Chapter 2

Business Ethics and

Social Responsibility
Learning Objectives

1 Explain the concern for ethical and 4 Describe how businesses can act
societal issues. responsibly to satisfy society.

2 Describe the contemporary ethical Explain the ethical responsibilities of

environment. businesses to investors and the
financial community.
3 Discuss how organizations shape ethical 5
conduct.
 Concern for Ethical and
Societal Issues
Business Ethics
The standards of conduct and moral values
governing actions and decisions in the work
environment.
Social responsibility
Balance between what’s right and what’s profitable
Often no clear-cut choices
Often shaped by the organization’s ethical climate
The Contemporary Ethical
Environment

High-profile investigations and arrests in

headlines.

Vast majority of businesses are ethical.

New corporate officers charged with deterring

wrongdoing and ensuring ethical standards.
See how Walmart highlights corporate
responsibility on its website.
 Business Approach to Ethics and
Social Responsibility
Sarbanes-Oxley Act
A 2002 law that added oversight for the nation’s
major companies and a special oversight board
to regulate public accounting firms that audit the
financial records of these corporations.
Engage in traditional corporate philanthropy,
which involves giving to worthy causes.
Anticipate and manage risks.
Identify opportunities to create value by doing
the right thing.
Individuals Make a Difference
Individuals can make the
difference in ethical
expectations and behavior.
Putting own interest
ahead of the
organization
Lying to employee
Misrepresenting hours
Safety violations
Internet abuse
Technology is expanding
unethical behavior.
Development of Individual Ethics
 On-the-Job Ethical Dilemmas

Situation in which a
business decision Telling the truth and
may be influenced adhering to deeply
for personal gain. felt ethical principles
in business
decisions.

Employee’s Businesspeople
disclosure of expect employees
illegal, immoral, to be loyal and
or unethical truthful, but
practices in the ethical conflicts
organization. may arise.
How Organizations Shape Ethical
Conduct
Ethical Awareness

Code of Conduct:
Formal statement that
defines how the
organization expects
and requires employees
to resolve ethical
questions.
Ethical Education

Codes of conduct
cannot detail a solution
for every ethical
situation, so
corporations provide
training in ethical
reasoning.
Ethical Action

Helping employees
recognize and reason
through ethical
problems and turning
them into ethical
actions.

TI Ethics Quick Test

Ethical Leadership

Executives must
demonstrate ethical
behavior in their actions.

use clear, explicit language

rather than euphemisms for
corrupt behavior
encourage behavior that
generates and fosters ethical
values
practice moral absolutism,
insisting on doing right even if
it proves financially costly
Acting Responsibly to Satisfy
Society

Social Responsibility
Management’s consideration of profit,
consumer satisfaction, and societal well-being
of equal value in evaluating the firm’s
performance.
Contributions to the overall economy, job
opportunities, and charitable contributions and
service.
Organizations measure through social audits.
Areas of Responsibility
Responsibilities to the General
Public
Public Health Issues. What to do about inherently
dangerous products such as alcohol, tobacco, vaccines,
and steroids.
Protecting the Environment. Using resources efficiently,
minimizing pollution.
Green marketing
Sustainability
Developing the Quality of the Workforce. Enhancing
quality of the overall workforce through education and
diversity initiatives.
Corporate Philanthropy. Cash contributions, donations
of equipment and products, and supporting the volunteer
efforts of company employees.
Responsibilities to Customers
CONSUMERISM
The Right to Be Safe. Safe operation of products,
avoiding product liability.

The Right to Be Informed. Avoiding false or misleading

advertising and providing effective customer service.

The Right to Choose. Ability of consumers to choose the

products and services they want.

The Right to Be Heard. Ability of consumers to

express legitimate complaints to the appropriate parties.
Responsibilities to Employees
Workplace Safety. Monitored by Occupational Safety and
Health Administration.
Quality-of-Life Issues. Balancing work and family through
flexible work schedules, subsidized child care, and regulation
such as the Family and Medical Leave Act of 1993.
Ensuring Equal Opportunity on the Job. Providing equal
opportunities to all employees without discrimination; many
aspects regulated by the Equal Employment Opportunity
Commission.
Age Discrimination. Age Discrimination in Employment Act of
1968 protects workers age 40 or older.
Sexual Harassment and Sexism. Avoiding unwelcome
actions of a sexual nature; equal pay for equal work without
regard to gender.
Responsibilities to Investors and
the Financial Community
Obligation to make profits for
shareholders.
Expectation of ethical and moral
behavior.
Protection of investors by the
Securities and Exchange Commission
and state regulations.