Part One
An Overview of
Business Ethics
Chapter 1
The Importance of
Business Ethics
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Ethicsisapartofdecisionmakingatall
levelsofworkandmanagement
v  Asimportantasfunctionalareasofbusiness
v  Questionswhetherpracticesareacceptable
v  Therearenouniversallyaccepted
approachesforresolvingissues
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Comprisesorganizationalprinciples,values,
andnormsthatmayoriginatefromindividuals,
organizationalstatements,orfromthelegal
systemthatprimarilyguideindividualand
groupbehaviorinbusiness
v  Ethicaldecisionsoccurwhenacceptedrulesno
longerserveanddecisionmakersmustweigh
valuesandreachajudgment
Ø  Valuesandjudgmentsplayacriticalrolewhenwe
makeethicaldecisions
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v  Morals:Refertoaperson’spersonal
philosophiesaboutwhatisrightorwrong
Ø  Moralsarepersonalandsingular
v  Principles:Specificandpervasiveboundaries
forbehaviorthatshouldnotbeviolated
Ø  Humanrights,freedomofspeechandjustice
v  Values:Enduringbeliefsandidealsthatare
sociallyenforced
Ø  Teamwork,trustandintegrity
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Nearlyhalfofemployeesobserveatleast
oneformofmisconductintheworkplace
v  Afterthefinancialcrisis,businessdecisions
andactivitieshavecomeunderscrutiny
v  Thefinancialsectorhasnotfullyregained
stakeholdertrust
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Global Trust in
Industry Sectors
Source:EdelmanGlobalDeck:2013TrustBarometer,http://www.edelman.com/trust-downloads/global-results-2/
(accessedJanuary30,2013).
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v  Misuseofcompanyresources
v  Abusivebehavior
v  Harassment
v  Accountingfraud
v  Conflictsofinterest
v  Defectiveproducts
v  Bribery
v  Employeetheft
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v  Havinggoodindividualmoralsisnotenough
tostopethicalmisconduct
v  Ethicstraininghelpsprovidecollective
agreementindiverseorganizations
v  Businessethicsdecisionscanbecomplicated
v  Helpstoidentifyethicalissueswhenthey
ariseandrecognizetheapproachesavailable
toresolvethem
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Timeline of Ethical and
Socially Responsible Concerns
1960s
1970s
1980s
1990s
2000s
Environmental
issues
Employee
militancy
Bribesand
illegal
contracting
practices
Sweatshopsandunsafe
workingconditionsin
third-worldcountries
Cybercrime
Civilrightsissues
Humanrights
issues
Influence
peddling
Risingcorporate
liabilityforpersonal
damages(cigarette
companies)
Financial
misconduct
Increased
employeeemployer
tension
Coveringup
ratherthan
correctingissues
Deceptive
advertising
Financial
mismanagement
andfraud
Globalissues,
Chineseproduct
safety
Changing
workethic
Disadvantaged
consumers
Financialfraud
(savingsand
loanscandal)
Organizationalethical
misconduct
Sustainability
Risingdruguse
Transparency
issues
Intellectual
propertytheft
Source:Adaptedfrom“BusinessEthicsTimeline,”EthicsResourceCenter,http://www.ethics.org/resource/business-ethicstimeline(accessedJune13,2013).Copyright©2006,EthicsResourceCenter(ERC).UsedwithpermissionoftheERC,1747
PennsylvaniaAve.N.W.,Suite400,Washington,DC,2006,www.ethics.org.
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Theologicaldiscussionsofethicsemerged
v  Catholicsocialethicswereconcernedwith
moralityinbusiness,workers’rights,and
livingwages
v  TheProtestantworkethicencouraged
individualstobefrugal,workhardand
attainsuccessinthecapitalisticsystem
v  Thesetraditionsprovidedafoundationfor
thefuturefieldofbusinessethics
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Socialconsciousnessemerged
v  Increasedanti-businesssentiment
v  JFK’sConsumerBillofRights—aneweraof
consumerism
Ø  Righttosafety,tobeinformed,tochoose,andto
beheard
v  Consumerprotectiongroupsfoughtfor
legislationchanges
Ø  RalphNader
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Corporatesocialresponsibility-an
organization’sobligationtomaximizepositive
impactandminimizenegativeimpacton
stakeholders
v  Philosophersincreasedtheirinvolvement
v  Businessesconcernedwithpublicimage
v  Conferencesheldandcentersdeveloped
v  Issues:
Bribery
Pricecollusion
Environment
Deceptiveadvertising
Productsafety
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v  Businessethicsbecameanacknowledged
fieldofstudyandfirmsestablishedethics
committees
v  Ethicscentersprovidedpublications,
courses,conferences,andseminars
v  DefenseIndustryInitiativeonBusiness
EthicsandConduct(DII)
Ø  FoundationfortheFederalSentencingGuidelines
forOrganizationstocomeinthe1990’s
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Continuedsupportforself-regulationand
freetrade
v  Health-relatedissuesmoreregulated
v  TheFederalSentencingGuidelinesfor
Organizations(FSGO)in1991
Ø  Settoneforcompliance
Ø  Preventativeactionsagainstmisconduct
Ø  Acompanycouldavoid/minimizepotential
penalties
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Continuedcorporatenon-compliance
v  Increasedpublic/politicaldemandfor
improvedethicalstandards
v  Sarbanes-OxleyAct(2002)
Ø
Increasedaccountingregulations
v  Dodd-FrankWallStreetReformand
ConsumerProtectionAct(2010)
Ø
Aimedatmakingthefinancialindustrymore
transparent/responsible
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Ethicalculture:acceptablebehavioras
definedbythecompanyandindustry
v  Createssharedvaluesandsupportforethical
decisions–drivenbytopmanagement
Goal:
Ø  Minimizeneedforenforcedcompliance
Ø  Maximizeutilizationofprinciples/ethical
reasoningindifficultornewsituations
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Collaborativeeffortstoestablishgoals
andsetminimumlevelsofethical
behavior
Ø  EuropeanUnion
Ø  NAFTA
Ø  MERCOSUR(SouthAmericaCommonMarket)
Ø  WTO
v  Companiescandemonstratetheir
commitmenttosocialresponsibilitythrough
adoptinginternationalstandardslikethe
UnitedNationsGlobalCompact
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©CengageLearning2015
Role of Organizational
Ethics in Performance
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Commitmentcomesfromemployeeswhoare
investedintheorganizationandwillingto
makepersonalsacrificesfortheorganization
Ø  Themorecompanydedicationtoethics,the
greatertheemployeededication
Ø  Concernsincludeasafeworkenvironment,
competitivesalariesandbenefitspackages,and
fulfillmentofcontractualobligations
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v  Investorsareincreasinglyinterestedina
company’sreputationandrecognizehow:
Ø  ethicalcultureprovidesafoundationfor
efficiency,productivity,andprofitability
Ø  negativepublicity,lawsuits,andfinesthreatena
company’slong-termviability
v  Gaininginvestors’trustandconfidenceis
vitaltosustainingfinancialstability
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v  Customersatisfactionisanimportantfactor
inasuccessfulbusinessstrategy
Ø  Companiesseentobesociallyresponsibleincrease
customertrustandsatisfaction
Ø  Trustisessentialforlong-termcustomer
relationships
Ø  Astrongorganizationalethicalclimateplaces
customers’interestsfirst
v  Ethicalconducttowardcustomersbuildsa
strongcompetitivepositionshownto
positivelyaffectperformanceandinnovation
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v  Companiesneedprofitsinordertomeet
theirresponsibilities
v  Corporateconcernforethicalconductis
beingintegratedwithstrategicplanning
Ø  Maximizingprofitability
v  Ethicshasmovedfrombeingacompliance
standardtobecominganintegralpartof
achievingacompetitiveadvantage
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