BUSINESS ETHICS

Dr. NGUYEN BICH NGOC

Business ethics

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Why Does Ethics Matter in Business?

▰ Financially and Economically: “Doing the right thing” matters to firms,

taxpayers, employees, and other stakeholders, as well as to society.

▰ Relationships, Reputation, Morale, and Productivity Costs to businesses also

include deterioration of relationships; damage to reputation; declining
employee productivity, creativity, and loyalty; ineffective information flow
throughout the organization; and absenteeism. Companies that have a
reputation of unethical and uncaring behavior toward employees also have a
difficult time recruiting and retaining valued professionals.

▰ Integrity, Culture, Communication, and the Common Good For business

leaders and managers, managing ethically also means managing with
integrity.
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 Business ethics

▰ Formosa Ha Tinh ▰ Cambodian garment workers die while making

clothes for Gap and Old Navy

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 MAIN DEFINITIONS

▰ Business ethics comprises organizational principles, values,

and norms that may originate from individuals, organizational
statements, or from the legal system that primarily guide
individual and group behavior in business.
▻ Principles are specific and pervasive boundaries for behavior
that should not be violated. Principles often become the basis
for rules. Some examples of principles could include human
rights, freedom of speech, and fundamentals of justice.
▻ Values are enduring beliefs and ideals that are socially
enforced. Several desirable or ethical values for business today
are teamwork, trust, and integrity.
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 MAIN DEFINITIONS

▰ Ethical culture is the component of corporate culture that

captures the values and norms an organization defines and is
compared to by its industry as appropriate conduct.
▻ The goal of an ethical culture is to minimize the need for enforced compliance
of rules and maximize the use of principles that contribute to ethical reasoning
in difficult or new situations.
▻ Ethical culture is positively related to workplace confrontation over ethics
issues, reports to management of observed misconduct, and the presence of
ethics hotlines.
▻ To develop better ethical corporate cultures, many businesses communicate
core values to their employees by creating ethics programs and appointing
ethics officers to oversee them.
▻ An ethical culture creates shared values and support for ethical decisions and
is driven by top management.
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MAIN DEFINITIONS

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 Ethical statements

▰ Most companies begin the process of establishing organizational

ethics programs by developing codes of conduct, or formal
statements that describe what an organization expects of its
employees.

▰ Such statements may take three different forms: a code of ethics,

a code of conduct, and a statement of values.

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 a code of ethics

▰ A code of ethics is the most comprehensive and consists of

general statements, sometimes altruistic or inspirational, that serve
as principles and as the basis for rules of conduct.

▰ A code of ethics generally specifies methods for reporting

violations, disciplinary action for violations, and a structure of due
process.

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 codes of ethics

The six values that have been suggested as being desirable for
codes of ethics are
▻ (1) trustworthiness,
▻ (2) respect,
▻ (3) responsibility,
▻ (4) fairness,
▻ (5) caring,
▻ (6) citizenship 10
a code of conduct

▰ A code of conduct is a written document that may contain

some inspirational statements but mainly specifies acceptable
and unacceptable types of behavior.

▰ A code of conduct is more akin to a regulatory set of rules and,

as such, tends to elicit less debate about specific actions.

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 a statement of values

▰ a statement of values serves the general public and also addresses

distinct groups such as stakeholders.

▰ Values statements are conceived by management and are fully

developed with input from all stakeholders.

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Stakeholders

▰ A stakeholder is “any individual or group who can affect

or is affected by the actions, decisions, policies, practices,
or goals of the organization”.

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 Stakeholders
▰ Primary stakeholders are those whose
continued association is absolutely
necessary for a firm’s survival.
▰ These include employees, customers,
investors, and shareholders, as well as
the governments and communities
that provide necessary infrastructure.
▰ Ethical corporate cultures are
important because they are linked to
positive relationships with
stakeholders.
▰ Concern for stakeholders’ needs and
expectations is necessary to avoid
ethical conflicts.
▰ Secondary stakeholders do not typically
engage in transactions with a company
and are therefore not essential to its
survival.
▰ These include the media, trade
associations, and special interest groups
such as health care benefits, retiree’s
rights.
▰ Both primary and secondary
stakeholders embrace specific values
and standards that dictate acceptable
and unacceptable corporate behaviors
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Stakeholders

Wal mart
Nike
Gap
Formosa

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 Social responsibility

▰ Social responsibility rests on a stakeholder orientation. The

realities of global warming, obesity, consumer protection, and
other issues are causing companies to look at a broader, more
inclusive stakeholder orientation.

▰ Long-term relationships with stakeholders develop trust, loyalty,

and the performance necessary to maintain profitability.

▰ Issues generally associated with social responsibility can be

separated into four general categories: social issues, consumer
protection, sustainability, and corporate governance. 16
 Social responsibility
1. Social issues are associated with the common good. In other words, social issues deal with
concerns affecting large segments of society and the welfare of the entire society: obesity,
smoking, and exploiting vulnerable or impoverished populations.
2. Consumer protection, which often occurs in the form of laws passed to protect consumers
from unfair and deceptive business practices. Issues involving consumer protection usually
have an immediate impact on the consumer after a purchase. Major areas of concern
include advertising, disclosure, financial practices, and product safety.
3. Sustainability: the potential for the long-term well-being of the natural environment, including
all biological entities, as well as the mutually beneficial interactions among nature and
individuals, organizations, and business strategies. With major environmental challenges such
as global warming and the passage of new environmental legislation, businesses can no
longer afford to ignore the natural environment as a stakeholder.
4. Corporate governance involves the development of formal systems of accountability,
oversight, and control. Strong corporate governance mechanisms remove the opportunity
for employees to make unethical decisions.
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Social responsibility

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 Examples of ethical issues
faced by business
executives
1. Relationships with suppliers and
business partners: 3. Relationship with employees:
(a) Bribery and immoral entertainment (a) Discrimination in hiring and
(b) Discrimination between suppliers treatment of employees
(c) Dishonesty in making and keeping
contracts 4. Management of financial
2. Relationship with customers: resources:
(a) Unfair pricing (a) Misuse of organisational funds
(b) Cheating customers (b) Tax evasion.
(c) Dishonest advertising
(d) Research confidentiality
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 Ethical decision-making

The stages of ethical decision-making are seen as follows:

1. awareness of an ethical problem, usually characterised as a dilemma;
2. identification of alternative actions and consequences. This requires experience and imagination and
is not usually carried out in isolation from other decisions and agents, which does, of course,
complicate the analysis;
3. deontological evaluation (rights and duties) and consequentialist evaluation (for a range of
stakeholders);
4. reconciliation of rights and consequences (‘rights’ usually act as constraints in specific situations);
5. impact of ethical judgements on decision makers’ preferences and intentions (what do I/we actually
want to do here?);
6. control and power in an actual situation (what can I/we actually do here?).

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 Global business ethics

▰ International businesspersons must understand the values, culture,

and ethical standards of their own countries and also be sensitive
to those of other cultures.
▰ National culture is a much broader concept than organizational
culture and includes everything in our surroundings made by
people—both tangible items, such as artifacts, and intangible
entities, such as concepts and values.
▰ Cultural relativism: the concept that morality varies from one
culture to another and that “right” and “wrong” are defined
differently.

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 global common values

▰ Despite the various differences in values between countries, there

are certain values broadly accepted worldwide. These global
common values are shared across most cultures.

▻ Desirable common values: Integrity, family and community

unity, equality, honesty, fidelity, sharing, and unselfishness

▻ Undesirable common values: Ignorance, pride and egoism,

selfish desires, lust, greed, adultery, theft, deceit, lying,
murder, hypocrisy, slander, and addiction

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 Ethical Leadership

▰ Leadership is the ability or authority to guide and direct

others toward a goal.
▻ Effective leadership is essential for a company.
▻ Ethical decisions are one dimension of leadership.

▰ Ethical leadership creates an ethical culture. Top managers

provide a blueprint for a firm’s corporate culture. If these
leaders fail to express desired ethical behaviors and goals, a
corporate culture evolves on its own to reflect the values
and norms of the company.

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 Ethical conflicts

▰ Ethical conflicts occur when there are two or more positions

on an ethical decision.

▰ Sometimes ethical conflicts emerge because employees feel

uncomfortable about their own or their co-workers’ decisions.

▰ Training employees to recognize and resolve conflict can

prevent employees from being the victims of questionable
conduct such as bullying.

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 HOW SUSTAINABILITY RELATES
TO ETHICAL DECISION
MAKING AND SOCIAL
RESPONSIBILITY
▰ Sustainability from a strategic business perspective is the potential for the
long-term well-being of the natural environment, including all biological
entities, as well as mutually beneficial interactions among nature and
individuals, organizations, and business strategies.

▰ Sustainability includes the assessment and improvement of business

strategies, economic sectors, work practices, technologies, and lifestyles
while maintaining the natural environment.

▰ Sustainability falls into the social responsibility domain of maximizing

positive and minimizing negative impacts on stakeholders.

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HOW SUSTAINABILITY RELATES
TO ETHICAL DECISION
MAKING AND SOCIAL
RESPONSIBILITY

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 GLOBAL ENVIRONMENTAL
ISSUES

▰ Air pollution, acid rain, and global warming

▰ Water pollution, water quantity

▰ Land pollution, waste

▰ Deforestation

▰ Genetically modified organisms (GMO)

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