Business Ethics and Social

Responsibility
Defining Business Ethics

1. Understanding Ethics
2. Defining Business Ethics
We begin by exploring how people live their lives
according to a standard of right or wrong behavior.

Where do people look for guidance in deciding what is

right or wrong or good or bad?

Once they have developed a personal set of moral

standards or ethical principles, how do people then
interact with other members of their community or
society as a whole who may or may not share the same
ethical principles.
With a basic understanding of ethics, we can then
examine the concept of business ethics, where
employees face the dilemma of balancing their own
moral standards with those of the company they work
for and the supervisor or manager to whom they
report on a daily basis.

We examine the question of whether the business

world should be viewed as an artificial environment
where the rules by which you choose to live your own
life dont necessarily apply.
 What is Ethics ?
The manner by which we try to live our lives
according to a standard of right or wrong
behavior - in both how we think and behave
toward others and how would we like them to
think and behave toward us.

Ethics is about how we meet the challenge of

doing the right thing when that will cost more
than we want to pay.
 Business Ethics

Ethics is a part of decision making at all

levels of work and management
Just as important as functional areas of
business
Deals with questions of whether practices are
acceptable
No universally accepted approach for resolving
issues

2013 Cengage Learning. All Rights Reserved. 6

 Business Ethics
Defined
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
Ethical decisions occur when accepted rules
no longer serve and decision makers must
weigh values and reach a judgment
Values and judgments play a critical role when we make
ethical decisions

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7
 Business Ethics
Defined
Morals: Refer to a persons personal
philosophies about what is right or wrong
Morals are personal and singular
Principles: Specific and pervasive
boundaries for behavior that should not be
violated
Human rights, freedom of speech and justice
Values: Enduring beliefs and ideals that are
socially enforced
Teamwork, trust and integrity
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8
 A Crisis in Business Ethics

Nearly half of employees observe

misconduct in the workplace
After the financial crisis, business decisions
and activities have come under scrutiny
The financial sector has not regained
stakeholder trust

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 Americans Trust in Business Sectors
(% of respondents who say they trust the following business
categories)

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 Role of Organizational
Ethics in Performance

Cengage Learning 2015

2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11
 Ethics Contributes to
Employee Commitment

Commitment comes from employees who are

invested in the organization and willing to make
personal sacrifices for the organization
The more company dedication to ethics, the
greater the employee dedication
Concerns include a safe work environment,
competitive salaries and benefits packages, and
fulfillment of contractual obligations

2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12
 Ethics Contributes to
Investor Loyalty

Investors are increasingly interested in a

companys reputation and recognize how:
ethical culture provides a foundation for
efficiency, productivity, and profitability
negative publicity, lawsuits, and fines
threaten a companys long-term viability
Gaining investors trust and confidence is vital
to sustaining financial stability

2015 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part,
except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13
 Ethics Contributes to
Customer Satisfaction
Customer satisfaction is an important factor in
a successful business strategy
Companies seen to be socially responsible
increase customer trust and satisfaction
Trust is essential for long-term customer
relationships
A strong organizational ethical climate
places customers interests first
Ethical conduct toward customers builds a
strong competitive position shown to
positively affect performance and innovation
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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14
 Ethics Contributes to
Profits

Companies need profits in order to meet their

responsibilities
Corporate concern for ethical conduct is being
integrated with strategic planning
Maximizing profitability
Ethics has moved from being a compliance
standard to becoming an integral part of
achieving a competitive advantage

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except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15
 Specific Issues

Misuse of company resources

Abusive behavior
Harassment
Accounting fraud
Conflicts of interest
Defective products
Bribery
Employee theft

2013 Cengage Learning. All Rights Reserved. 16

 The Reasons for Studying Business Ethics

Having good individual values/morals is not

enough to stop ethical misconduct
Ethics training helps provide collective
agreement in diverse organizations
Business ethics decisions can be complicated
Studying business ethics helps identify ethical
issues to key stakeholders

2013 Cengage Learning. All Rights Reserved. 17

 A Timeline of Ethical and Socially
Responsible Concerns
1960s 1970s 1980s 1990s 2000s

Environmental Employee Bribes and Sweatshops and unsafe Cybercrime

issues militancy illegal working conditions in
contracting third-world countries
prices
Civil rights Human rights Influence Rising corporate liability Financial
issues issues peddling for persona damages misconduct
(for example, cigarette
Source: Adapted from Business companies)
Increasing Covering up Deceptive Financial Global issues,
employee- rather than advertising mismanagement and Chinese product
employer correcting fraud safety
tension issues
Changing work Disadvantaged Financial fraud Organizational ethical Sustainability
ethic consumers (for example, misconduct
savings and
loan scandal)
Rising drug use Transparency Intellectual
issues property theft
Ethics Timeline, Ethics Resource Center, http://www.ethics.org/resources/business-ethics-timeline.asp (accessed May 27, 2009). Copyright
2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006, www.ethics.org.

2013 Cengage Learning. All Rights Reserved. 18

 What is ethics?
Ethics is the branch of philosophy that focuses
on morality and the way in which moral
principles are applied to everyday life. Ethics
has to do with fundamental questions such as
What is fair? What is just? What is the
right thing to do in this situation? Ethics
involves an active process of applying values,
which may range from religious principles to
customs and traditions.
 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,
businesspeople also have a responsibility to
the public and themselves to maintain ethical
principles.
 Although ethics provides moral guidelines,
individuals must apply these guidelines in making
decisions. Ethics that applies to business (business
ethics) is not a separate theory of ethics; rather, it is
an application of ethics to business situations.
Although all people have ethical responsibilities,
higher ethical standards are imposed upon
professionals who serve as social models, such as
physicians, attorneys, and businesspeople.
 The Relationship Between Law and
Ethics
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.
 Similarly, just because an act is illegal does not
necessarily mean it is immoral. Rosa Parks was
acting illegally when she refused to give up her
seat on the bus to a white male, but that does not
necessarily mean she was acting unethically.
Should an individual obey the law even if it would
be unethical to do so? Under the theory of civil
disobedience espoused by Martin Luther King,
Mahatma Ghandi and others, an immoral law
deserves to be disobeyed. Can you think of any
examples of acts that would be illegal, yet
arguably ethical?
 Understanding Right and Wrong
Moral standards are principles based on religious,
cultural, or philosophical beliefs by which judgments are
made about good or bad behavior.
These beliefs can come from different sources:
Friends.
Family.
Ethnic background.
Religion.
School.
Media (television, radio, newspaper, magazines, and the internet).
Personal role models and mentors.
 How Should I live ?
You do not acquire your personal moral
standards in the same way that you learn the
alphabet. Standards of ethical behavior are
absorbed by observing the examples (both
positive and negative) set by everyone around
you parents, family members, friends, peers,
and neighbors.
 The value of A Value
When individuals share similar standards in a community, we
can use the terms values and value system.

The terms morals and values often used to mean the same
thing a set of personal principles by which you aim to live
your life. When you try to formalize those principles into a
code of behavior then you are seen to be adopting a Value
System.

Just as the word value is used to denote the worth of an item,

a persons values can be said to have a specific worth for
them. That worth can be expressed in two ways;
1. An intrinsic value by which a value is a good thing
in itself and is pursued for its own sake, whether
anything good comes from that pursuit or not. For
example, happiness, health, and self-respect can all
be said to have intrinsic value.

2. An instrumental value by which the pursuit of

one value is a good way to reach another value. For
example, money is valued for what it can buy
rather than for itself.
 Value Conflict
It is this gray area that makes the study of ethics so
complex. We would like to believe that there are clearly
defined rules of right and wrong. However, it is more likely
that situations will arise that will require exceptions to
those rules. For example:

Lying is wrong but what if you were lying to protect

the life of a loved one?
Stealing is wrong but what if you were stealing food
for a starving child?
Killing is wrong but what if you had to kill someone in
self-defense to protect your own life?
 Ethics Means to Others

1. Simple Truth - Doing the right thing.

2. Personal integrity - personal character.
3. Rules of appropriate individual behavior.
4. Rules of appropriate behavior for a
community or society.
 The Golden Rule

Treat others as you would like to be treated

The danger with the Golden Rule is that not everyone

thinks like you, acts like you, or believes in the same
principles that you do.

So to live your life on the assumption that your pursuit of

an ethical ideal will match others ethical ideal could get
you into trouble.
 Ethical Theories
Is about how we should go about living an ethical life.

Ethical theories can be divided into three categories

1. Virtue Ethics.

What sort of person would I like to become, and how do I go about

becoming that person?
2. Ethics for the Greater Good (Utilitarianism)

Focus on the greatest good for the greatest number of people.

we must think beyond our own interests to the interests of
those we lead and serve, and the interests of communities
and the world. We must take a long-term view, keeping in
mind the broad impact of our day-to-day decisions.

3. Universal Ethics.

There are certain and universal principles that should apply

to all ethical judgments. such as the Declaration of
Human Rights
 Ethical Relativism
Its not always easy to choose from the previous
theories, and it becomes clear that there is no truly
comprehensive theory of ethics, only a choice that is
made based on your personal value system.

Therefore, many people choose the idea of ethical

relativism, whereby the traditions of their society,
their personal opinions and the circumstances of the
present moment define their ethical principles.

Implies some degree of flexibility

 Ethical Dilemmas
The basic assumption of ethical theory is that you as an
individual or community are in control of all the factors
that influence the choices that you make.

In reality, your ethical principles are most likely to be

tested when you face a situation in which there is no
obvious right or wrong decision but rather a right or right
answer.

Such situations are referred to as ethical dilemmas.

Any idealized set of principles or standards inevitably
faces some form of challenge. For ethical theories,
that challenge takes the form of a dilemma in which
the decision you must take requires you to make a
right choice knowing full well that you are:
- Leaving an equally right choice undone.
- Likely to suffer something bad as a result of that
choice.
- Contradicting a personal ethical principles in
making that choice.
- Abandoning an ethical value of your community
or society in making that choice.
 Resolving Ethical Dilemmas
1) Analyze the consequences: who will be helped
by what you do? Who will be harmed? What
kind of benefits and harm are we talking about?
2) Analyze the actions: Consider all the options
from a different perspective, without thinking
about the consequences. How do the actions
measure up against moral principles like honesty,
fairness, equality, respecting the dignity of other.
3) Make a decision: take both parts of your analysis
into account, and make a decision.
 Example #2
A secretary who has worked for your
corporation for fifteen years is involved in a
car accident in which she permanently loses
the use of her right hand. Thus, she can no
longer effectively type, file, or perform many
of the other functions that she previously had
performed and that are included in her job
description.
 Your corporation has a very tight budget and
does not have sufficient funds to pay for an
additional secretary without reallocating
budget items. The injured secretary has been
very loyal to your corporation, and you have
been very satisfied with her work and
dedication. She wants to stay at her job.
 Moreover, she does not believe that she could
find other employment at this time. Should
your corporation fire her, lay her off with
compensation, or find a way to retain her?