1. Introduction to Business Ethics CHAPTER 1 Business Ethics Instructor: sihem smida

2. 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

3. 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

4. Introduction  Business ethics is a branch of ethics which prescribes standards of how the business is to be carried out.  Guidelines to stakeholders  The responsibility of the managers and employees  The application of ethical judgments to business activities.

5. WHAT IS ETHICAL BEHAVIOUR?  Business ethics is a specialized study of right and wrong applied to business policies, institutions, and behaviors.  The advantages of ethical behavior include: 1.Cultivates strong teamwork and productivity. 2.Supports employee growth and meaning. 3.Helps to ensure that policies are legal. 4.Helps to avoid criminal acts of “omission” 5.Promotes a strong public image. 6.Improves trust in relationships. 7.Legitimizes managerial actions.

6. Relationship between business and ethics  Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run  Enhances a company's reputation  The highly competitive environment in today's global economy puts pressures on company leaders to remain profitable

7. Why Study Business Ethics? Global financial crisis created diminished stakeholder trust  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 stakeholder demands for ethics initiatives  Individual ethics alone is not sufficient  Studying business ethics helps identify ethical issues to key stakeholders

8. Business Ethics  Comprises principles, values, and standards that guide behavior in the world of business  Principles: Specific boundaries for behavior that are universal and absolute  Freedom of speech, civil liberties  Values: Used to develop socially enforced norms  Integrity, accountability, trust

9. Code of ethics  Also called code of conduct and ethical code.  A code of ethics will start by setting out the values that underpin the code and will describe a company's obligation to its stakeholders.  The code is publicly available and addressed to anyone with an interest in the company's activities and the way it does business.  It will include details of how the company plans to implement its values and vision, as well as guidance to staff on ethical standards and how to achieve them.

10. 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

11. 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 Creates shared values  Goal is to: Minimize need for enforced compliance Maximize utilization of principles/ ethical reasoning Source: Triangle Images

12. 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

13. 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

14. 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

15. 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