1) Read chapters One through three of your textbook 2)Compare and contrast the Existentialism and Contractarianism framework Compare: Both existentialism and contractarianism frameworks are two of the three deontological frameworks outlined in chapter one. Deontological frameworks focus on the duty or obligation in determining whether the actions are right or wrong.
Contrast: Existentialism focuses on individual behavior while contractarianism focuses on society as a whole. Existentialism highlights that the only person who can determine right and wrong is based on the free will of the person making the decisions. As a result, duty is connected with actions meaning each individual determines the value of his/her actions. Contractarianism, or social contract theory, highlights that individuals agree to social contracts to be members within society. As a member of society, each individual agrees to certain social norms. As a result, the values and norms developed by society must be fair to everyone who is a member of society.
3)Compare and contrast Teleological, Deontological, and Mixed Frameworks Compare: Teleological, Deontological, and Mixed frameworks are each foundational philosophies towards ethical conduct.
Contrast: Teleological frameworks focus on the results of the conduct of the individual and the ramifications, positive and negative, resulting from the actions and conduct of individuals. Deontological frameworks focus on duty or obligation in determining whether the actions are right or wrong. Mixed frameworks combine theories from both teleological and deontological frameworks. Mixed framework theory supports that through the seven guiding principles listed below, individuals develop a level of intuition that becomes incorporated in their decision-making processes. The seven guiding principles pull from both the teleological and deontological frameworks. The seven guiding principles include:
Fidelity- based on deontological theory and states that an individual needs to keep explicit and implicit promises. Reparation- based on deontological theory and states that an individual must act on repairing the consequences for previous wrongful acts. Gratitude- based on deontological theory and states that an individual must be able to show gratitude for the kindness that others have given to him/her. Justice- based on deontological theory and states that an individual should try to see that any goods are fairly distributed. Beneficence- Based on teleological theory and states that an individual should focus on trying to improve the lives of others. Self-improvement- pulls from both deontological and teleological theories and states that an individual should improve oneself by focusing on virtue and intelligence. Noninjury- based on teleological theory and states that an individual should not cause any harm to others.
4)Compare and contract the guiding principles of the Global Business Standards Codex and the Mixed Framework principles. Compare: Both the Mixed Framework and Global Business Standards Codex principles are standards that attempt to promote fairness and to interpret and evaluate ethical behavior. Contrast: The Mixed framework principles focus on individuals, but the Global Business Standards Codex principles focus on companies around the world.
The mixed framework principles were defined in the question above, but here are brief definitions for each of the Global Business Standards Codex:
Fiduciary Principle- Each officer and director of a company has the legal obligation to act in the best interest of the stakeholders and other employees within the firm. Property Principle- based on the belief that every employee should respect property as well as the rights of the owners of property. Reliability Principle- based on the belief that it is the employee’s responsibility to honor the commitments he or she makes to the firm. Transparency Principle- based on the belief that every employee should conduct business in a truthful and open manner.
It is expected that employees will not make decisions based on a personal matter. Dignity Principle- based on the belief that each employee needs to respect the dignity of all individuals Fairness Principle- based on the belief that stakeholders who have a vested interest in the firm should be treated fairly. Citizenship Principle- based on the belief that every employee should act as a responsible citizen in the community. Responsiveness Principle- based on the belief that employees have a responsibility to respond to requests for information about the operations from the various stakeholders.
5)What are the four types of unintentional unethical behavior? Implicit Prejudice- occurs based on unconscious beliefs. Common examples include biases based on ethnic and gender differences. In-Group Favoritism- occurs when a decision maker forms a bias toward individuals in the same “group” as the decision maker. An Example would be if a boss favors employees who share the same political party association.
Actual or Potential Conflicts of Interest- occurs when there are personal benefits for making a decision that are not available to others. Claiming Credit for Others’ Actions- occurs when the decision makers believe that they are above average in their job duties, responsibilities, and general intellect, which results in above average performance. An example would be when an individual group member feels that he/she contributed more than he/she actually did to the group’s overall performance.
6)Briefly compare and contrast moral, immoral, and amoral managers. Immoral manager- one who not only does not care how his/her decisions impact the stakeholders, but the actions are actively counter to what is the right and ethical thing to do. They focus on only their own goals and the goals of the company and consider law requirements as constraints or barriers that are ignored when their corporate actions are implemented. Amoral manager- one who would be considered ethically neutral.
An amoral manager does not focus proactively on ethical issues nor does he/she try to purposely go against the social and legal norms that are expected of the firm by society. The danger with an amoral manager is that because ethical considerations are not contemplated in the decision-making process, the manager may unintentionally commit unethical acts and not realize the impact the decision had on various stakeholders. Moral managers- one who understands the importance and relevance of considering ethical issues when they are making decisions. These managers not only meet the minimal legal standards, but also are proactive in presenting ethical leadership to the firm’s employees and other stakeholders.
7)Define Corporate Social Responsibility
Corporate responsibility is the obligation that companies have to develop and implement courses of action that aid in social issues that impact society. This term is used by corporations to signify several topics including legal responsibility, fiduciary duty, legitimacy, and charitable donations.
8)Define the concept of stakeholder as it applies to business ethics Stakeholders are defined as any group that has a vested interest in the operations of the firm. Traditional stakeholders for a firm include employees, suppliers, stockholders, customers, the government, local communities, and society as a whole. Stakeholders have a vested interest in the firm; therefore, they are greatly impacted by the ethical behavior of the firm, including economical, legal, and environmental concerns.
9)Read case #7 on pages 265-283 of the textbook and answer questions 1, 2, and 3 on page 283 What are “cookie jar” reserves? Explain Enron’s use of this concept. Cookie jar reserves are funds set aside by a firm to be used to adjust the financial performance in any given point of time. The purpose of the reserve is that it allows the firm to increase its financial performance by transferring the reserves into the current period financial statements to help control the financial performance of the firm. Enron is the perfect example of using these reserves because of two very favorable factors. The first is that Enron dealt in long term energy contracts that are difficult to calculate a true market value. As a result, Enron had the opportunity to create all the years of the contract within a one-year window allowing them to manipulate the financial statements. This manipulation would only work if you have a co-operative external auditor. David Duncan of Arthur Andersen was very accommodating to Enron in this manner and accepted this type of aggressive accounting.
Identify as many stakeholders as you can in this case. For each, explain how they were affected by the events surrounding the demise of Enron. Employees- the employees were devastated by the demise of Enron. Not only did they lose their jobs, but also for a vast majority of the employees all of their retirement funds were in Enron stock. They were not allowed to sell the stock during the quick fall so they ended up with virtually nothing in their retirement accounts at the end of Enron. Stockholders- The stockholders also were severely impacted by the demise of Enron. The free fall of the Enron stock until it was worthless than $1 ensured that the stockholder endured heavy losses in their Enron investment. Government- After a sluggish start, the SEC became very involved in the operations of Enron.
A number of top-level executives were tried by the justice department as well as millions of dollars recovered in restitution to help pay for the losses endured by the employees and the stockholders. Suppliers- The suppliers also were left with little recourse once Enron went bankrupt. All the top priority secured creditors would get the first chance to recover their money from Enron. Unless the supplier was a secured creditor, they may have received very little from Enron once it declared bankruptcy. Local Community- The Houston community was severely impacted by the demise of Enron. Not only was Houston a home for a number of Enron employees, but also the image of the city was negatively impacted by the demise of Enron. It also did not help that the professional baseball park was called Enron Field (it is now named after fruit juice producer, Minute Maid).
Summarize the main points of this case in one succinct paragraph. The case is about greed in the highest order. The company from its origin quickly focused on increasing market capitalization at any cost. Employees were selected based on how well they could play the game. The winners were rewarded handsomely and the losers were fired. The corporate culture was one in which it was Enron against the world and Enron kept on winning. However, like a Trojan horse, the true Enron was hollow inside. Once the house of cards collapsed, it was left to the stockholders and the employees to pick up the pieces.
Update on Case (not part of the assignment)- In 2007, Credit Suisse paid $61.5 million, UBS agreed to pay $115 million and Deutsche Bank agreed to pay $25 million to settle litigation pertaining to their role in the Enron fraud. In January 2008, former lead auditor at Arthur Andersen, David Duncan, agreed to settled allegations filed by the SEC that he had violated securities law by signing audit reports that were false and misleading. No fine was issued but Duncan was barred from appearing before the SEC as an accountant. In March 2008, Citigroup settled litigation claims against it for it actions during the Enron scandal for $1.66 billion.
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