CHAPTER 4
Demonstrating Ethical Behavior and Social
Responsibility
 Ethics in business : Governments always try to pass new legislations and laws
intended to make business more responsive to ethical
concerns.
 Never the less, there are plenty of honest business people
and companies out there who resolve to help others and
who behave ethically.
 Ethics defined :-
Ethics: is our understanding of the standards of
moral behavior towards others that is accepted by
society as right versus wrong.
 Many people today have few moral absolute, many decide
situationaly whether its okay to steal, lie, cheat.
 People seem to think these days that what is right is
whatever works best for the individual, that each person
has to work out for him self or herself the difference
between right or wrong. This type of thinking leads to the
scandals in businesses and governments.
 We should know that there is normally a deep agreement
in society as to matters of right and wrong and when
individuals think otherwise they may be heading for
disaster-so as contributing members of society,
businesses and individuals must meet the ethical
standards of society or risk facing the
consequences.

Religion and culture : are generally our main
sources of ethics, which sometimes makes determining
the "Right" ethical course to take in a given situation a
difficult task, since religion and culture vary among
people.
 Even though people might come from diverse cultures,
still we can find astonishing similarity of values and
standards for what is right or wrong
 Most of the religious books among our hands contain
similar basic moral guidelines such as : integrity, respect
for human life, self control, honesty, courage, and selfsacrifice-which are right ,while cheating, cowardice, and
cruelty-are wrong.
 THE GOLDEN RULE : Do not do unto others as you
would not have them do unto you.
 So in general ethics should be similar where ever you live
-but this is not always the case, because even though
people might have the same basic values, but culture
intervene to cloud particular issues.
 Ethics are not the same as law.
 Generally ,something that is illegal is also unethical, but
NOT everything that is unethical must be illegal.
 illegal means you could be fined or imprisoned by a court
of law for engaging in a particular action in some cases.
 e.g.: stealing is illegal and unethical, but gossiping is
unethical but not necessarily illegal.
 Ethical standards are right versus wrong behavior
according to society down to the smallest actions in some
cases.
 Cultural differences is what makes determining the right
ethical course of action so difficult, it makes it difficult to
understand what others perceive as being ethical or
unethical.
 Personal Ethics : Personal ethics are what guide us in making the right
decisions. Many people use the idea “will I be able to get
away with it ? “ as a way of making ethical choices.
 Normally we consult our consciences, law, religion, and
culture to define our ethics
 There are five main approaches we can use when trying to
make an ethical decision, because we cannot always base
ethics on law and on our conscience, or feelings.
 Ethics must be based on some universally applied
principles such as the 5 sources :- (refer pg.114 figure
4.1)
1). The Utilitarian Approach : Ethical action should provide the most good and does the
least harm, i.e. produces the greatest balance of good
over harm.
2). The Right Approach :




Right to choose
Right to be told the truth
Right not to be injured by another
Right to have privacy etc.
 Ethics is to best protect and respect the moral rights of
those affected. Its based on the belief that humans have
dignity based on their human nature or on their ability to
choose freely what they do with their lives
3). The Fairness or Justice Approach : All are equal and all should be treated equally.
4). The Common Good Approach : It states that life in community is good in itself and our
actions should contribute to that life .(e.g.:- by putting
good laws, effective police and fire departments, health
care, public education system, even public recreational
areas.)
5). The Virtue Approach : It states that ethical actions ought to be consistent with
certain ideal virtues that provide for the full development
of our humanity .Such virtues are :honesty,courage,compassion,generosity,tolerance,love,fi
delity,integrity,fairness,self-control are all examples of
virtues.
 Virtue ethics asks of any action: “what kind of person will I
become if I do this ?” or “is this action consistent with my
acting at my best ?”
 There are eight main principles also that we
should be concerned with in determining our
own personal ethics :
1)
2)
3)
4)
5)
6)
7)
8)
Concern for the well being of others.
Respect for the autonomy of others .
Trust worthiness and honesty.
Willing compliance with the law.
Basic justice , being fair.
Refusing to take unfair advantage.
Benevolence ;doing good.
Preventing harm to others and the world around us.
 Should we download music to our computer that we didn’t
pay for ?
 Should we run the stop sign ,since no one is looking ?
 Should we photocopy personal stuff at work ?
 Shall we tell when we know one of our friends is cheating
*These are all ethical decisions that we have to
make during our life –we can use 5-step process to
take decisions :- (refer p.g.115)





Recognize an ethical issue:
Get the facts:
Evaluate alternative actions:
Act on your decisions:
Reflect on your decision:
 Just like individuals ,corporations and those who run them
must make ethical decisions on a daily basis as well . so
have to learn about ethics in a corporate environment.
 Corporate Ethics:People make decisions based on informal ways of personal
ethics,
While companies have found they must have a formal code of
ethics by which employees must abide
It was found that 89% of companies have written code of ethics.
Whether a company has a written code of ethics not depends of
the size of company- with mainly large size companies.
However, writing down ethical standards is much different than
actually following them.
Corporate ethics are classified mainly into two
major categories :1). Compliance based ethics code :Emphasize preventing unlawful behavior by:
1- increasing control; and
2- by penalizing wrong doers ,but its based on avoiding legal
punishment.
2). Integrity based ethics code : Defines, the organization’s guiding values.
 Create an environment that supports ethically sound
behavior.
 Stress a shared accountability among employees.
 In both codes of ethics, the leadership of the company
must set the pace for ethical standards. So the leadership
cannot act unethically and expect employees to act
ethically.
 To help improve business ethics, we
should follow five step process :1) Top management must adopt and unconditionally support
an explicit corporate code of conduct
2) Employees must understand that expectations for ethical
behavior begin at the top and that senior management
expects all employees to act accordingly.
3) Managers and others must be trained to consider the
ethical implications of all business decisions.
4) Outsiders such as suppliers, sub contractors, distributers
and customers must be told about the ethics program.
5) The ethic code must be enforced. It is important to back
any ethics program with timely action if any rules are
broken, so all employees know that the code is serious.
No matter how well the ethic code is, it is worthless if it is
not enforced. Some companies have an ethics office, and
ethics officer, and free phone lines . So employees can
call to enquire about ethical matters anonymously.
 Like we said before ,governments try
always to come up with regulations and
laws to minimize unethical behavior
such as : Whistleblowers :- People who report illegal or
unethical behavior .
 Board of Directors :- They try to put new
penalties for board of directors, accounting firms,
and management if inaccurate or fraudulent
financial reporting is found.
 Some governments founded a new public
agency that oversees, regulates, and
inspects accounting firms.
 Corporate Social Responsibility Defined : It is the concern businesses have for the
welfare of the society.
 Being good to society, help corporations
become good citizens, also it helps their image
and profitability.
 We can judge the social performance of a
company by 3 determinants or categories :1) Corporate Philanthropy
2) Corporate Responsibility
3) Corporate Policy
1). Corporate Philanthrophy: It is one indicator of social responsibility.
 It includes charitable donations to non profit groups of all
kinds.
 Strategic philanthropy involves companies making long
term commitments to one cause
 Corporate Philanthropy is practiced by large and small
corporations.
2). Corporate Responsibility: It is all encompassing because it includes everything from
hiring minority workers, making safe products, minimizing
pollution using energy wisely and providing a safe work
environment i.e. everything that has to do with acting
responsibly within society.
3). Corporate Policy: It refers to the position a firm takes on social and political
and sometimes internal business ethical issues.
 2/3 of the MBA student surveyed by a group called
Students for Responsible Business said that they would
take a lower salary to work for a socially responsible
company.
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