Business Ethics

and Social
Responsibility

Chapter 2

©Steve Allen/ Getty Images

©2020 McGraw-Hill Education Limited

 Learning Objectives
2-1 Define business ethics and social responsibility and
examine their importance.
2-2 Detect some of the ethical issues that may arise in
business.
2-3 Specify how businesses can promote ethical
behaviour.
2-4 Explain the four dimensions of social responsibility.
2-5 Debate an organization’s social responsibilities to
owners, employees, consumers, the environment
and the community.

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 Business Ethics and Social Responsibility 1

Business ethics versus personal ethics

Acceptable business behaviour determined by:
• The organization
• Stakeholders: customers, suppliers, competitors,
government regulators, interest groups, and the public
• An individual’s personal principles and values

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 Business Ethics and Social Responsibility 2

Social responsibility
• Business’s obligation to maximize its positive impact
and minimize its negative impact on society
Social responsibility and ethics differ
• Ethics: decisions made by an individual or work group
that society evaluates as right or wrong
• Social responsibility: impact of the entire
organization’s activities on society
Social Entrepreneur

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 Business Ethics and Social Responsibility 3

Business law
• Refers to the laws and regulations that govern the
conduct of business
• The most basic ethical and social responsibility
concerns have been codified as laws and regulations
that encourage businesses to conform to society’s
standards, values, and attitudes.

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 Table 2.1 Timeline of Ethical and Socially
Responsible Concerns
Timeline Activities
Environmental issues, Civil rights issues, Increased employee–
1960s employer tension, Honesty, Changing work ethic, Rising drug
use
Employee militancy, Human rights issues, Covering up rather
1970s than correcting issues, Discrimination, Harassment
Bribes and illegal contracting practices, Influence peddling,
1980s Deceptive advertising, Financial fraud (e.g., savings and loan
scandal), Transparency issues
Sweatshops and unsafe working conditions in third-world
1990s countries, Rising corporate liability for personal damages (e.g.,
cigarette companies), Financial mismanagement and fraud
Employee benefits, Privacy issues, Financial mismanagement,
2000s Abusive behaviour, Cyber crime, Intellectual property theft
Social media, Financial fraud, Privacy, Bullying
2010s
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 The Role of Ethics in Business 1
Society’s judgment directly affects an
organization’s ability to achieve its goals
Well-publicized incidents of unethical and illegal
activity increases public pressure to raise
standards
Legal and ethical issues
• Ethical conflicts can evolve into legal disputes
• Business ethics goes beyond legal issues
• Not limited to for-profit organizations

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 The Role of Ethics in Business 2
Recognizing Ethical Issues in Business
• An ethical issue is an identifiable problem, situation, or
opportunity that requires a person to choose from
among several actions that may be evaluated as right
or wrong, ethical or unethical
• Bribery: payments, gifts, or special favors intended to
influence the outcome of a decision

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 Bribery

While bribery is illegal in Canada, facilitation payments or bribes are

common in other parts of the world. Would you be willing to pay a
facilitation payment if it was common practice in a country where you
owned a business?  
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 Table 2.2 Types and Incidences of Observed Misconduct

Employees
Types of Conduct Observed Observing It
Lying to employees, customers, vendors, or the public 26%
Abusive or intimidating behaviour toward employees 21%
Situations placing employee interests over
16%
organizational interests
Internet abuse  16%
Health violations  15%
Discrimination on the basis of race, colour, gender,
12%
age, or similar categories
Sexual harassment  12%
Stealing  12%

Source: “National Business Ethics Survey 2018,” “Survey Documents State of Ethics in the Workplace,” and
“Misconduct,” Ethics Resource Center (n.d.), https://www.ethics.org/wp-
content/uploads/2019/01/Global_Business_Ethics_Survey_2018_Q4_Final.pdf &
http://www.boeingsuppliers.com/GBES2018-Final.pdf (accessed January 01, 2019). 10
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 The Role of Ethics in Business 4
Recognizing Ethical Issues in Business continued
• Abusive and intimidating behaviour
• Most common ethical problem for employees
• Includes actions such as: physical threats, false accusations,
profanity, insults, yelling, ignoring someone
• Difficult to assess and manage
• Intent must be considered
• Bullying is associated with a hostile workplace

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 The Role of Ethics in Business 3
Recognizing Ethical Issues in Business continued
• Abusive or Intimidating Behaviour

Bullying, which was once thought to occur primarily on the playground, is

also a problem at work when abusive or intimidating behaviour is directed
at employees. 12
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 Table 2.3 Actions Associated with Bullies
1. Spreading rumors to damage others
2. Blocking others’ communication in the workplace
3. Flaunting status or authority to take advantage of others
4. Discrediting others’ ideas and opinions
5. Use of emails to demean others
6. Failing to communicate or return communication
7. Insults, yelling, and shouting
8. Using terminology to discriminate by gender, race, or age
9. Using eye or body language to hurt others or their reputation
10. Taking credit for others’ work or ideas

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 The Role of Ethics in Business 6
Recognizing Ethical Issues in Business continued
• Conflict of interest
• When a person must choose whether to advance personal
interests or those of others
• To avoid, employees must separate personal financial interests
from business dealings
• Insider trading: the buying or selling of stocks by insiders who
possess material information that is still not public

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 The Role of Ethics in Business 7
Fairness and Honesty
• Communications
• False and misleading advertising
• Deceptive personal-selling tactics
• Product labeling

• Business relationships
• Keep company secrets
• Meet obligations and responsibilities
• Avoid undue pressure forcing others to act unethically

• Plagiarism

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 Table 2.5 Questions to Consider in Determining Whether an
Action Is Ethical

Are there any potential legal restrictions or violations that could result from
the action?

Does your company have a specific code of ethics or policy on the action?

Is this activity customary in your industry? Are there any industry trade
groups that provide guidelines or codes of conduct that address this issue?

Would this activity be accepted by your co-workers? Will your decision or

action withstand open discussion with co-workers and managers and survive
untarnished?

How does this activity fit with your own beliefs and values?
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 The Role of Ethics in Business 9
Improving Ethical Behaviour in Business
• Ethical decisions in organizations are influenced by
three key factors:
1. Individual moral standards and values
2. Influence of managers and co-workers
3. Opportunity to engage in misconduct
• Professional codes of ethics
• Whistleblowing

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 The Nature of Social Responsibility 1
Corporate Citizenship
• is the extent to which businesses meet the legal,
ethical, economic, and voluntary responsibilities
placed on them by their various stakeholders.

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 Figure 2.2 The Pyramid of Social Responsibility

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 Table 2.7a The Argument For and Against Social Responsibility

For:
1. Business helped to create many of the social problems that exist
today, so it should play a significant role in solving them.
2. Businesses should be more responsible because they have the
financial and technical resources to help solve social problems.
3. As members of society, businesses should do their fair share to
help others.
4. Socially responsible decision making by businesses can prevent
increased government regulation.
5. Social responsibility is necessary to ensure economic survival: if
businesses want educated and healthy employees, customers with
money to spend, and suppliers with quality goods and services in
years to come, they must take steps to help solve the social and
environmental problems that exist today.

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 Table 2.7b The Argument For and Against Social Responsibility

Against:
1. It sidetracks managers from the primary goal of business—
earning profits. Every dollar donated to social causes or
otherwise spent on society’s problems is a dollar less for
owners and investors.
2. Participation in social programs gives businesses greater power,
perhaps at the expense of particular segments of society.
3. Some people question whether business has the expertise
needed to assess and make decisions about social problems.
4. Many people believe that social problems are the responsibility
of government agencies and officials, who can be held
accountable by voters.

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 The Nature of Social Responsibility 2
Social Responsibility Issues continued
• Relations with owners and stockholders
• Maintain proper accounting procedures
• Provide investors will all relevant information
• Protect owners’ rights and investments

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 The Nature of Social Responsibility 2
Social Responsibility Issues continued
• Employee relations
• Provide a safe workplace
• Pay them adequately
• Keep employees informed of what is happening in their
company
• Listen to their grievances and treat them fairly
• Provide equal opportunities for all employees

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 The Nature of Social Responsibility 3
Social Responsibility Issues continued
• Consumer relations
• Consumerism
• Many of those involved in the consumer movement argue that
consumers should have four specific rights:
• Right to safety
• Right to be informed
• Right to choose
• Right to be heard

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 The Nature of Social Responsibility 4
Social Responsibility Issues continued
• Environmental issues
• Animal Rights
• Pollution
• Water
• Air
• Land

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 The Nature of Social Responsibility 6
Social Responsibility Issues continued
• Response to environmental issues
• Link executive pay to environmental performance
• Make products, packaging, and processes more
environmentally friendly – “green” business
• Recycling

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 The Nature of Social Responsibility 7
Social Responsibility Issues continued
• Community relations
• Many businesses want to make their communities better
places for everyone to live and work
• Most common way is through donations to local and national
charitable organizations

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