1. The Importance of Business Ethics
Part One: An Overview of Business Ethics
Chapter 1:
The Importance of Business Ethics
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2. Business Ethics
Ethics is a part of decision making at all levels of work and management
Just as important as functional areas of business
Deals with questions of whether practices are acceptable
No universally accepted approach for resolving issues
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3. Business Ethics Defined
Comprises principles, values, and standards that guide behavior in the world of business
Ethical decisions occur when accepted rules no longer serve and decision makers must weigh values and reach a judgment
Values and judgments are critical in ethical decisions
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
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4. A Crisis in Business Ethics
Nearly half of employees observe misconduct in the workplace
After the financial crisis, business decisions and activities have come under scrutiny
The financial sector has not regained stakeholder trust
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5. Americans’ Trust in Business Sectors
(% of respondents who say they trust the following business categories)
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6. Specific Issues Misuse of company resources Abusive behavior
Harassment
Accounting fraud
Conflicts of interest
Defective products
Bribery
Employee theft
© 2013 Cengage Learning. All Rights Reserved.

7. The Reasons for Studying Business Ethics
Having good individual values/morals is not enough to stop ethical misconduct
Ethics training helps provide collective agreement in diverse organizations
Business ethics decisions can be complicated
Studying business ethics helps identify ethical issues to key stakeholders
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8. A Timeline of Ethical and Socially Responsible Concerns
Source: Adapted from “Business
A Timeline of Ethical and Socially Responsible Concerns
1960s
1970s
1980s
1990s
2000s
Environmental issues
Employee militancy
Bribes and illegal contracting prices
Sweatshops and unsafe working conditions in third-world countries
Cybercrime
Civil rights issues
Human rights issues
Influence peddling
Rising corporate liability for persona damages (for example, cigarette companies)
Financial misconduct
Increasing employee-employer tension
Covering up rather than correcting issues
Deceptive advertising
Financial mismanagement and fraud
Global issues, Chinese product safety
Changing work ethic
Disadvantaged consumers
Financial fraud (for example, savings and loan scandal)
Organizational ethical misconduct
Sustainability
Rising drug use
Transparency issues
Intellectual property theft
Ethics Timeline,” Ethics Resource Center, (accessed May 27, 2009). Copyright ©
2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006,
© 2013 Cengage Learning. All Rights Reserved.

9. 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 theology schools
The Protestant work ethic encouraged hard work
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10. The 1960s: The Rise of Social Issues in Business
Social consciousness emerged
Increased anti-business sentiment
JFK’s Consumer Bill of Rights— a new era of consumerism
Right to safety, to be informed, to choose, and to be heard
Consumer protection groups fought for legislation changes
Ralph Nader
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11. 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
Philosophers involved
Businesses concerned with public image
Conferences held and centers developed
Issues:
Bribery Deceptive advertising
Price collusion Product safety
Environment
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12. The 1980s: Consolidation
Increased membership in business ethics organizations
Ethics centers provided publications, courses, conferences, and seminars
Firms established ethics committees
Defense Industry Initiative on Business Ethics and Conduct (DII)
The foundation for the Federal Sentencing Guidelines for Organizations
Corporate support for ethics
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13. The 1990s: Institutionalization of Business Ethics
Continued support for self-regulation, deregulation, and free trade
Health-related issues more regulated
The Federal Sentencing Guidelines for Organizations (FSGO) in 1991
Set tone for compliance
Preventative actions against misconduct
A company could avoid/minimize potential penalties
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14. The Federal Sentencing Guidelines for Organizations
Standards and procedures for preventing misconduct
High level of oversight
Care in delegation of authority
Effective communication
Employee training
Systems to monitor, audit, and report misconduct
Consistent enforcement and continuous improvement
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15. The 21st Century: A New Focus
Continued issues with corporate non-compliance
Public/political demand for improved ethical standards
Sarbanes-Oxley Act (2002)
Most extensive ethics reform
Increased accounting regulations
FSGO reforms (2004, 2008, 2010)
Requires governing authorities to be informed of business ethics programs
Dodd-Frank Wall Street Reform and Consumer Protection Act (2009)
Aimed at making the financial industry more transparent/responsible
A firm’s greatest danger is not discovering misconduct early
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16. Organizational Ethical Culture
Ethical culture: The component of corporate culture that captures the values and norms that an organization defines as appropriate
Creates shared values
Goal is to:
Minimize need for enforced compliance
Maximize utilization of principles/ethical reasoning
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17. Global Ethical Culture
Nations working together to establish standards of ethical behavior
NAFTA
MERCOSUR
WTO
Companies can demonstrate their commitment to social responsibility through adopting international standards
Global Sullivan Principles
Coalition for Environmentally Responsible Economies (CERES)
United Nations Global Compact
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18. The Role of Organizational Ethics in Performance
Source: Adapted from “Business
The Role of Organizational Ethics in Performance
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19. Ethics Contributes to Employee Commitment
Commitment comes from employees who are invested in the organization
Employees willing to make personal sacrifices for the organization
The more company dedication to ethics, the greater the employee dedication
Concerns include a safe work environment, competitive salaries and benefits packages, and fulfillment of contractual obligations
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20. Ethics Contributes to Investor Loyalty
Companies perceived by their employees as being honest are more profitable
Ethical climates in organizations provide a platform for
Efficiency
Productivity
Profitability
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21. Ethics Contributes to Customer Satisfaction
Consumers respond positively to socially concerned businesses
Being good can be 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
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22. Ethics Contributes to Profits
Corporate concern for ethical planning is being integrated with strategic planning
Maximizes profitability
Corporate citizenship is positively associated with
Return on investment and assets
Sales growth
Studies have found a positive relationship between corporate citizenship and performance
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