The Importance of Business Ethics Ethical Decision Making for Business 8e Fraedrich/ Ferrell/ Ferrell CHAPTER 1 The Importance of Business Ethics

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 Our Framework for Studying Business Ethics

Business Ethics Comprises principles and standards that guide behavior in the world of business Right or wrong, acceptable or unacceptable behavior within the organization Determined by you and key stakeholders 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 5

Why Study Business Ethics? 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 Sarbanes-Oxley, FSGO, and stakeholder demands for ethics initiatives Individual ethics alone is not sufficient Studying business ethics helps identify ethical issues to key stakeholders Due to the need for professional experience and understanding the complexities of the legal environment. Even a person with good personal ethics will need business ethics training to confront complex ethical situations in the workplace. 6

Before 1960: Ethics in Business A living wage Theology’s domain Philosophy’s domain 7

The 1960s: The Rise of Social Issues in Business Consumer’s Bill of Rights Ralph Nader 8

The 1970s: Business Ethics as an Emerging Field Bribery Deceptive advertising Price collusion Product safety The environment 9

The 1980s: Consolidation Organized field of study Business ethics centers Business ethics courses Defense industry initiative Multinationals Self-regulation (Reagan/Bush) 10

The 1990s: Institutionalization of Business Ethics Free trade Self-regulation Federal Sentencing Guidelines for Organizations (FSGO) More multinationals 11

The Federal Sentencing Guidelines for Organizations Standards and procedures capable of detecting and preventing misconduct High level oversight Care in delegation of authority Effective communication (training) Systems to monitor, audit, and report misconduct Consistent enforcement Continuous improvement 12

The 21st Century: A New Focus Continued issues with corporate non-compliance Sarbanes-Oxley Act (2002) FSGO reform (2004) Firm’s greatest danger is not discovering misconduct early Basic assumptions of capitalism being debated 13

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 14

Benefits of Business Ethics Better ethical climate Employee commitment and trust Investor loyalty and trust Customer satisfaction and trust Long term profits 15