BUSINESS ETHICS

Lecture 1:
Introduction to Business Ethics

1
Learning Objectives

• Define ethics and business ethics

• Understand the nature of ethics as moral value
• Differentiate between law and ethics
• Understand the importance of business ethics

2
Learning Outcomes
At the end of the lesson, students should be able :

• to understand the meaning and scope of

business ethics.
• to determine the factors that contributes to the
increasing importance of business ethics.

3
What is Ethics?
• The word ethics is derived from the Greek word
“ethos” meaning character and latin word mores
meaning customs.

• Ethics is about the good (the values and virtues we

should cultivate) and the right (our moral duties).
• “It examines alternative views of what is good and right;
it explores ways of gaining the moral knowledge we
need; it asks why we ought to do right; and it brings all
this to bear on the practical moral problems that arouse
such thinking in the first place.” (Arthur Holmes, 2008)

4
What is Business Ethics?

Business ethics focuses on what constitutes right or

wrong behavior in the world of business.
Corporate business executives have a responsibility
to their shareholders and employees to make
decisions that will help their business make a
profit.
But in doing so, business people also have a
responsibility to the public and themselves to
maintain ethical principles.

5
What is Business Ethics?

“Business ethics is the study of business situations,

activities and decisions, where issues of right and
wrong are addresses (Crane & Matten, 2007)”.

6
Business Ethics

• The principle of conduct – professional ethics

• A system or philosophy of conduct

• A discipline dealing with what is good and bad-

moral duty and obligation

• A set of moral principles or values.

7
Determinants of Business Ethics

8
Societal Ethics

Standards that govern how members of a society

should deal with one another in matters
involving issues such as fairness, justice,
poverty, and the rights of the individual.

People behave ethically because they have

internalized certain values, beliefs, and norms.

9
Occupational Ethics

Standards that govern how members of a

profession, trade, or craft should conduct
themselves when performing work-related
activities.

Medical & legal ethics

10
Individual Ethics

Personal standards and values that determine

how people view their responsibilities to other
people and groups.

How they should act in situations when their own

self-interests are at stake.

11
Organizational Ethics

Guiding practices and beliefs through which a

particular company and its managers view their
responsibility toward their stakeholders.

Top managers play a crucial role in determining a

company’s ethics.

4-12
The Relationship Between Law and Ethics

• Ethical beliefs lead to the development of laws and

regulations to prevent certain behaviors or encourage
others.
• The law is an expression of the ethical beliefs of our
society.
• Law and ethics are not the same thing.

The question, “Is an act legal?” is different from the

question, “Is an act ethical?” The law cannot codify all
ethical requirements. Therefore, an action might be
unethical, yet not necessarily illegal. For example, it might
be unethical to lie to your family, but it is not necessary
illegal.
13
The Relationship Between Law and Ethics
• Law is a consistent set of universal rules that are
widely published, generally accepted and usually
enforced. These rules describe the ways in which people
are required to act in society.

• Ethics defines what is good for the individual and for

society and establishes the nature of duties that people
owe to oneself and others in society.

14
The World’s Most Ethical Companies

15
16
 Factor that Drives Organisational
Concern with Business Ethics
• Corporate reputation - create and maintain organisational
positive image in the eyes of its stakeholders.
• Investor confidence - company is being managed in fair,
accountable, responsible, and transparent way which build
investor confidence.
• Discerning consumers - ethical consumers are concerned
about the social responsibility and ethical practices of
companies.
• Corporate financial performance - good social
performance will subsequently lead to good financial
performance.

17
Factors Affecting Ethical Behavior

Source: Based on O. C. Ferrell and Larry Gresham, “A Contingency Framework for

Understanding Ethical Decision Making in Marketing,” Journal of Marketing, Summer
1985, p. 89.

18
 Factors Affecting Ethical Behavior

 Individual knowledge of an
Individual factors issue
 Personal values
 Personal goals

 Cultural norms
 Coworkers
Social factors  Significant others
 Use of the Internet

 Presence of opportunity
Opportunity  Ethical codes
 Enforcement

19
 Why Study Business Ethics?

• Reports of unethical behavior are on the rise

• Society’s evaluation of right or wrong affects its

ability to achieve its business goals

• Studying business ethics helps identify ethical

issues to key stakeholders and stakeholder
demands for ethics initiatives

20