Ethical Decision Making for Business 8e

Fraedrich/ Ferrell/ Ferrell

CHAPTER1

The Importance of Business

Ethics

Chapter Objectives
To explore conceptualizations of business ethics from
an organizational perspective
To examine the historical foundations and evolution
of business ethics
To provide evidence that ethical value systems
support business performance
To gain insight into the extent of ethical misconduct in
the workplace and the pressures for unethical
behavior

Chapter Outline
Why Study Business Ethics?
The Development of Business Ethics
Developing an Organizational and Global Ethical
Culture
The Benefits of Business Ethics
Our Framework for Studying Business Ethics

Business Ethics
Comprises principles and standards that guide behavior
in the world of business
Right or wrong, acceptable or unacceptable behavior
within the organization
Determined by you and key stakeholders

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

Why Study Business Ethics?

Reports of unethical behavior are on the rise
Societys 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

Before 1960: Ethics in Business

A living wage
Theologys domain
Philosophys domain

The 1960s: The Rise of Social Issues in

Business
Consumers Bill of Rights
Ralph Nader

The 1970s: Business Ethics as an

Emerging Field
Bribery
Deceptive advertising
Price collusion
Product safety
The environment

The 1980s: Consolidation

Organized field of study
Business ethics centers
Business ethics courses
Defense industry initiative
Multinationals
Self-regulation (Reagan/Bush)

The 1990s: Institutionalization of

Business Ethics
Free trade
Self-regulation
Federal Sentencing Guidelines for Organizations
(FSGO)
More multinationals

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

The 21st Century: A New Focus

Continued issues with corporate non-compliance

Sarbanes-Oxley Act (2002)
FSGO reform (2004)
Firms greatest danger is not discovering misconduct
early
Basic assumptions of capitalism being debated

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

Benefits of Business Ethics

Better ethical climate
Employee commitment and trust
Investor loyalty and trust
Customer satisfaction and trust
Long term profits