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