evaluate and reflect on the outcome in your