Ethics vs Compliance

Question 1

Ethics -

Answer 1

Principles or standards of behavior to which we hold ourselves.

Question 2

Compliance

Answer 2

The extent to which a company conducts its business operations in accordance with applicable regulations, statutes, and laws.

Question 3

What is business ethics?

Answer 3

the study of business situations, activities, and decisions where issues of right and wrong are addressed

Question 4

violin example

Answer 4

What about approaching each situation such that both parties are better off?
Yard sale: “the buyer could act as an agent for the sellers, who clearly don’t know much about violins.”
Music store: “seller could decide to work with the customer over time, selling an inexpensive violin initially, but also pointing the customer to lessons and, eventually, a more expensive, but worthwhile, violin.”

Question 5

Separation Fallacy

Answer 5

the myth that business considerations can be separated into purely business decisions with no ethical content and ethical decisions

Question 6

Integration thesis

Answer 6

Ethics isn’t just about avoiding illegal actions. It’s about conducting ourselves and business in a way that benefits rather than harms others

Question 7

Legal vs. Ethical

Answer 7

legal responsibilities controlled by federal legislations on how not to behave vs ethical that which is good for the individual

Question 8

Shareholder Primacy

Answer 8

The belief that a corporation should be run, primarily or exclusively, for the benefit of its shareholders.

Question 9

Stakeholder Primacy / Ed Freeman

Answer 9

A view that suggests that a firm needs to have a fundamental commitment to all of its stakeholders—customers, employees, suppliers, communities, and shareholders
Ed Freeman: UVA Darden, “Commonly referenced as the foremost scholar on stakeholder theory and business ethics”, 1984 book: StrategicManagement: A Stakeholder Approach

Question 10

short term vs. long term perspective

Answer 10

short-term perspective: fails to take into account effects that require a longer time to develop. For example, charitable donations in the form of corporate assets or employees’ volunteered time may not show a return on investment until a sustained effort has been maintained for years.
A long-term perspective is a more balanced view of profit maximization that recognizes that the impacts of a business decision may not manifest for a longer time.

Question 11

short-term perspective:

Answer 11

fails to take into account effects that require a longer time to develop. For example, charitable donations in the form of corporate assets or employees’ volunteered time may not show a return on investment until a sustained effort has been maintained for years.

Question 12

A long-term perspective

Answer 12

is a more balanced view of profit maximization that recognizes that the impacts of a business decision may not manifest for a longer time.

Question 13

The impact of stock options on CEOs & companies

Answer 13

• Motivate risky behavior, don’t lose money if the stock does bad
• Instead of just receiving salary, executives could buy stocks and get back shares
• Gov’t basically mandates it (tax code change)
  Intended to squash CEO salaries but it did the opposite