An Overview of Business Ethics

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 What is ethical behavior?

Ethical behaviour is characterized by honesty, fairness and

equity in interpersonal, professional and academic
relationships and in research and scholarly activities.

➢ Ethics
 Code of moral principles.
 Setstandards of “good” or “bad” or “right” or “wrong” in one’s
conduct.
 Also called moral philosophy, the discipline concerned
with what is morally good and bad and morally right and
wrong.
Why It’s Important

Understanding business ethics and

social responsibility makes you
informed of your rights as a
consumer, an employee, and a
citizen.
❖ Morals: Refer to a person’s personal
philosophies about what is right or wrong
❖ Principles: Specific and pervasive boundaries
for behavior that should not be violated
➢ Human rights, freedom of speech and justice
❖ Values: Enduring beliefs and ideals that are
socially enforced
➢ Teamwork, trust and integrity

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❖ Having good individual morals is not
enough to stop ethical misconduct
❖ Ethics training helps provide collective
agreement in diverse organizations
❖ Business ethics decisions can be
complicated
❖ Helps to identify ethical issues when
they arise and recognize the approaches
available to resolve them

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 Organizational Ethical Culture
Ethical culture: acceptable behavior as
defined by the company and industry
❖ Creates shared values and support for
ethical decisions – driven by top
management
Goal:
➢ Minimize need for enforced compliance
➢ Maximize utilization of
principles/ethical reasoning in difficult
or new situations
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 Ethics Contributes to Employee
Commitment
Commitment comes from employees who are
invested in the organization and willing to make
personal sacrifices for the organization
➢ The more company dedication to ethics,
the greater the employee dedication
➢ Concerns include a safe work environment,
competitive salaries and benefits packages,
and fulfillment of contractual obligations

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 Ethics Contributes to Investor Loyalty
❖ Investors are increasingly interested in a
company’s reputation and recognize how:
➢ ethical culture provides a foundation for
efficiency, productivity, and profitability
➢ negative publicity, lawsuits, and fines
threaten a company’s long-term viability
❖ Gaining investors’ trust and confidence is
vital to sustaining financial stability

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Ethics Contributes to Customer Satisfaction
❖ Customer satisfaction is an important factor in a
successful business strategy
➢ Companies seen to be socially responsible increase
customer trust and satisfaction
➢ Trust is essential for long-term customer
relationships
➢ A strong organizational ethical climate places
customers’ interests first
❖ Ethical conduct toward customers build a strong
competitive position shown to positively affect
performance and innovation
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➢ Utilitarian view of ethics — greatest good to the
greatest number of people.
➢ Individualism view of ethics — primary
commitment is to one’s long-term self-interests.
➢ Moral-rights view of ethics — respects and
protects the fundamental rights of all people.
➢ Justice view of ethics — fair and impartial
treatment of people according to legal rules and
standards.
• Procedural justice
• Distributive justice
• Interactional justice
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➢ Cultural issues in ethical behavior:
 Cultural relativism
 Ethical behavior is always determined by cultural context.
 Isthe ability to understand a culture on its own terms and not to make judgments
using the standards of one's own culture. The goal of this is promote understanding of
cultural practices that are not typically part of one's own culture.
 Culturalrelativism attempts to counter ethnocentrism by promoting the
understanding of cultural practices unfamiliar to other cultures. For example, it is a
common practice for friends of the same-sex in India to hold hands while walking in
public.

 Cultural universalism

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How international businesses can respect core or universal values:
Respect for human dignity
• Create culture that values employees, customers, and suppliers.
• Keep a safe workplace.
• Produce safe products and services.
Respect for basic rights
• Protect rights of employees, customers, and communities.
• Avoid anything that threatening safety, health, education, and
living standards.
Be good citizens
• Support social institutions, including economic and educational systems.
• Work with local government and institutions to protect environment.
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How do ethical dilemmas complicate the workplace?
➢ An ethical dilemma occurs when choices, although
having potential for personal and/or organizational
benefit, may be considered unethical.
➢ Ethical dilemmas include:
Discrimination
Sexual harassment
Conflicts of interest

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 How do ethical dilemmas complicate the workplace?

➢ Factors influencing ethical behavior include:

The person
Family influences, religious values, personal standards,
and personal needs.
The organization
Supervisory behavior, peer group norms and behavior,
and policy statements and written rules.
The environment
Government laws and regulations, societal norms and
values, and competitive climate in an industry.
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Factors influencing ethical managerial behavior—the
person, organization, and environment.

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How can high ethical standards be maintained?

➢ Ethics training:
 Structured programs that help participants to
understand ethical aspects of decision making.
 Helps people incorporate high ethical
standards into daily life.
 Helps people deal with ethical issues under
pressure.

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How can high ethical standards be maintained?

➢ Whistleblowers
 Expose misdeeds of others to:
Preserve ethical standards
Protect against wasteful, harmful, or illegal
acts

 Laws protecting whistleblowers vary

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 How can high ethical standards be maintained?

➢ Ethical role models:

Top managers serve as ethical role models.

All managers can influence the ethical behavior

of people who work for and with them.

Excessive pressure can foster unethical

behavior.

Managers should be realistic in setting

performance goals for others. 19
What is social responsibility and governance?

➢ Perspectives on social responsibility:

 Classical view—

 Management’s only responsibility is to maximize

profits.
 Socioeconomic view—

 Management must be concerned for the broader

social welfare, not just profits.