Chapter objectives

• Ethic, stakeholders, sources of ethic norm

• Management’s role in setting ethical standards
• 6 steps in setting up a corporate ethics code according to
distinguishing between compliance-based and integrity-based
• Define corporate social responsibility and compare corporation’s
responsibilities to various stakeholders
Responding to the various business
stakeholders
What is meant by ethics?
An ethic is a moral principle or set of moral values held by an
individual or a group.

Ethical behaviour is behaviour which is considered to be right and

moral.

Business ethics are the values and principles which operate in the
world of business. They form the moral framework of the
organisation.
Comparing Working Conditions

Bangladesh The UK

Wage per month: £12 £813

Wage per week: £3 £203
Wage per hour: 33p £5.35
Hours per week: 90hrs 38hrs
What ethical issues are faced by business?
• Should firms use child labour?

• Is animal testing needed in products and ingredients?

• What wages should firms pay to poor countries?

• To what extent should firms seek to be environmentally friendly?

• Should firms get involved in certain activities?

e.g making weapons
The worst offenders
The Fraser 2006 rating on ethical reputation (1st being regarded as least
ethical), based on interviews with 1,300 adults:

1)McDonald's
2)Nike
3)Shell
4)Adidas
5)Barclays
6)Coca-Cola
7)BP
8)Camelot (National Lottery)
9)American Express
True or False?
Is the following statement true or false?

“Ethics has to do with whether my feelings are right or wrong.”

True – but we must realise that

sometimes our feelings can cloud are
judgement and make it difficult to see
both sides.
True or False?
Is the following statement true or false?

“Ethics has to do with my religious beliefs.”

True – it can be linked to religious

beliefs, but remember it is much more
than this.
True or False?
Is the following statement true or false?

“Being ethical is doing what the law always requires.”

True – people and business have to

follow law, but remember that some
laws may be unethical.
True or False?
Is the following statement true or false?

“Ethics consists of the standards of behaviour our society expects.”

True – but remember that society is

sometimes unpredictable and cruel.
Business Ethics: What Does It Really Mean?
Business Ethics:Today vs. Earlier Period

Society’s
Expectations
Expected and Actual Levels of Business
of Business Ethics Ethics

Ethical
Problem

Actual
Ethical Problem Business
Ethics

1950s Time Early 2000s

13
Business Ethics: What Does It Really
Mean?
Definitions
• Ethics involves a discipline that examines good or bad practices within
the context of a moral duty
• Moral conduct is behavior that is right or wrong
• Business ethics include practices and behaviors that are good or bad

14
 Business Ethics: What Does It Really
Mean?
Two Key Branches of Ethics
• Descriptive ethics involves describing, characterizing and studying
morality
• “What is”
• Normative ethics involves supplying and justifying moral systems
• “What should be”

15
Sources of Ethical Norms
Regions of
Fellow Workers Fellow Workers
Country

Family Profession
The Individual
Conscience
Friends Employer

The Law Religious

Society at Large
Beliefs

16
Ethics and the Law
• Law often represents an ethical minimum
• Ethics often represents a standard that exceeds the legal minimum

Frequent Overlap

Ethics Law

17
Making Ethical Judgments
Behavior or act compared with Prevailing
that has been norms of
committed acceptability

Value
judgments and
perceptions of
the observer
Ethics, Economics, and Law

6-14
Important Ethical Questions
• What is?
• What ought to be?
• How to we get from what is to what ought to be?
• What is our motivation for acting ethically?

Important Questions help to ask yourself when

facing with an ethical dilemma
• Is my proposed action legal?
• Is it balanced? Am I acting fairly? Would I want to be treated that
way?
• How will it make me feel about myself? 20
 Top management must adopt and unconditionally support an explicit corporate

6 steps can improve U.S.

code of conduct

Employees must understand that expectations for ethical behavior begin at

business ethics the top that senior management expects all employees to act accordingly

Managers and other must be trained to consider the ethical implication

for all business decisions

An ethics office must be set up with employees can communicate

anonymously. Whistleblowers must feel protected from retaliation

Outsider such as suppliers, subcontractors, distributors and customers must

be told about ethical program

The ethics code must be enforced with timely action if any rules are broken
Understand corporate social responsibility and
corporation’s responsibility to stakeholders
Corporate social responsibility is the concern businesses have for society.
Businesses demonstrate responsibility to stakeholders by
1. Satisfying customers with goods and services of real value;
2. Making money for investors;
3. Creating jobs for employees, maintaining job security, and
seeing that hard work and talent are fairly rewarded; and
4. Creating new wealth for society, promoting social justice, and
contributing to making the businesses’ own environment a better place.
Theories of Social Responsibility

Maximizing Moral Minimum

Profits

Corporate Stakeholder
Citizenship Interest

Copyright © 2004 by Prentice-Hall. All rights reserved.

Theories of Social Responsibility

Copyright © 2004 by Prentice-Hall. All rights reserved.