THE ETHICAL

ENVIRONMENT OF
THE FIRM
“Dissecting key components of a business”
BRAINSTORMING……
ETHICS
▪ Ethics is a set of principle that guide people’s behavior and judgment. Ethics
can also be considered as a guiding philosophy for individuals.
▪ In businesses, ethical standards are created so that managers can form
meaningful and just decisions and uphold certain values.
▪ However, these values obtained by ethical standards can sometimes
contradict each other. (e.g. weighing between what is good and what is
right)
 BUSINESS ETHICS AND
MANAGEMENT

▪ An ethical issue refers to a concern on which an individual must decide based on several

alternatives of what is morally right or wrong.

▪ In businesses, these issues play a crucial role in decision making.

▪ Any manager should be guided by a set of business ethics which are moral principles and

standards that guide businesspeople in their transactions.

▪ Generally, business ethics sets the moral standards for any kind of business function.
 ETHICS IN ACTION…

The Business Ethics of Ben & Jerry’s

▪ Ben and Jerry’s Homemade Holdings, Inc. is an American company that manufactures
ice cream products.
▪ It was founded by Ben Cohen and Jerry Greenfield in 1978 in Burlington, Vermont.
▪ It has grown into one of the most successful companies in the United States.
▪ The company stand on ethics and responsibility VERY SERIOUSLY.
 ETHICS IN ACTION…

The Business Ethics of Ben & Jerry’s

▪ During the early 2000s, Ben and Jerry’s encountered a trending controversy regarding to one
of their products: GMOs of The Heath Bar Crunch
▪ This was due to the ingredients made by this snack and the manufacturing process to create this
product.
▪ It was discovered that Genetically Modified Organisms (GMOs) were used by Ben and Jerry’s
to compensate the growing demand of their products.
▪ GMOs are organisms comprising of plants or animals whose genetic makeup has been altered
to bring about changes such as larger yields*
 ETHICS IN ACTION…

The Business Ethics of Ben & Jerry’s

▪ Anti-GMO movement became prevalent due to fear of genetic instability.
▪ This concern caught the attention of lawmakers and prompted them to pass laws
which require food companies to label their products that are made from GMOs.
▪ Ben and Jerry’s fully understood the conditions and decided to support the law and
put labels on its products that used GMO.
▪ However, the view of people on GMOs scared them from buying GMO products and
Ben and Jerry’s had to do an important step: Gradually remove products that use
GMO.
 ETHICS IN ACTION…

The Business Ethics of Ben & Jerry’s

▪ By 2014, the company finally announces that all of their ingredients are GMO-free.
▪ By doing that, Ben and Jerry’s had to drastically increase the price of their products as
the ingredients they buy from their suppliers use traditional means of producing
supplies for Ben and Jerry’s.
▪ It was a hard transition period for Ben and Jerry’s to become non-GMO. However, it
was not without purpose since it is one of their missions to uphold ethics in their line
of business.
 PERSPECTIVES ON ETHICS
In deciding on ethical issues, five guiding principles may be used:

▪ Universalism- This is the principle which states that all people should have
certain values like honesty, respect and cooperation under all circumstances
and at all times.
▪ Egoism- This is the principle which promotes the greatest good to oneself. It
is focused on the perspective that people ultimately act for self-advancement,
no matter how good their intentions are.
▪ Utilitarianism- This is the principle which focuses on the greatest good for the
greatest number of people. The ultimate concern is to make decisions that are
beneficial to the greatest number of people.
▪ Relativism- This is the principle which states that ethical behavior is based on
a person’s own and other relevant people’s opinions. It also acknowledges
that there are different standards for each culture.
▪ Virtue Ethics- This is the principle which states that morality depends on the
maturity of a person with good moral character.
CORPORATE INTEGRITY

▪ Corporate Integrity refers to that sense of “wholeness” created by the right

relationships among the members of the corporation.
▪ It has five dimensions, all interrelated and interdependent namely the:
▪ Cultural Dimension;

▪ Interpersonal Dimension;

▪ Organizational Dimension;

▪ Social Dimension; and

▪ Natural Dimension
 CORPORATE INTEGRITY
The five dimensions of corporate integrity should be in harmony with each other to
achieve a successful firm.
▪ Cultural Dimension unites all employees by having the same cultural aspects
such as language, rituals, behavioral patterns, and beliefs.
▪ Interpersonal Dimension focuses on the corporate member’ s important
relationships that impact the organization. Example of such relationships
include family relations, civic life, and work relations.
▪ Organizational Dimension focuses particularly on economic and financial
purposes, managerial purposes, and civic purposes.
▪ Social Dimension focuses on making the organization actively engaging with
society. It must be seen as a significant social element in the community.
▪ Natural Dimension looks into how the organization relates to nature.
Managers should consider how their business impact the environment.
CORPORATE SOCIAL
RESPONSIBILITY
▪ Corporate Social Responsibility refers to business operations and activities
that have the welfare of society in mind.

Corporate social Responsibility is closely related to the concepts of social

obligation and social responsiveness. These define the company’s ability to
exercise social responsibility.

▪ Social Obligation refers to complying with legal and ethical standards to

uphold social welfare.
▪ Social Responsiveness, on the other hand, goes beyond prescribed standards
and implements action to make an impact to society.

Social obligation is good while social responsiveness is better.

In addition, Having corporate social responsibility enhances the overall
image of a company.
 CORPORATE SOCIAL
RESPONSIBILITY
Today, companies strive to incorporate elements of social responsibility in
their operations:

▪ Economic Responsibility pertains to companies producing goods and services

with reasonable prices. These should also satisfy the consumer fully.
▪ Legal Responsibility looks at companies complying with local and
international laws that apply to its business operations.
▪ Ethical Responsibility includes establishing norms, standards, mores and
practices that reflect fairness to the consumers, employees, shareholders, and
the community.
▪ Philanthropic responsibility includes the initiation of voluntary activities such
as donating to charity, and establishing corporate programs.