Business Ethics Chapter 3 0

Business Ethics “doing well by doing good” 1

Why Study Business Ethics Perhaps when business people ask why they should be ethical, they have a different question in mind: what is the motivation for being good? Is their something in it for them? There is no denying that one can often do well by doing good. An ethical company is more likely to build a good reputation, which is more likely to bring financial rewards over the long term.

What is Business Ethics? Business Ethics: are rules that examine ethical principles or ethical problems that arise in a business environment. Business Ethics consist of the principles, values, & standards that guide behavior in the world of business.

Why the Managers Should Behave Ethically? Managers should behave ethically to avoid harming others. – Managers are responsible for protecting and using the resources in their trust. Unethical managers run the risk for damage of a company reputation which is : – A valuable asset to any manager! – Critical to long term management success. – All stakeholders are judged by reputation. 4

Arguments Supporting Business Ethics Ethics applies to all human activities. Business cannot survive without ethics. Ethics is consistent with profit seeking. Customers, employees, and people in general care about ethics. Studies suggest ethics does not detract from profits and seems to contribute to profits.

Business and Managerial Ethics Managerial Ethics: – The standards of behavior that guide individual managers in their work with: Employees. The organization. Other economic agents—customers, competitors, stockholders, suppliers, dealers, and unions.

Stakeholders and Ethics Stakeholders: A person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions, and policies.persongrouporganization'sactionspolicies Key stakeholders in a business organization include creditors, customers, directors, employees, owners (shareholders), suppliers, and the community from which the business draws its resources.business creditorscustomersdirectorsemployeesownersshareholderssupplierscommunitydrawsresources 7

Types of Company Stakeholders 8

1. Stockholders Want to ensure that managers are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation Want to maximize their return on investment 9

2. Managers Responsible for using a company’s financial capital and human resources to increase its performance Have the right to expect a good return or reward by investing their human capital to improve a company’s performance Frequently manage multiple interests 6

3. Employees Expect to receive rewards consistent with their performance Companies can act ethically toward employees by creating an working structure that fairly and rightfully rewards employees for their contributions 11

4. Suppliers and Distributors Suppliers expect to be paid fairly and promptly for their inputs Distributors expect to receive quality products at agreed-upon prices 12

5. Customers Most critical stakeholder. Company must work to increase efficiency and effectiveness in order to create loyal customers and attract new ones. 13

Sources of Ethics 14

1. Societal Ethics: 1. Societal (Social) Ethics: – Standards that direct how members of a society should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual People behave ethically because they have certain values, beliefs. 15

2. Occupational Ethics Occupational Ethics: – Standards that direct how members of a profession, trade should conduct themselves when performing work-related activities – Medical & legal ethics 16

3. Individual Ethics Individual Ethics: – Personal standards and values that determine how people view their responsibilities to other people and groups – How they should act in situations when their own self-interests are at stake 17

4. Organizational Ethics Organizational Ethics: – Guiding practices and beliefs through which a particular company and its managers view their responsibility toward their stakeholders – Top managers play a crucial role in determining a company’s ethics 18

Company Practices and Business Ethics Encouraging Ethical Behavior Involves: A company can encourage ethical behavior in a number of ways. These include: – Adopting written codes of conduct – Having top management support of ethical standards – Instituting ethics programs – Establishing ethical hotlines for reporting and discussing unethical behavior and activities 19

Code of Ethics Code of ethics: is a written document that clearly states what acceptable and unacceptable behaviors are for all of the employees in the organization. Represents the identification and explanation of what the firm considers acceptable behavior Employees working under the code of ethics have a standard by which they can judge their own behavior and that of others within the organization. Worldwide, McDonald's employees follow a standard ethical code.