Ethics and

Corporate
Responsibility

Chapter Five

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
 Ethics
Ethics
 The system of rules
that governs the
ordering of values

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 Ethics
Ethical issue
 Situation, problem, or opportunity in which an
individual must choose among several
actions that must be evaluated as morally
right or wrong
Business ethics
 The moral principles and standards that
guide behavior in the world of business.

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 Ethical Systems
Moral philosophy
 Principles, rules, and values people use in
deciding what is right or wrong
Universalism
 The ethical system stating that all people
should uphold certain values that society
needs to function.

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 Caux Principles
Caux Principles
 Ethical principles established by international
executives based in Caux, Switzerland, in
collaboration with business leaders from
Japan, Europe, and the United States.

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 Caux Principles
Kyosei Human dignity
 living and working  concerns the value of
together for the each person as an
common good, end, not a means to
allowing cooperation the fulfillment of
and mutual prosperity others’ purposes
to coexist with healthy
and fair competition

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 Ethical Systems
Egoism
 An ethical system defining acceptable
behavior as that which maximizes
consequences for the individual. “Do the act
that promotes the greatest good for oneself”
Utilitarianism
 An ethical system stating that the greatest
good for the greatest number should be
the overriding concern of decision makers.

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 Ethical Systems
Relativism
 Philosophy that bases ethical behavior on
the opinions and behaviors of relevant other
people
 Based on the “industry practice”, if you do it,
I follow
Virtue ethics
 Classification of people based on their level
of moral judgment. Refer to next slide
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 Ethical Systems –Virtue Ethics
 Kohlberg’s model of cognitive moral
development
 Perspective that what is moral comes from
what a mature person with “good” moral
character would deem right.

5-9
 Business Ethics
Ethical climate
 In an organization, the
processes by which
decisions are
evaluated and made
on the basis of right
and wrong

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 Ethics Programs
Compliance-based ethics programs
 Company mechanisms typically designed by
corporate counsel to prevent, detect, and
punish legal violations.
 This increases surveillance and controls on
people and impose punishments on
wrongdoers.

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 Ethics Programs
Integrity-based ethics
programs
 Company mechanisms
designed to instill in people
a personal responsibility for
ethical behavior
 Code of Ethics in
companies
 Confidentiality-Internal auditors
respect the value and ownership of
information they receive and do not
disclose information without
appropriate authority . Source:
Institute of Internal Auditors 5-12
 A Process for Ethical Decision
Making
Figure 5.1

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 Ethical Decision Making
Making ethical decisions takes:
Moral awareness
 realizing the issue has ethical implications
Moral judgment
 knowing what actions are morally defensible
Moral character
 the strength and persistence to act in
accordance with your ethics despite the
challenges
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 The Business Costs of Ethical
Failure
Figure 5.2

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 Corporate Social Responsibility
Corporate social
responsibility
(CSR)
 Obligation toward
society assumed by
business.

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 Corporate Social Responsibility
Economic Legal
responsibilities responsibilities
 To produce goods and  To obey local, state,
services that society federal, and relevant
wants at a price that international laws
perpetuates the
business and satisfies
its obligations to
investors.

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 Corporate Social Responsibility
Ethical responsibilities
 Meeting other social expectations, not written
as law.
 E.g. Provide jobs to homeless people,
donation to maintain a park etc

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 Corporate Social Responsibility
Philanthropic
responsibilities
 Additional behaviors and
activities that society finds
desirable and that the values of
the business support.
 For instance, a philanthropist
not only contribute their money
for charity and at the same time
teaching people to do extra to
improve themselves.
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 Pyramid of Global Corporate Social
Responsibility and Performance
Figure 5.3

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