Students,

The purpose of chapter 2 is to understand how to deal with various ethical challenges, strategies for analyzing ethical choices, and philosophical frameworks.

The following objectives are addressed in this chapter:

Define ethics.
Describe the different theories of ethics.
Contrast the ethical implications of the shareholder theory with the stakeholder theory of management.
Define corporate social responsibility.
Identify how to remedy unethical behavior.
Explain the financial and non-financial costs of reported and unreported unethical behavior to a business.

Key Terms:

Ethics: How people should behave

Ethics decision: Any choice about how a person should behave that is based on a sense of right and wrong

Life Principles: The rules by which you live your life

Deontological: From the Greek word for obligation; the duty to do the right thing, regardless of the result

Kant’s categorical imperative: An act is only ethical if it would be acceptable for everyone to do the same thing

Life prospects: The circumstances into which we are born

Veil of ignorance: The rules for society that we would propose if we did not know how lucky we would be in life’s lottery

Difference principle: Rawls’s suggestion that society should reward behavior that provides the most benefit to the community as a whole

Moral universalism: A belief that some acts are always right or always wrong

Moral relativism: A belief that a decision may be right even if it is not in keeping with one’s own ethics standards

Moral licensing: After doing something ethical, many people then have a tendency to act unethically

Optimism bias: A belief that the outcome of an event will be more positive than the evidence warrants

Kantian Evasion or palter: A truthful statement that is nonetheless misleading

Corporate social responsibility (CSR): An organization’s obligation to contribute positively to the world around it