3. Business Ethics
• Comprises principles, values, and standards that guide
behavior in the world of business
• Principles: Specific boundaries for behavior that are
universal and absolute
– Freedom of speech, civil liberties
• Values: Used to develop socially enforced norms
– Integrity, accountability, trust
4. Americans’ Trust in Business
(% of respondents who say they trust the
following business categories a great deal)
5. A Crisis in Business Ethics
• Consumer trust of businesses is declining
• No sector is exempt from ethical misconduct
• Stakeholders determine what is ethical/unethical
– Investors
– Employees
– Customers
– Interest groups
– Legal system
– Community
Source: Stockbyte
6. 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 is a response to
Sarbanes-Oxley, FSGO, and stakeholder
demands for ethics initiatives
• Individual ethics alone is not sufficient
• Studying business ethics helps identify ethical
issues to key stakeholders
7. A Timeline of Ethical and Socially
Responsible Concerns
8. Before 1960: Ethics in Business
• Theological discussions of ethics emerged
– Catholic social ethics included a concern for
morality in business, workers’ rights and living
wages
– Protestants developed ethics courses in their
seminaries and schools of theology
• The Protestant work ethic encouraged hard work
9. The 1960s: The Rise of Social Issues in
Business
• Societal social consciousness emerged
– Anti-business sentiment rose
• JFK’s Consumer Bill of Rights-
A new era of consumerism
– Right to safety, to be
informed, to choose,
and to be heard
• Consumer protection groups
fought for consumer
protection legislation
– Ralph Nader Source: Hisham Ibrahim
10. The 1970s: Business Ethics as an
Emerging Field
• Business professors began to write about social
responsibility
– An organization’s obligation to maximize positive
impact and minimize negative impact on stakeholders
• Philosophers became involved
• Businesses became concerned with public image
• Conferences were held and centers developed
• Issues:
– Bribery – Product safety
– Deceptive advertising – Environment
– Price collusion
11. The 1980s: Consolidation
• Membership in business ethics organizations
increased
• Ethics centers provided:
– Publications, courses, conferences and seminars
• Firms established ethics committees
• Defense Industry Initiative on Business Ethics and
Conduct (DII) emerged
– Foundation for the Federal Sentencing Guidelines
for Organizations
• Corporate support for ethics
12. The 1990s: Institutionalization of
Business Ethics
• The Federal Sentencing Guidelines for Organizations
(FSGO)
– Set tone for compliance
• Preventative actions against misconduct
– A company could avoid/minimize potential
penalties
13. The Federal Sentencing Guidelines for
Organizations
• Standards and procedures capable of detecting and
preventing misconduct
• High level oversight
• Care in delegation of authority
• Effective communication (training)
• Systems to monitor, audit, and report misconduct
• Consistent enforcement
• Continuous improvement
14. The 21st Century: A New Focus
• Continued issues with corporate non-compliance
– Growing public/political demand for improved ethical standards
• Sarbanes-Oxley Act (2002)
– Most extensive ethics reform
– Increased accounting regulations
• FSGO reform (2004)
– Requires governing authorities to be well-informed regarding
business ethics programs
• Firm’s greatest danger is not discovering misconduct
early
• Basic assumptions of capitalism being debated
– Fears in the wake of global recession and financial meltdown
15. Organizational and Global Ethical
Culture
• Ethical culture describes the component of
corporate culture that captures the values and norms
that an organization defines as appropriate conduct
• Creates shared values
• Goal is to:
• Minimize need for
enforced compliance
• Maximize utilization of
principles/ ethical
reasoning
Source: Triangle Images
17. Ethics Contributes to Employee
Commitment
• Comes from employees who believe their future
is tied to the organization’s
• Are willing to make personal sacrifices for the
organization
– The more dedication on the part of the company,
the greater the employee dedication
– Concerns include a safe work environment,
competitive salaries and benefit packages, and
fulfillment of contractual obligations
18. Ethics Contributes to Investor
Loyalty
• Companies perceived by their employees as
having a high level of honesty and integrity are
more profitable than companies with a low level
of honesty and integrity
• Ethical climates in organizations provide platform
for:
– Efficiency
– Productivity
– Profitability
19. Ethics Contributes to Customer
Satisfaction
• Consumers respond positively to socially concerned
businesses
– Being good can be extremely profitable
• Customer satisfaction dictates business success
• A strong organizational ethical climate
places customers’ interests first
• Research shows a strong relationship between ethical
behavior and customer satisfaction
20. Ethics Contributes to Profits
• Corporate concern for ethical
conduct is being integrated with
strategic planning
– Maximize profitability
• Corporate citizenship is
positively associated with:
– Return on investment and
assets
– Sales growth Source: PhotoLink
• Studies have found a positive
relationship between citizenship
and performance
Notes de l'éditeur
Increased awareness of ethical issues in the following industries: Accounting fraud Insider trading of stocks and bonds Falsifying of organizational documents Deceptive advertising Defective products Bribery Employee theft
Due to the need for professional experience and understanding the complexities of the legal environment. Even a person with good personal ethics will need business ethics training to confront complex ethical situations in the workplace.