Contemporary Business 12th ed.
Chapter 2 Summary
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BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
0201 – Concern for Ethical and Societal Issues
Businesses must balance acting in a way that is profitable with acting in a way consistent
with business ethics and social issues. They must think about how their decisions will
impact the environment, their employees, and their customers.
0202 – The New Ethical Environment
Although recent investigations have put a spotlight on business ethics, many businesses
and managers have reputations built on a strong commitment to ethical behavior.
Business ethics are the standards of conduct and moral values governing actions and
decisions in the work environment. Surveys of employees show high levels of faith in the
ethical behavior of managers, but surveys of average Americans reveal a belief that poor
values leads companies away from ethical behavior. To guide their ethical behavior,
some companies have appointed corporate officers to ensure compliance with ethical
guidelines.
Individuals within organizations help shape ethical expectations and behavior.
Unfortunately, some individuals act unethically on the job. Technology, such as the
Internet, may be making some forms of unethical behavior—such as intellectual property
theft or conducting personal business on company time—more common. While some
employees undoubtedly rationalize their unethical conduct, others do make it a point to
avoid unethical acts that don’t mesh with their personal values and morals.
Individuals develop personal ethical standards in three stages: preconventional,
conventional, and postconventional. In the preconventional stage, individuals obey rules
to escape punishment. In the conventional stage, individuals combine a concern for selfinterest with a duty to others. In the postconventional stage, individuals move beyond
self-interest and duty and consider the larger needs of society. The postconventional stage
represents the highest level of ethical and moral behavior. Ethical issues are not always
clear-cut, and employees must often make judgments about the most appropriate course
of action. There are four primary ethical dilemmas. The first, a conflict of interest, occurs
when a businessperson has a duty to more than one party in a transaction in which one
party’s gain potentially harms the other party. All conflicts of interests should be avoided
or disclosed. The second dilemma is maintaining honesty and integrity. Employees who
display honesty and integrity inspire trust and expect their leaders to treat them likewise.
Truths unfavorable to a company can lead to the third dilemma, a conflict between truth
and loyalty. The fourth, whistle-blowing, is an employee’s disclosure to company
officials, government authorities, or the media, of illegal, immoral, or unethical practices.
0203 – How Organizations Shape Ethical Conduct
Contemporary Business 12th ed.
Chapter 2 Summary
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Individuals’ ethical choices are influenced by organizational standards of conduct. These
standards are developed on four levels: ethical awareness, ethical reasoning, ethical
action, and ethical leadership. Organizations can support members’ ethical awareness by
creating a formal code of conduct outlining the organization’s expectations. Ethics
training programs can help employees develop ethical reasoning skills to better apply
ethical standards in difficult situations. Companies should provide structures and
approaches, such as an ethics hotline, that encourage ethical actions. Leaders should
demonstrate their commitment to ethical standards through their actions, including
admitting mistakes and correcting problems. When businesses fail to act ethically,
pressure and the legal system may intervene to protect the interests of stakeholders.
0204 – Acting Responsibly to Satisfy Society
In addition to behaving ethically, businesses must display social responsibility. Social
responsibility is the obligation to consider profit, consumer satisfaction, and societal
well-being equally when evaluating performance. Businesses may exercise social
responsibility for legal, public relations, and ethical reasons. Some firms measure social
responsibility by conducting social audits, formal assessments that evaluate company
activities relating to issues such as conservation, employment practices, environmental
protection, and philanthropy. The social responsibilities of business can be classified
according to its relationships to the general public, customers, employees, investors, and
other members of the financial community.
Businesses’ responsibilities to the public include dealing with public health issues, such
as how businesses should respond to the dangers posed by the consumption of alcohol,
cigarettes, and illicit drugs. Businesses also have a public responsibility to be good
stewards of the environment, both in the energy they consume and the waste they
produce. Some businesses have found ways to be both environmentally friendly and
profitable through new technologies and green marketing. Green marketing is a
marketing strategy that promotes environmentally safe products and production methods.
Recycling is another tool businesses can use to reduce waste and the consumption of raw
materials. Businesses also have an obligation to improve the quality of the nation’s
workforce by supporting education and by encouraging diversity in their workforces.
Corporate philanthropy is a way that many businesses meet their responsibility to the
general public. This philanthropy benefits not-for-profit organizations such as cultural
organizations, adopt-a-school programs, community development agencies, and housing
and job training programs. Companies often align their corporate giving with their
marketing, a practice called cause-related marketing.
Businesspeople share a social and ethical responsibility to treat their customers fairly and
avoid harm to them. Consumers’ rights include the right to be safe while using a
company’s products in the way they were intended to be used; the right to be informed
well enough to make responsible buying decisions; the right to choose which goods and
services to purchase; and the right to express legitimate complaints about products to the
appropriate parties.
Contemporary Business 12th ed.
Chapter 2 Summary
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Businesses’ social and ethical obligations include a commitment to protect the health and
safety of workers, a responsibility that is regulated on the federal level by the
Occupational Safety and Health Administration. Businesses also have an ethical
responsibility to help employees balance work responsibilities with other areas of their
lives, such as family and personal needs. Solutions such as flexible work schedules and
on-site daycare are complemented by legal requirements such as the Family and Medical
Leave Act, which requires some businesses to provide unpaid time off to employees for
specific family and medical reasons. Another ethical obligation of businesses is to
provide equal opportunities for all employees. Many aspects of managing diversity are
regulated by the law, including the Civil Rights Act of 1964. Preventing age
discrimination and sexual harassment are two additional obligations of businesses with
respect to their own employees.
Finally, businesses have an obligation to behave legally and ethically to avoid harm to
investors and the business community. The Securities and Exchange Commission is the
main regulatory body that investigates misdeeds by publicly traded companies.
The ultimate goal of a business is to provide customers with a good or a service while
making a profit for the business. But most companies try to accomplish more than this
simple economic goal. Most businesses look for ways to give back to their customers,
their employees, society, and the environment. Sometimes difficult questions or
dilemmas arise in the process. A growing number of businesses of all sizes are striving
to seek profits while upholding higher principles aimed at society as a whole.