Describe Utilitarian Theory in Business Ethics

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					Summary of Trevino Handout                                 Managing Business Ethics, Chapter 4


                                  Accounting 1370
           Summary of Chapter 4: Managing Business Ethics (Trevino Handout)
                        Approaches to Ethical Decision Making in Business

Prescriptive theories describe the normative states or conditions, in other words… how the world
“ought to be” according to a given set of beliefs.

Three major prescriptive theories are described by most ethicists.

    I.         Consequentialist Theories – focus on consequences
    II.        Deontological Theories – focus on duties, obligations, and principles
    III.       Integrity Theories – focus on virtue ethics

    I.         Consequentialist theories focus attention on the results or consequences of a given
               decision or action.

               a. Utilitarian theory is one such consequentialist theory. Utilitarian theory suggests
                  that the “ethical decision” is one that maximizes the overall benefit to society
                  while minimizing harm.

               b. A utilitarian individual would approach an ethical dilemma by identifying the
                  alternative actions and their consequences (social harm or benefit) for all
                  stakeholders.

               c. This theory requires broad thinking about the consequences for society. Narrow
                  thinking may overlook significant stakeholders and focus too narrowly on those
                  in our immediate environment or to ethical issues that can be measured in
                  monetary terms only.

    II.        Deontological theories focus attention on “the right thing to do” in a given
               circumstance based upon a broad, abstract universal set of principles or values such
               as honesty, promise keeping, fairness, loyalty, rights and privileges, justice,
               compassion, respect, etc.

               a. According to some deontologists, certain moral principles are binding, regardless
                  of the consequences. Therefore, some actions would be considered wrong even if
                  they led to a positive outcome.

               b. The rules or principles to be followed are typically based on a codified set
           of mores like the Western Bible, Quran, or Torah.

           c. Corporate codes of conduct may also qualify as useful set of principles upon which
           to base deontological conduct.

    III.       A virtue ethics approach to behavior focuses more on the integrity of the moral actor
               than on the moral act itself. Therefore, more consideration is given to the
               motivations, intentions, and moral reasoning of the individual.

               a. In virtue ethics, character is defined by one’s community. Therefore, the social
                  or business community is essential to defining the individual as an ethical being.



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Summary of Trevino Handout                              Managing Business Ethics, Chapter 4

            b. A good accountant may be a “qualified” professional, but a virtuous
            accountant is one that plays by the rules of accounting (GAAP, GAAS, or code of
            conduct).



            EIGHT STEPS TO SOUND ETHICAL DECISION MAKING IN BUSINESS

            Step 1: Gather the Facts
            Step 2: Define the Ethical Issues
            Step 3: Identify the Affected Parties (stakeholders)
            Step 4: Identify the Consequences
            Step 5: Identify the Obligations
            Step 6: Consider your own character and integrity
            Step 7: Think creatively about potential actions
            Step 8: Check your gut!



This eight-step process involves elements of the three major theories described above.


Step 1: Gather the Facts

These three philosophical approaches do not tell you explicitly how to gather the facts. However,
fact gathering is easier if you consider the context in which the actions and events occurred or
relevant historical facts.

Step 2: Define the Ethical Issues

       Identify a number of dilemmas, points of conflict or areas of ethical confrontation.
       Consider how the ethical issue would be defined according to each theory described
        above.
       Avoid jumping to conclusions based on personal biases.
       Invite others to share their views

Step 3: Step 3: Identify the Affected Parties (stakeholders)

       What parties may be potentially harmed or helped?
       See the problem through the eyes of others…role playing my help.
       Fine-tune your decision with a “test run” … ask potential stakeholders how they would
        respond to your suggested solution.

Step 4: Identify the Consequences

       Consider the potential consequence for each affected party.
       Who would be helped? Who would be harmed?
       Consider the solution that accomplishes the most good.
           o Monetary consequences
           o Long-term vs. short-term consequences


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Summary of Trevino Handout                             Managing Business Ethics, Chapter 4

           o   Symbolic consequences (e.g. reputation, confidence, and integrity effects).
           o   Consequences of secrecy (“What happens if I take no action?)

Step 5: Identify the Obligations

          What duty is owed… and to whom?
          Are there stakeholders you have overlooked in step 3 above?

Step 6: Consider your own character and integrity

      Consider your own community of reference. How would your peers or significant others
       evaluate the decision or action you are considering?
      Remember the disclosure rule…WWJD?
           o Okay, perhaps not… but consider whether you would feel comfortable if your
               activities were disclosed in the middle of main street or in the New York Times!

Step 7: Think creatively about potential actions

          Don’t limit your choice to the obvious yes or no.
          Think outside the box.


Step 8: Check your gut!

      After careful consideration of all alternatives… what do your instincts tell you?
      It is possible that you discover that your own values conflict with those of your
       community of reference (e.g. employer, family, friends, organizations).
      Make a choice that you can live with!

When you are asked to make a snap decision.

      After considering the above guidelines…
      Don’t underestimate the importance a hunch to alert you that you are facing an
       ethical dilemma.
      Ask for time to think things over.
      Find out if your organization has a policy that applies to your decision.
      Ask your manager or peers for advice.
      Use the disclosure rule… would your decision be the same if you were called upon to
       disclose it in public.




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Summary of Trevino Handout                        Managing Business Ethics, Chapter 4

         EIGHT STEPS TO SOUND ETHICAL DECISION MAKING IN BUSINESS

                                     Mini-case THE LAYOFF


         Step 1: Gather the Facts




         Step 2: Define the Ethical Issues




         Step 3: Step 3: Identify the Affected Parties (stakeholders)




         Step 4: Identify the Consequences




         Step 5: Identify the Obligations




         Step 6: Consider your own character and integrity




         Step 7: Think creatively about potential actions



         Step 8: Check your gut!


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Summary of Trevino Handout                        Managing Business Ethics, Chapter 4

         EIGHT STEPS TO SOUND ETHICAL DECISION MAKING IN BUSINESS

                                    Fight Back or Death Rattle?


         Step 1: Gather the Facts




         Step 2: Define the Ethical Issues




         Step 3: Step 3: Identify the Affected Parties (stakeholders)




         Step 4: Identify the Consequences




         Step 5: Identify the Obligations




         Step 6: Consider your own character and integrity




         Step 7: Think creatively about potential actions



         Step 8: Check your gut!


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