Chapter 2

Today's Environment for

Business Ethics and Related
Social Issues
Learning Goals

1 Explain the concepts of business ethics and 4 Describe how businesses’ social
social responsibility responsibility is measured and
summarize the responsibilities of
Describe the factors that influence business business to the general public,
2 customers, and employees.
ethics.

List the stages in the development of ethical 5 Explain why investors and the financial
3 community are concerned with business
standards and discuss how organizations
shape ethical behavior. ethics and social responsibility.
 Concern for Ethical and
Societal Issues
Business Ethics
 The standards of conduct and moral values governing
actions and decisions in the work environment.
 Social responsibility
 Balance between what’s right and what’s profitable
 Often no clear-cut choices
 Often shaped by the organization’s ethical climate
Sarbanes-Oxley Act
 A 2002 law that added oversight for the nation’s major
companies and a special oversight board to regulate
public accounting firms that audit the financial records of
these corporations.
The Contemporary Ethical
Environment

 High-profile investigations and arrests in headlines.

 Vast majority of businesses are ethical.

 New corporate officers charged with deterring

wrongdoing and ensuring ethical standards.
 Business Approach to Ethics and
Social Responsibility
 Engage in traditional corporate philanthropy, which
involves giving to worthy causes.
 Anticipate and manage risks.
 Identify opportunities to create value by doing the
right thing.

 See how Walmart highlights corporate responsibility

on its website.
 Individuals Make a Difference
 Individuals can make the
difference in ethical
expectations and behavior.
 Putting own interest ahead

of the organization
 Lying to employee

 Misrepresenting hours

 Safety violations

 Internet abuse

 Technology is expanding
unethical behavior.
Development of Individual Ethics
 On-the-Job Ethical Dilemmas

Situation in which a
Telling the truth and
business decision may be
adhering to deeply felt
influenced for personal
ethical principles in
gain.
business decisions.

Employee’s disclosure Businesspeople expect

of illegal, immoral, or employees to be loyal

unethical practices in and truthful, but

the organization. ethical conflicts may

arise.
How Organizations Shape Ethical
Conduct
Ethical Awareness

Code of Conduct: Formal

statement that defines how the

organization expects and

requires employees to resolve

ethical questions.
Ethical Education

Codes of conduct cannot detail

a solution for every ethical

situation, so corporations

provide training in ethical

reasoning.
Ethical Action

Helping employees recognize

and reason through ethical

problems and turning them

into ethical actions.

TI Ethics Quick Test

Ethical Leadership

Executives must demonstrate

ethical behavior in their actions.


use clear, explicit language rather than

euphemisms for corrupt behavior


encourage behavior that generates and

fosters ethical values


practice moral absolutism, insisting on

doing right even if it proves

Acting Responsibly to Satisfy
Society

Social Responsibility


Management’s consideration of profit, consumer

satisfaction, and societal well-being of equal value in

evaluating the firm’s performance.


Contributions to the overall economy, job opportunities,

and charitable contributions and service.


Organizations measure through social audits.
Areas of Responsibility
Responsibilities to the General
Public
 Public Health Issues. What to do about inherently dangerous
products such as alcohol, tobacco, vaccines, and steroids.
 Protecting the Environment. Using resources efficiently,
minimizing pollution.
 Green marketing
 Sustainability
 Developing the Quality of the Workforce. Enhancing quality
of the overall workforce through education and diversity
initiatives.
 Corporate Philanthropy. Cash contributions, donations of
equipment and products, and supporting the volunteer efforts of
company employees.
Responsibilities to Customers
CONSUMERISM
 The Right to Be Safe. Safe operation of products, avoiding

product liability.

 The Right to Be Informed. Avoiding false or misleading

advertising and providing effective customer service.

 The Right to Choose. Ability of consumers to choose the

products and services they want.

 The Right to Be Heard. Ability of consumers to

express legitimate complaints to the appropriate parties.
Responsibilities to Employees
 Workplace Safety. Monitored by Occupational Safety and Health
Administration.
 Quality-of-Life Issues. Balancing work and family through flexible
work schedules, subsidized child care, and regulation such as the
Family and Medical Leave Act of 1993.
 Ensuring Equal Opportunity on the Job. Providing equal
opportunities to all employees without discrimination; many aspects
regulated by the Equal Employment Opportunity Commission.
 Age Discrimination. Age Discrimination in Employment Act of
1968 protects workers age 40 or older.
 Sexual Harassment and Sexism. Avoiding unwelcome actions of a
sexual nature; equal pay for equal work without regard to gender.
Responsibilities to Investors

 Obligation to make profits for shareholders.

 Expectation of ethical and moral behavior.
 Protection of investors by the
Securities and Exchange Commission
and state regulations.