Chapter 2: Ethics & Social Responsibility in Business
Business Ethics
➔ Ethics: study of right & wrong + the morality of choices ppl make.
➔ Business ethics: application of moral standards to business situations.
Ethical Issues
➔ arises out of business’s relationship w/ investors, customers, employees, creditors,
suppliers, or competitors.
◆ Each of these stakeholder groups has specific concerns & exerts pressure on
organisation’s managers.
◆ types of concerns:
● investors want mngmt to make financial decisions to ↑ profits.
● Customers expect firm’s product to be safe/reasonably priced.
● Employees demand treated fairly in hiring & promotion.
● Creditors require accounts to be paid on time/ accounting info to be
accurate
Fairness and Honesty
● Business People are expected to refrain from misleading, misrepresenting, or
intimidating others.
- Example: the federal trade commission ruled that gerber’s claim that its good
start gentle baby formula can prevent or reduce allergies in children lacked
scientific evidence & asked the company to remove the statement from its
advertising & product labels.
Organisational Relationships
● Business people shouldn’t place personal welfare above the welfare of others or
welfare of the organisation.
● Relationships among co-workers often create unethical problems.
○ Includes:
■ Not meeting one’s commitments in a mutual agreement
■ Pressuring others to behave unethically
■ Plagiarism – knowingly taking someone else’s words, ideas, or other
original material without acknowledging the source (issue related to
fairness/honesty)
Conflicts of interest
➔ Occurs when a businessperson takes advantage of a situation for their own personal
interest rather than for the employer's interest.
, ◆ Example: a manager, a subordinate, a firm that advises clients without
informing them that it has a relationship with some of the products it
recommends.
● Conflicts of interest may occur when payments & gifts make their way into business
deals.
➔ Bribes- gifts, favours, or payments offered w/ the intent of influencing an outcome (is
illegal in the US/abroad).
Communications
● False/ misleading advertising is illegal & unethical + can infuriate customers.
○ Ex: advertisers of health-related products must take precautions to guard
against deception when using such descriptive terms as low fat, fat free, and
light.
Factors that affect the level of ethics behaviour
Individual Factors Affecting Ethics:
- How much an individual knows
- More values and central, value related attitudes
- Personal goals and the manner in which these goals are pursued.
Social Factors affecting ethics:
- Cultural norms
- Actions and decisions of co-workers
- Values and attitudes of “significant others”
- The use of internet
Opportunity as a Factor Affecting Ethics:
➔ opportunity- the amount of freedom an organisation affords an employee to behave
unethically if he or she makes that choice.
- Degree of enforcement of company policies, procedures, and ethical codes.
Encouraging Ethical Behaviour
Government’s Role in Encouraging Ethics
● the gov. can encourage ethical behaviour by passing more strict laws.
○ Sar banes Oxley act of 2002- provides thorough new legal protection for
employees who report corporate wrongdoing.
Trade Associations Role in Encouraging Ethics
● Trade associations can & often provide ethical guidelines for their members.
Individual Companies Role in Encouraging Ethics
➔ Code of ethics- guide to acceptable & ethical behaviour as defined by the
organisation; outlines policies & punshiment for violations.
Business Ethics
➔ Ethics: study of right & wrong + the morality of choices ppl make.
➔ Business ethics: application of moral standards to business situations.
Ethical Issues
➔ arises out of business’s relationship w/ investors, customers, employees, creditors,
suppliers, or competitors.
◆ Each of these stakeholder groups has specific concerns & exerts pressure on
organisation’s managers.
◆ types of concerns:
● investors want mngmt to make financial decisions to ↑ profits.
● Customers expect firm’s product to be safe/reasonably priced.
● Employees demand treated fairly in hiring & promotion.
● Creditors require accounts to be paid on time/ accounting info to be
accurate
Fairness and Honesty
● Business People are expected to refrain from misleading, misrepresenting, or
intimidating others.
- Example: the federal trade commission ruled that gerber’s claim that its good
start gentle baby formula can prevent or reduce allergies in children lacked
scientific evidence & asked the company to remove the statement from its
advertising & product labels.
Organisational Relationships
● Business people shouldn’t place personal welfare above the welfare of others or
welfare of the organisation.
● Relationships among co-workers often create unethical problems.
○ Includes:
■ Not meeting one’s commitments in a mutual agreement
■ Pressuring others to behave unethically
■ Plagiarism – knowingly taking someone else’s words, ideas, or other
original material without acknowledging the source (issue related to
fairness/honesty)
Conflicts of interest
➔ Occurs when a businessperson takes advantage of a situation for their own personal
interest rather than for the employer's interest.
, ◆ Example: a manager, a subordinate, a firm that advises clients without
informing them that it has a relationship with some of the products it
recommends.
● Conflicts of interest may occur when payments & gifts make their way into business
deals.
➔ Bribes- gifts, favours, or payments offered w/ the intent of influencing an outcome (is
illegal in the US/abroad).
Communications
● False/ misleading advertising is illegal & unethical + can infuriate customers.
○ Ex: advertisers of health-related products must take precautions to guard
against deception when using such descriptive terms as low fat, fat free, and
light.
Factors that affect the level of ethics behaviour
Individual Factors Affecting Ethics:
- How much an individual knows
- More values and central, value related attitudes
- Personal goals and the manner in which these goals are pursued.
Social Factors affecting ethics:
- Cultural norms
- Actions and decisions of co-workers
- Values and attitudes of “significant others”
- The use of internet
Opportunity as a Factor Affecting Ethics:
➔ opportunity- the amount of freedom an organisation affords an employee to behave
unethically if he or she makes that choice.
- Degree of enforcement of company policies, procedures, and ethical codes.
Encouraging Ethical Behaviour
Government’s Role in Encouraging Ethics
● the gov. can encourage ethical behaviour by passing more strict laws.
○ Sar banes Oxley act of 2002- provides thorough new legal protection for
employees who report corporate wrongdoing.
Trade Associations Role in Encouraging Ethics
● Trade associations can & often provide ethical guidelines for their members.
Individual Companies Role in Encouraging Ethics
➔ Code of ethics- guide to acceptable & ethical behaviour as defined by the
organisation; outlines policies & punshiment for violations.
