1. The Importance of Business Ethics C H A P T E R 1 Ethical Decision Making For Business 8e Fraedrich/Ferrell/Ferrell CHAPTER 1

2. Why Study Business Ethics? Business decisions under great scrutiny –Global financial crisis created diminished stakeholder trust Deals with questions about whether practices are acceptable No universally-accepted approach for resolving issues Source: © Jack Hollingsworth/Corbis

3. Business Ethics Comprises principles, values, and standards that guide behavior in the world of business

4. 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 Source: Stockbyte

5. Before 1960: Ethics in Business Theological discussions of ethics emerged –Catholic social ethics included a concern for morality in business, workers’ rights and living wages –Protestants developed ethics courses in their seminaries and schools of theology The Protestant work ethic encouraged hard work

6. The 1960s: The Rise of Social Issues in Business Societal social consciousness emerged –Anti-business sentiment rose A new era of consumerism –Right to safety, to be informed, to choose, and to be heard Consumer protection groups fought for consumer protection legislation Source: Hisham Ibrahim

7. The 1970s: Business Ethics as an Emerging Field Business professors began to write about social responsibility –An organization’s obligation to maximize positive impact and minimize negative impact on stakeholders Businesses became concerned with public image Issues: –Bribery – Product safety –Deceptive advertising – Environment –Price collusion

8. The 1980s: Consolidation Membership in business ethics organizations increased Ethics centers provided: –Publications, courses, conferences and seminars Firms established ethics committees Corporate support for ethics

9. The 1990s: Institutionalization of Business Ethics Preventative actions against misconduct –A company could avoid/minimize potential penalties

10. 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

11. 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

12. 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

13. 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 performance Source: PhotoLink