Business Ethics
Unethical Business Practices
• Lying
• Offering substandard merchandise
• Unfair treatment of customers or
employees
• Violation of ethical practices lead to:
– Fines
– Jail Time
– License Revoked
– Termination of employment
– Sometimes unethical actions
affect businesses indirectly
Examples:
• Auto-body paint shop
– charge top prices but use cheap paint
– customers may complain – eventually may
lose business and be forced to close.
• Small film distribution Company
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Hire graduate of business school
Fully train them to run your company
Work them hard and treat poorly
They leave and get hired by competitor
You invested money to train your competition
• Q – Any Examples you can think of?
Conflict of Interest
• Conflict between personal interest and
professional obligation
• When making business decisions,
employees have an ethical obligation to
act in the best interest of the company
– Manager hires his sister who is not qualified to
do the job
– This might help the sister’s family, but create
problems with other employees.
• Q – Any other examples you can share?
Social Responsibility
• The duty to do what is best for the good of
society.
• Business Ethics focus on what is good and
bad, correct or incorrect.
• Businesses that follow ethical standards
value integrity and honesty in employees.
• Social Responsibility takes into account all
that business does or does not do to solve
problems of society.
Q – How could a business demonstrate
social responsibility by participating in an
event like this community concert?
Society vs. Environment
• Some believe businesses that produce
goods to benefit society are fulfilling their
social responsibility
• Others are concerned about limiting the
damage done to the environment.
• L.A. Times with 1 million plus subscribers
uses recyclable paper and soy-based ink.
• Honda and Toyota offer eco-cars, which
reduce air pollution.
• Q – What are some other ways businesses
can fulfill its social responsibilities?
Responsibility to Customers
• Provide a good, safe, product or service at
a reasonable price.
• Some companies use unfair competition
• The market economy relies on market
forces to allocate goods, services, and
other resources and determine prices.
• Some companies use unethical tactics to
eliminate competition.
• They may conspire with other companies
to control the market for a product.
Unfair Competition
• When companies restrict competition,
consumers are affected.
– Fewer choices
– Might have to pay more
– Quality will not be required.
• When a company doesn’t have to compete
for its business, productivity decreases.
• They may not be ready when new markets
open up and they aren’t prepared for the
change.
Responsibility to Employees
• Some businesses provide work experience
to people with limited job skills.
• Purpose of such programs are to develop
skills and confidence necessary for success.
• Businesses need to provide safe working
conditions, equal treatment and fair pay.
• Over the years, the government has passed
laws to protect workers from:
– child labor abuses
– rights of workers to organize
• Q – Can you think of others?
Responsibility to Creditors/Owners
• Around the turn of the century, many major
corporations kept inaccurate records
showing that the firms had higher profits
than were reported to others.
• Such behaviors are harmful to creditors
(those who loan money) and shareholders
(those who own but don’t work in the
business)
• (Discussion) – Why do you think false
reporting is harmful?