Business Ethics Morals – Beliefs about what constitutes right or wrong behaviors Values – Desired ends or goals of society Ethics – The application of morals and values to practical decisions Business Ethics – The application of moral principles and values to business transactions

Ethical Dilemmas Managers often must deal with ethical dilemmas –situations in which none of the available alternatives seems ethically acceptable –situations with conflicting ethical expectations

Ethical Behavior Individual Beliefs Organizational Culture Institutional Norms

Ethics Background Major Approaches Consequentialism: Actions and decision are judged by the outcomes they are expected to produce Deontology: Actions themselves are judged as right or wrong regardless of expected outcomes

Consequentialism –Utilitarian Perspective: Ethical actions and decisions are those that maximize the total utility produced by business practice –Justice Perspective: Ethical actions and decisions are those that promote equity, fairness, and impartiality in the distribution of the costs and benefits of business practice

Deontology –Legal Perspective: Ethical actions and decisions are those that obey all laws related to business practice –Moral Rights: Ethical actions and decisions are those that uphold recognized human rights in business practice

The Ethics Debate Few Trends could so thoroughly undermine the very foundations of our free society as the acceptance of a [corporate] social responsibility other than to make as much money for the stockholders as possible (within the limits of the law). Milton Friedman The purpose of business is not to make a profit; it is to make a profit so that the business can do something more or better (for society). Charles Handy

Two Approaches to Business Ethics Organizational/Legal View –Businesses are legal entities and have no social or moral purpose –Purpose of business is to maximize owner's wealth within the limits of the law –Charitable activities (contributions, volunteerism, etc.) are the responsibility of individual shareholders, not the corporation. Corporate Social Responsibility (CSR) View –Businesses are social entities and have social and ethical impact on society –Purpose of business is to satisfy the needs of society as well as the financial interests of stockholders –Business must consider the needs of multiple stakeholders, both inside and outside the company, not just the interests of stockholders

Issues in CSR Are they two approaches incompatible? What is the effect of CSR on the bottom line? Are there other benefits of CSR?

How do Businesses Encourage Ethical Behaviors? Codes of Conduct Role Models Policies and Procedures Reward Systems Organizational Culture Selection and Training