Module 1: Ethics and Business
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Ethics: How we should act/live; focus on personal integrity and community wellbeing.
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Golden Rule: Treat others as you want to be treated.
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Socrates: "The unexamined life is not worth living."
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Virtue: Acting virtuously stems from knowledge.
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Social Responsibility: Individuals prioritize society over self-interest.
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Norms: Standards of appropriate behavior based on values (e.g., honesty,
courage).
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Ethics & Law: Ethics may go beyond laws. Limitations of laws include ambiguity
and inability to address all ethical issues.
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Adam Smith: Self-interest in free markets can promote societal well-being
("invisible hand").
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Business Ethics Benefits: Brand recognition, trust, customer retention,
attracting talent/investors.
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Stakeholders:
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Primary: Essential to survival (e.g., employees, customers).
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Secondary: Non-essential but affected (e.g., activists).
Module 2: Key Concepts
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Descriptive Ethics: Explains how people act.
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Normative Ethics: Explains how people should act.
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Planned Behavior:
1. Attitudes: Personal thoughts.
2. Subjective Norms: Social influences.
3. Perceived Control: Feasibility.
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Rest's Framework:
1. Sensitivity: Recognize issues.
2. Judgment: Analyze morals.
3. Motivation: Moral > personal values.
4. Implementation: Act ethically.
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Kohlberg's Moral Development:
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Level 1: Pre-conventional (reward/punishment, self-interest).
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Level 2: Conventional (social approval, law/order).
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Level 3: Post-conventional (social contract, universal principles).
Unethical Behavior Causes: Obedience, slippery slope, financial obsession,
bad role models, power misuse.
Module 4: Corporate Culture and Ethical Leadership
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Organizational Culture: Shared values, norms, and behaviors.
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Surface Culture: Visible (rules, handbooks).
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Deep Culture: Invisible (values, assumptions).
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Ethical Culture: Promotes ethical behavior through trust, communication, and
transparency.
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Dimensions of Culture:
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Outcome orientation, risk-taking, people orientation.
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Ethical Leadership: Role modeling, character, accountability, integration of
ethics.
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Compliance vs. Value-Based Culture:
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Compliance: Rule-focused.
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Value-Based: Ethics-focused.
Whistleblowing: Encourage reporting unethical behavior.
Module 5: Employee Responsibility and Rights
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Employer Approaches:
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Utilitarian: Treat well for productivity.
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Deontological: Treat well out of duty.
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Employment Security: Justice demands job security.
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Due Process: Protection from arbitrary authority.
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Performance Appraisal: Must be fair and transparent.
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Health & Safety:
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Free Market Approach: Workers negotiate risk for wages.
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Acceptable Risks: Risks comparable to daily activities.
Diversity:
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Managing diversity involves respecting and utilizing differences.
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Challenges: Glass ceiling, sticky floor.
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Affirmative Action: Temporary policies for balanced workforce.
Sexual Harassment:
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Quid Pro Quo: One-time advance tied to benefits.
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Hostile Environment: Repeated, hostile actions.
Dual Relationships: Risk of conflicts of interest or impaired judgment.
Module 6: Corporate Governance
Corporate Governance refers to a set of rules, practices, and processes used to direct
and control an organization. It ensures accountability, transparency, and ethical
business conduct.
Corporate Hierarchy:
1. Employees: Foundation of the organization.
2. Management Team: Oversees daily operations.
3. CEO: Acts as the link between the Board of Directors and the management team.
4. Board of Directors (BOD): Elected by the CEO to provide oversight and
guidance.
5. Owner: Ultimate authority of the organization.
Importance of Corporate Governance
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Protects shareholders and ensures their interests are safeguarded.
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Provides mechanisms to separate ownership from management.
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Encourages diversity, unbiased decision-making, and effective oversight.
Board of Directors (BOD)
1. Structure:
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Inside Directors: Employees or stakeholders within the company.
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Outside Directors (Non-Executive Directors): Independent members
ensuring impartial oversight.
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Chairperson: Can be an insider or outsider.
2. Director Independence:
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Prevents conflicts of interest.
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Encourages accountability and effective decision-making.
Legal Duties of BOD:
1. Duty of Care:
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Make informed decisions based on reliable reports and expert opinions.
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Investigate options responsibly within constraints.
2. Duty of Loyalty:
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Act in the best interest of shareholders.
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Avoid conflicts of interest or self-dealing.
3. Duty of Good Faith:
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Uphold the organization’s mission and objectives.
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Avoid deviating from organizational goals.
Effective Corporate Governance Principles:
1. Impartiality: Independent decision-making without personal biases.
2. Transparency: Clear and accurate reporting of financial statements.
3. Accountability: Decisions must be justifiable and backed by evidence.
Conflict of Interest Examples:
1. Self-Dealing: Favoring personal gain over company interests.
2. Insider Trading: Using confidential company information for personal benefit.
3. Undermining Investor Confidence: Leads to legal and reputational
consequences.
Corporate Governance Principles:
1. Protect Shareholders: Ensure management decisions benefit shareholders.
2. Equitable Treatment: Equal rights for all shareholders, including minorities.
3. Transparency: Accurate disclosure through audits by independent bodies.
4. Effective Participation: Shareholder activism for organizational improvements.
Module 8: Marketing Ethics
Ethics in marketing examines the responsibility of businesses in creating, promoting,
and selling products while ensuring respect for consumers and fairness.
4Ps of Marketing Ethics:
1. Production: Ethical considerations in sourcing and production.
2. Price: Avoid practices like price gouging and monopolistic pricing.
3. Promotion: Prevent manipulative or deceptive advertising.
4. Place: Ensure accessibility without exploiting vulnerable populations.
Framework for Ethical Issues in Marketing:
1. Voluntariness:
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Transactions must be free of force, deception, or manipulation.
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Avoid price fixing, monopolies, and exploitation of vulnerable consumers.
2. Informed Consent:
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Consumers must have accurate and understandable information about
products.
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Deceptive marketing or omission of details violates consent.
3. Benefits of Exchange:
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Transactions should genuinely benefit consumers.
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Avoid promoting harmful consumption patterns (e.g., affluenza).
4. Competing Values:
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Ensure fairness, justice, health, and safety in market practices.
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Mitigate externalities like environmental damage or health risks.
Examples of Marketing Misconduct:
1. Price Gouging: Unfair pricing, especially in essential goods.
2. Price Fixing: Agreements to set prices, eliminating competition.
3. Monopoly Pricing: Charging excessively high prices due to lack of competition.
4. Deceptive Practices: Misleading ads, fraud, or targeting uninformed consumers.
Ethical Issues in Advertising:
1. Manipulation of Autonomy:
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Misleading or targeting susceptible audiences (e.g., children, elderly).
2. Stealth Marketing:
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Engaging consumers without their awareness, often bypassing autonomy.
Vulnerable Populations in Marketing:
1. Consumer Vulnerability: Lack of capacity to give informed consent (e.g.,
children, elderly).
2. General Vulnerability: Susceptibility to harm (e.g., targeting alcoholics).
3. Unawareness of Being Targeted: Stealth marketing aimed at unsuspecting
consumers.
Legal Aspects of Marketing Ethics:
1. Tort Law:
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Focuses on civil wrongs like negligence or harm caused by products.
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Includes strict liability for defective products.
2. Product Liability:
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Holds manufacturers accountable for defective or unsafe products.
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Emphasizes warranties and safety standards.
Module 9: What is CSR?
CSR refers to the responsibilities businesses have toward the society in which they
operate, encompassing voluntary activities undertaken to ensure economic, social,
environmental, and sustainable operations.
Four Components of CSR
1. Economic (Required): Be profitable by maximizing sales and minimizing costs.
2. Legal (Required): Comply with all applicable laws and regulations.
3. Ethical (Expected): Act fairly, justly, and with integrity beyond legal
requirements.
4. Philanthropic (Desired/Expected): Contribute to societal welfare as a good
corporate citizen.
Business Case for CSR
1. Profitability: Responsible behavior rewards businesses with loyal markets and
punishes lapses (e.g., public backlash).
2. Competitive Advantage: CSR can position companies favorably in industries
like green tech or social impact markets.
Market of Virtue
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Managers are driven by market demands and social forces to adopt CSR.
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Power of Virtue: Activists, NGOs, and social pressures influence corporate
behavior.
Strategic CSR
CSR can be strategic if aligned with corporate benefits, serving both the public good
and business interests (e.g., sustainability initiatives that reduce costs).
Corporate Ethical Responsibility
Ethical responsibilities involve accountability and actions that uphold trust and social
standards, including:
1. Doing Good (optional): Charitable work and volunteering.
2. Preventing Harm: Avoid harm to others or prevent harm where possible.
3. Not Causing Harm (obligatory): Mandatory under law and ethics.
Is Good Ethics Good Business?
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Enlightened Self-Interest: Ethical decisions may cost in the short term but often
pay off in long-term profitability through customer loyalty, reputation, and reduced
risks.
Models of CSR
1. Economic Model
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Focus: Maximize profits while obeying the law (rooted in utilitarianism).
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Pros: Encourages efficiency, innovation, and wealth creation.
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Cons: May ignore environmental or social externalities.
2. Philanthropic Model
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Focus: Voluntary contributions for social good (not a duty).
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Pros: Enhances reputation and morale.
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Cons: Can be superficial, masking harmful business practices.
3. Social Web Model
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Focus: Businesses are part of society, sharing similar obligations (e.g.,
respecting human rights).
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Pros: Emphasizes stakeholder rights.
4. Integrative Model
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Focus: Embeds social goals into the company’s mission (e.g.,
sustainability commitments).
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Pros: Eliminates harm and adds societal value.
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Cons: Can increase costs and reduce competitiveness in some markets.
Milton Friedman’s View
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Executives are ethically responsible if they focus on maximizing shareholder
value while conforming to legal and societal norms.
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Pros: Wealth creation, employment, and innovation.
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Cons: Risk of inequality, environmental harm, and short-termism.
Key Takeaways
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CSR integrates business goals with societal impact to achieve long-term
value.
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Companies can choose different CSR models depending on their priorities, but
balancing profitability, legal compliance, ethics, and philanthropy is critical for
sustainable success.