WEEK 2 LESSON 1

Business Values and Ethics

Overview of Business values and Ethics
17th January 2022

Business Values and Ethics; Dr (Eng) Musebe Edward Achieng 8–1

 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

Introduction

 Business ethics is a branch of ethics which

prescribes standards of how the business is to
be carried out.

 Guidelines to stakeholders

 The responsibility of the managers and

employees

 The application of ethical judgments to business

activities.
 WHAT IS ETHICAL BEHAVIOUR?

 Business ethics is a specialized study of right and wrong

applied to business policies, institutions, and behaviors.
 Ethical behavior is characterized by honesty, fairness and
equity in Business, interpersonal, professional and
academic relationships and in research and scholarly
activities.
 Ethical behavior respects the dignity, diversity and rights
of individuals and groups of people.
 WHAT IS ETHICAL BEHAVIOUR?

 The advantages of ethical behavior include:

1. Cultivates strong teamwork and productivity .

2. Supports employee growth and meaning.

3. Helps to ensure that policies are legal.

4. Helps to avoid criminal acts of “omission”

5. Promotes a strong public image.

6. Improves trust in relationships.

7. Legitimizes managerial actions.

Relationship between business and ethics

 Businesses that exhibit and promote strong corporate

codes of ethics are more prosperous in the long run

 Enhances a company's reputation

 The highly competitive environment in today's global

economy puts pressures on company leaders to remain
profitable

 UNETHICAL BUSINESS PRACTICESS CAN ONLY

LEAD TO BAD BUSINESS
 Relationship between business and ethics

 The relationship between business and ethics is

intrinsically entwined. A successful company is one which
can effectively recognize and cultivate the relationship
which exists between the two.
 Businesses that exhibit and promote strong corporate
codes of ethics are more prosperous in the long run
because they show a commitment to an expectation of
sound moral behavior.
 This demonstrates a dedication to society, customers,
employees and the business itself.
 It also enhances a company's reputation if they become
commonly known as an ethical company, and this brings
more value to the organization.
 Relationship between business and ethics
 The highly competitive environment in today's global
economy puts pressures on company leaders to remain
profitable and to show a good return to stakeholders.
 Often this pressure can result in unethical decisions being
made in order to deliver positive results. When this occurs
it usually results in a pattern that gets passed down
through the organization.
 As leaders show unethical behavior, and perhaps even
justify such behavior while knowing it to be wrong, this
eventually becomes a part of organizational culture.
 It's easy to blame "the system", yet many fail to realize
"the system" is comprised of decision making individuals.
 To say "business is business" is not justified, as responsible
(ethical) decision making is an important component of
doing good business.
 Why Study Business Ethics?

• Global financial crisis created diminished stakeholder

trust
– Reports of unethical behavior are on the rise

– Society’s evaluation of right or wrong affects its ability to

achieve its business goals
– Studying business ethics is a response to stakeholder
demands for ethics initiatives
– Individual ethics alone is not sufficient
– Studying business ethics helps identify ethical issues to
key stakeholders
Business Ethics

 Comprises principles, values, and standards that guide

behavior in the world of business

 Principles: Specific boundaries for behavior that are

universal and absolute
– Freedom of speech, civil liberties

 Values: Used to develop socially enforced norms

– Integrity, accountability, trust
Business Ethics

 Business ethics is a practice that determines what is

right, wrong, and appropriate in the workplace.

 It is often guided by laws, and keeps companies and

individuals from engaging in illegal activity such as
insider trading, discrimination and bribery.

 The purpose of business ethics is to ensure a consistent

moral attitude within the company, from executive-level
management to new hires.

 It helps to ensure everyone is treated with respect,

fairness and honesty.
Code of ethics

 Also called code of conduct and ethical code.

 A code of ethics will start by setting out the
values that underpin the code and will describe a
company's obligation to its stakeholders.
 The code is publicly available and addressed to
anyone with an interest in the company's
activities and the way it does business.
 It will include details of how the company plans
to implement its values and vision, as well as
guidance to staff on ethical standards and how to
achieve them.
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
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
• Creates shared values

 Goal is to:
• Minimize need for enforced compliance
• Maximize utilization of principles/ ethical
reasoning
Source: Triangle Images
Ethics Contributes to Employee Commitment

 Comes from employees who believe their future

is tied to the organization’s

 Are willing to make personal sacrifices for the

organization
– The more dedication on the part of the company, the
greater the employee dedication
– Concerns include a safe work environment, competitive
salaries and benefit packages, and fulfillment of
contractual obligations
Ethics Contributes to Investor Loyalty

 Companies perceived by their employees as

having a high level of honesty and integrity
are more profitable than companies with a
low level of honesty and integrity

 Ethical climates in organizations provide

platform for:
– Efficiency
– Productivity
– Profitability
 Ethics Contributes to Customer Satisfaction

 Consumers respond positively to socially

concerned businesses
– Being good can be extremely profitable

 Customer satisfaction dictates business success

 A strong organizational ethical climate

places customers’ interests first

 Research shows a strong relationship between

ethical behavior and customer satisfaction
 Ethics Contributes to Profits

 Corporate concern for ethical

conduct is being integrated with
strategic planning
– Maximize profitability
 Corporate citizenship is
positively associated with:
– Return on investment and assets
– Sales growth
 Studies have found a positive
relationship between citizenship and Source: PhotoLink

performance
End