Corporate Ethics and Social Responsibilities Spring 2020

Ms. K. Durrani BSBA 6th C

Why Ethics Matter, Chapter One Lecture

Notes
These notes are to help you understand what is presented in the book we are using and how it
relates to the first topic of the course corporate ethics and social responsibilities.

TOPIC ONE: BUSINESS ETHICS AN INTRODUCTION

If you look at the course outline, I have already uploaded the relevant documents to help you
understand those topics. The first asks about ethical and unethical behavior at the work place.
Before talking about that we need to know what ethics to us is, what does the word mean to us???

Definition: if you google there are many definitions of what ethics is, so I have taken this one "the
discipline dealing with what is good and bad and with moral duty and
obligation"

So looking at the definition it how we can individuals can tell what action/decision or point of
view is good and bad and how we will act in a given situation.

Business ethics has a different definition;

According to Andrew Crane "Business ethics is the study of business situations, activities, and decisions where
issues of right and wrong are addressed"

According to Raymond C. Baumhart," The ethics of business is the ethics of responsibility. The business man
must promise that he will not harm knowingly"

So by looking at these definitions we can see that in the business world there will be decisions that can have
consequences that may cause harm to others while giving benefit to some. Should you make such a decision and what
tools, guides, processes can help the person to make the right choice, even if it may produce some harm to the decision
maker.

Integrity and Trust: These are values that we all want to have and to maintain. Someone who has
integrity is a person who lives by good principles and practices good principles in private and

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Corporate Ethics and Social Responsibilities Spring 2020
Ms. K. Durrani BSBA 6th C
professional life. There are many examples of people in business and political world who act one
way for the public to see and act differently in private these people have lost their integrity as when
it is discovered there are practicing two ways of living, people will not believe them and that’s the
term of losing your integrity. Once you have lost it, it is very difficult to get it back. Trust is
similar it takes years to build trust, you have to earn this trust from all your stake holders and then
a wrong decision may cost your stake holders to lose trust in you, this could lead to fall in sales,
harming long term relationships and reputation. Now you should understand how important both
values are and how difficult it is to maintain both.

Where does our Ethics come from???

Usually the sources of our ethics comes from our family, religious values, social norms, friends,
school, culture, laws of the nation. Some are what we call universal ethics like everyone agrees on
that killing is wrong, lying is wrong, stealing is wrong and honesty is good. While social norms,
culture and law can differentiate the ethical beliefs of one nation and another or one company and
another.

CODE OF ETHICS: Professions like medicine, accounting have their standard code of ethics
that all members swear to and uphold. Business does not have such universal codes, but each
business develops their own code according to their nature of industry and stakeholders and how
strong is the law of that nation. It is not enough just to follow the law of the land but you have to
go the extra mile and show that when taking all business decisions, the outcome shouldn’t harm
the direct or indirect stakeholders. Good Ethics does lead to Good Business

Ethical Principles: Normative Principles: How People should behave!!!

These are the classical beliefs coming from philosophy

 Utilitarianism: if the action results in many benefiting, the action would be ethical, so if
the result was many benefiting no matter how it was achieved then it is ethical; the end
justifies the means
 Deontology: how we achieve the result would determine if the action was ethical or not.

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Ms. K. Durrani BSBA 6th C

 Virtue theory; if the person has good values and character then the action would be
considered ethical.
Ethics and Profitability:
Doing good in your society will reap benefits but in the long term, you may see extra costs
in the short term when initiating more ethical choices but the benefits in increased in sales,
reputation, goodwill will come in the future. You have to see such measures as an
investment into the future of business and society and not as a cost to bear. Businesses is
also a corporate being, just like us it has responsibility to society just like we do. So when
making profits it has to perform in such a way that society is not negatively affected and
should bring benefits to the society besides the office product/service it is offering, salary
to employees and taxes to the government.

It is better to have one ethical standard and everyone can apply to that, it makes analyzing
a decision easy, having different rules for different people and different situations will
cause many issues. Ethical relativism is applying ethical standards to fit the situation rather
than adopting a single standard which is not good for business.

We all know how important good will is and how it is calculated in accounting, you all
know from business finance goal maximization, shareholder wealth and stakeholder wealth
maximization. You should also now by now that to increase stakeholder wealth you have
to accept positive NPV projects, so how can business ethics help in achieving this goal???

These notes are not a replacement for reading the chapters in the book, but help to make
things clearer to you.