BUSINESS ETHICS

LECTURER: DUONG THI HOAI

NHUNG (MBA)
FACULTY OF BUSINESS
ADMINISTRATION
EMAIL: nhungdth@ftu.edu.vn
MOBILE: 0985867488

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 What is business ethics?
Does ethical business Why do you
How do you behave
mean obeying the law? need doining
in doing business
towrad ethical
business
business ethically?

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 Expected Learning Outcome (ELOs)
 Knowledge

1. Understand concepts of ethics, business ethics and professional

ethics, Corporate social Responsibility

2. Understand theories of ethics and business

3. Identify stakeholders and the roles of stakeholders in corporate

social responsibility

4. Understand and demonstrates the principles of marketing, human

resource, accounting and environmental management ethics

5.3 Understand and build the codes of conduct in the organization

 Expected Learning Outcome (ELOs)
*Skills

1. Ability to debate and argue to defend your point of view based on ethical

principles
2. Build self-learning and self-study skills

3. Build and enhance problem-solving and decision-making ability in

management situations in general, and in human resource management in

particular.
4. Improve human skills such as team work, communication and presentation.

 *Attitude

1. Be cooperative and proactive in teamwork

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 Readings
Textbook
Laura P.Hartman, et.al, 2014, Business Ethics-
Decision making for integrity and social
responsibility, Mc. Graw Hills.

Reference
Thomas Donaldson, Patricia Werhane, 2008, Ethical
issues in Business- A philosophical approach (8th ).
Pearson Prentice Hall (chapter 2)

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 Learning tasks and assessment
Learning tasks Weighting
Student’s participation in 10%
class
Midterm test 10%

Group Debate 20%

Final exam 60%

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 Outline
Chapter 1: An introduction to business ethics
Chapter 2: Theories of ethics and business
Chapter 3: Stakeholders and Corporate Social
Responsibility (CSR)
Chapter 4: Ethics and HRM
Chapter 5: Ethics and Marketing
Chapter 6: Ethics and Environment
Chapter 7: Ethics, Accountancy and Corporate
Governance

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 Learning tasks and assessment
1. Mid-term test (10%)
- Content covered: chapter 1, 2, 3
- Type of test: answering short questions
- Time: 50 minutes

2. Group Assignment (20%)

- Form of group: 2-3 members/group
- Type of assignment: Group debate, submitting a handout
- Time: Debating (15 minutes) + Q&A (10 minutes)
2 case studies will be delivered to you and you will pick up one side of one
case.

3. Final exam (60%)

- Content covered: chapter 1, 2, 3, 4, 5, 6, 7.
- Type of test: multiple choice and short questions
- Time: 70 minutes (20 minutes for multiple choice and 50 minutes for
8 short questions)
 CHAPTER 1:
AN INTRODUCTION TO BUSINESS ETHICS

This chapter focuses on these key learning objectives:

Defining ethics and business ethics.
Understanding fully ethical terms in organizational
context.
Evaluating why businesses should be ethical.
Knowing why ethical problems occur in business.

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 Readings
Textbook
Laura P.Hartman, et.al, 2014, Business Ethics-
Decision making for integrity and social
responsibility, Mc. Graw Hills.
Chapter 1: Ethics and Business
Chapter 2: Ethical Decision Making: Personal and
Professional Contexts

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 • What is ethics? What is morals?
Ethics comes from the Greek Morality derives from the
words "ethikos" and "ethos," Latin- “Moralis” meaning
meaning character. customs or manners

Video clip- Integrating ethics (ch1a)

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 • What is ethics?
 Ethics relies on materialist and
social consequences, not spiritual
ones in order to determine what
is ethical or not
What is morals?
 Morality is inherently founded
on spiritual principle- one’s
responsibility to a supernatural
being or goal.

 Ethics is simply a formal branch of

philosophy concerns itself with the
study of morals and their derivation
Ethics is philosophy of moral

 Ethical is not simply following the rules

or law that have been established

 Ethics emphasize the responsibility and capability of the

individual to own her/his conclusion through reasoning and to
14- determine which principles are relevant in particular case.
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 • What is ethics?
Ethics comes from the Greek words "ethikos" and "ethos," meaning
character.

 Ethics reflects the character of the individual and more

contemporarily perhaps, the character of the business firm, which
is a collection of individuals.
 Ethical decisions also involve morals, which are society’s
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accepted standards of behavior.
 1. What is ethics? (cont.)
Philosophical ethics
ethics itself as a discipline

Normative ethics
focuses on what ought or should
be occurring
Ethics
Practical ethics
develop context-specific areas of
theory

Descriptive ethics
focuses on what is occurring
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 1. What is ethics? (cont.)
Philosophical ethics:
This is also referred to as ‘meta-ethics’, the prefix ‘meta’
showing we are talking about ethics itself as a discipline
rather than working within the discipline to solve ethical
problems.
philosophical ethics don’t tell you how to carry out
business negotiations in another country (to choose a
prosaic but useful problem area).
 If we state, for example, that ‘stealing is wrong’ then we
must be able to give the grounds for this assertion.

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 1. What is ethics? (cont.)
 Normative ethics
 Normative ethics covers a variety of theories which at one time
or another were considered by key writers as the only sensible
approach to ethics.
 In very general terms, normative ethical theories attempt to
prescribe the best way to live, including
 how to resolve the dilemmas which may arise when making
difficult decisions,
 what general rules and guidelines we should follow,
 how we should distinguish between right and wrong,
 what virtues we should develop.
 Focuses on what ought or should be occurring
 What is ethics? The study of right and wrong, duty and
16 obligation, moral norms, individual character, and responsibility.
 1. What is ethics? (cont.)
 Practical ethics
 the theories of normative ethics are still expressed in ways
which are not specific to context and may require considerable
interpretation and development before they capture the
particularities of such contexts.
 Therefore, one of the major developments in ethics as a totality
over the past few years, practical theory has been the
development of context-specific areas of theory, such as
medical ethics and business ethics, along with the emerging
role of the ‘ethicist’ as a professional able to contribute
towards the resolution of difficult dilemmas.
 Obviously, in this course we are focusing on business and
organisational ethics. We are looking at questions of behaviour
17 in the many and varied situations of organisational life.
 1. What is ethics? (cont.)
Descriptive ethics
A quite different approach often found in texts on
business ethics but frequently completely lacking in
philosophical texts is descriptive ethics.
This approach looks at how individuals, groups and
organisations approach ethical evaluation and decision-
making in practice.
It is an empirical methodology, often carried out as part
of social science projects and using research methods
commonly seen in sociology and psychology.
Focuses on what is occurring.

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2. Ethical terms in organisational contexts
(cont.)
Organizational ethics:
Organizational ethics is about the process of management,
the relationships between managers and the relationships
between managers and other employees.

Business ethics
The study of right and wrong, duty and obligation, moral
norms, individual character, and responsibility – in the
context of business.

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2. Ethical terms in organisational contexts
(cont.)
Corporate Social Responsibility
Corporate Social Responsibility (CSR) can be defined as
the obligation companies have to develop and implement
courses of action that aid in social issues that impact
society.

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2. Ethical terms in organisational contexts
(cont.)

Functional or professional ethics

We can differentiate by environmental context, it may also
be useful to consider the ethical problems which tend to
arise within specific functional areas of an organisation.

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2. Ethical terms in organisational contexts
(cont.)
Functional or professional ethics (cont.)
‘Accounting ethics’ is important for all organisations as the
audit, control and reporting aspects of financial
management must be carried out with a high degree of
probity and transparency; many examples of
organisational malpractice arise when this is not the case
and therefore accountants are bound by strict ethical codes
of practice.

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2. Ethical terms in organisational contexts
(cont.)
Functional or professional ethics (cont.)
‘Marketing ethics’ is another obvious area of concern due
to the consumer’s perceptions of misleading
advertisements and aggressive selling used by some
businesses, most recently through the use of the Internet.
Whilst this more visibly applies within business-to-
consumer contexts, many issues can arise within business-
to-business interactions (say, during negotiations or in
supply chain management) or in public sector situations
where clients have rightly come to expect high standards
of information and service.
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2. Ethical terms in organisational contexts
(cont.)
Functional or professional ethics (cont.)
‘HRM ethics’ is another key area where a consideration of
ethical practice is essential, perhaps to such an extent that
it is difficult to differentiate from organisational ethics as a
whole, that is the overall management of people within an
organisation may be broader than the traditional area of
‘personnel and welfare’, and strategic HRM may be
defined very broadly by its practitioners and advocates.

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 Functional or professional ethics (cont.)

Marketing ethics

Human resource management ethics

Accounting and finanice ethics

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 3. Ethics and the law

Ethic Law
s

Frequent Overlap

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 3. Ethics and the law
 The law and ethics can overlap in many respects.
 The law is a reflection of what society thinks are minimal
standards of conduct and behavior.
• Research focuses on two questions:
1. Why do firms do illegal things?
2. What are the consequences of engaging in illegal behavior?
 Ethics sometimes represents a standard that exceeds the legal
minimum
Frequent Overlap

Ethics Law

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 3. Ethics and the law (cont.)
If we see the law as the operationalisation of a moral code
then we may note the following:
There are actions which are legal but may be considered
unethical by some individuals in a society.
There are actions which may be illegal but have no specific
ethical content (except, of course, that one should obey the
law!). Typically this may include minor infringements of
laws which are intended as administrational or where
arbitrary limits have been set. This is not to say that such
laws can be broken but that extensive ethical analysis may
not be useful.
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 Ethics and the Law
Ethical Unethical
Legal

Illegal

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 4. Role of ethics in business

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 4. Role of ethics in business
Why Should Business Be Ethical?

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 4. Role of ethics in business
Why Should Business Be Ethical?
 For the past decade the Scottsdale, Arizona-based Ethisphere
Institute – an organization focused on gauging ethical business
practices – has put out a list of the “World’s Most Ethical
Companies.
 This year Ethisphere’s roster includes 131 companies from 21
countries, representing 45 industries. The list includes 1410-
time honorees and 13 first-time honorees.
 The Methodology
Companies in the running are asked 180 questions to form
Ethisphere’s proprietary “Ethics Quotient“ score—part of a
vetting process that evaluates them in categories including ethics
and compliance programs, corporate citizenship and
responsibility, culture of ethics, governance, and leadership,
32 innovation and reputation. Answering the many queries and
 4. Role of ethics in business
Why Should Business Be Ethical?
Meet Demands of Business Stakeholders
Some businesses know that meeting stakeholders’
expectations is good business. When a company upholds
ethical standards, consumers may conduct more business
with the firm and the stockholders may benefit as well.
Comply with Legal Requirements
Doing business ethically is also often a legal requirement.
To avoid some punishment

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 4. Role of ethics in business (cont.)
Enhance Business Performance
Being ethical imparts a sense of trust, which promotes
positive alliances among business partners. If this trust is
broken, the unethical party may be shunned and ignored.

A study conducted by a DePaul University accounting

professor found a statistically significant linkage between
management commitment to strong controls that
emphasize ethically responsible behavior on the one hand
and favorable corporate financial performance on the
other.
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 4. Role of ethics in business (cont.)
Enhance Business Performance (cont.)
Further support for the relationship between being ethical
and being profitable was found in a study conducted by the
Institute for Business Ethics in the United Kingdom.
Three of the four measures used in the study- economic
value added, market value added, and price/earnings
ratio- were stronger for companies that had a code of
ethics than for those that did not.
The study data also indicated that firms with an explicit
commitment to doing business ethically had produced
profit/turnover ratios 18 percent higher than those without
a similar commitment
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 4. Role of ethics in business (cont.)
 Prevent or Minimize Harm
Another reason businesses and their employees should act
ethically is to prevent harm to the general public and the
corporation’s many stakeholders. One of the strongest
ethical principles is stated very simply: Do no harm.
A company that is careless in disposing of toxic chemical
wastes that cause disease and death is breaking this ethical
injunction. Many ethical rules operate to protect society
against various types of harm, and businesses are expected
to observe these commonsense ethical principles.

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 4. Role of ethics in business (cont.)
Promote Personal Morality
A final reason for promoting ethics in business is a personal
one. Most people want to act in ways that are consistent
with their own sense of right and wrong. Being pressured
to contradict their personal values creates emotional stress
for people.
Knowing that one works in a supportive ethical climate
contributes to one’s sense of psychological security

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 5. Why Ethical Problems Occur in Business

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 5. Why Ethical Problems Occur in
Business
Personal Gain and Selfish Interest
Desire for personal gain, or even greed, causes some ethics
problems. Businesses sometimes employ people whose
personal values are less than desirable. They will put their
own welfare ahead of all others, regardless of the harm done
to other employees, the company, or society.

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5. Why Ethical Problems Occur in Business (cont.)
Personal Gain and Selfish Interest
Example:
One of the most egregious ethical egoists in recent history was
Dennis Kozlowski, former CEO of Tyco. New York
prosecutors charged Kozlowski with stealing more than
$170 million from the company. Kozlowski also was
accused of borrowing $270 million from a company loan
program intended to help him pay taxes, but he improperly
used 90 percent of this money for personal expenses, such
as yachts, jewelry, fine art, and real estate. Kozlowski was
sentenced to up to 25 years in a New York state prison in
2005.
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5. Why Ethical Problems Occur in Business
(cont.)
Competitive Pressures on Profits
When companies are squeezed by tough competition, they
sometimes engage in unethical activities to protect their
profits. This may be especially true in companies whose
financial performance is already substandard. Research has
shown that poor financial performers and companies with
financial uncertainty are more prone to commit illegal acts.

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5. Why Ethical Problems Occur in Business (cont.)
Competitive Pressures on Profits
Example:
Senior executives at Samsung of South Korea, the world’s largest
memory-chip maker by revenue, pleaded guilty to a U.S. price-
fixing charge and were ordered to pay $300 million in fines for
its role in a global cartel designed to drive up prices for
electronic memory. The U.S. Justice Department uncovered
evidence that Samsung and other firms under investigation
repeatedly met to discuss prices on dynamic random-access
memory chips, agreed on the prices to be quoted to customers,
and exchanged information about sales volume in order to
stabilize, control and bolster the industry, which had experienced
sharp swings in pricing and production in the past few years.
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5. Why Ethical Problems Occur in Business (cont.)
Conflicts of Interest
A conflict of interest occurs when an individual’s self-
interest conflicts with acting in the best interest of another,
when the individual has an obligation to do so.
Conflicts of interest are normally considered unethical,
because a failure to disclose a conflict of interest represents
deception and may hurt the person or organization on whose
behalf judgment has been exercise

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 Conflicts between business and ethics
Although Society wants companies to create many
well-paying jobs, those same organizations want to limit
compensation costs and raise productivity levels.
Customers want to purchase goods and services at low
prices, but businesses want to maximize profits.
Society wants to reduce pollution levels, but businesses
want to minimize the cost that environmental
regulations add to their operations.

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 Conflicts between business and ethics
Then, from that arising a natural, unavoidable tension in
the term "business ethics" - a tension that stems from
conflicts between the interests of companies and their
employees, customers, and the greater society.
Because these conflicts are fundamental to the nature of
business, managers must continuously and consciously
balance the needs of the organization and its
stockholders with the needs of other stakeholders,
including workers, customers, and the larger community

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 5. Why Ethical Problems Occur in Business (cont.)
 Cross-Cultural Contradictions
Today, the policy makers and strategic planners in all multinational
corporations, regardless of the nation where they are head quartered, face
this kind of ethical dilemma.
Case:
The pesticide methyl parathion is officially banned or restricted in many
countries including the United States, China, Malaysia, Indonesia, and
Cambodia. The World Health Organization classified methyl parathion as
“extremely hazardous.” The chemical can be fatal for humans if
swallowed, inhaled, or absorbed through the skin. Yet, methyl parathion
and nearly 50 other dangerous pesticides are being sold in Thailand and
Vietnam and, from there, being illegally exported to Cambodia.
Cambodian farmers argue that they need the pesticides to increase
agricultural production, despite the lack of protective safety equipment or
procedures for properly disposing of used containers. Multinational
46 companies that manufacture the chemicals say that they are not
responsible because they do not directly market to Cambodia.
 5. Why Ethical Problems Occur in Business (cont.)
Cross-Cultural Contradictions
Case:
Although the foreign sales of methyl parathion to Thailand
and Vietnam were legal, were they ethical? Is dumping
unsafe products ethical if it is not forbidden by the receiving
nation, especially if the companies know that the products
are exported to another country where farmers there
mishandle the product and use it without safety precautions?
Are multinational companies ethically responsible for what
happens to their products, even though they are being sold
legally? What or whose ethical standards should be the
guide?
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 Summary
1. What is ethics?
 Philosophical ethics
 Normative ethics
 Practical ethics
 Descriptive ethics
2. Ethical terms in organisational contexts
 Organisational ethics
 Business ethics
 Corporate Social Responsibility (CSR)
 Functional ethics: Accounting ethics, HRM ethics, Marketing
ethics

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 Summary
3. Concepts in business ethics
 Intentions, actions and consequences
 Ethics and the law

4. Role of ethics in business

 Meet Demands of Business Stakeholders
 Enhance Business Performance
 Comply with Legal Requirements
 Prevent or Minimize Harm
 Promote Personal Morality

5. Why Ethical Problems Occur in Business

 Personal Gain and Selfish Interest
 Competitive Pressures on Profits
 Conflicts of Interest
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 Cross-Cultural Contradictions