Ethics in Business and Society

What is Business Ethics?

Why Study Ethics?
 The intensity of consumer movements and
the rising level of awareness among
corporate stakeholders are making it
difficult for corporates to get away with
unethical business practices

 Help in trying to do the right thing

Definitions
• Ethics involves a
discipline that examines
good or bad practices
within the context of a
moral duty
• Moral conduct is behavior that is right or
wrong
• Business ethics include practices and
behaviors that are good or bad within a
business context
Business Ethics
 The application of general ethical
concepts to the unique situations
confronted in business. It asks what is
right or wrong behavior in business and
what principles or rules can be used as
guidance in business situations.
Unethical practices
 Financial irregularities
 Tax- evasion
 Poor quality products
 Kick-backs
 Non compliance with environmental
issues
 Hazardous working conditions.
Two Characteristics
 Tells people what they ought to do
 Set of principles or rules
Moral
Values Ethics Decisions Behavior
Fundament Standards Plans for Action
al beliefs of conduct behaving in taken
about in keeping in an ethical following
good/bad; with one’s fashion the decision
right/wrong moral Ex. I decide Ex. I do not
Ex. It is
values not to steal steal
wrong to Ex. I should from the
harm another not steal company

Religious Clearly
articulated Organizational and group
background, norms
beliefs ethical
training standards Org. Culture
Level of Training, Leadership behaviors
cognitive recognizing,
and External stressors
moral
development applying Work attitudes and motives
ethical
The nature of moral and immoral
behavior
 The character of a man is expressed in the
terms of his conduct or actions. These
actions can be good or bad.- Moral or
immoral.
 Immoral Management—A style devoid
of ethical principles and active opposition
to what is ethical.
 Moral Management—Conforms to high
standards of ethical behavior
Ammoral
 However they can be “Amoral” as well. –
They are beyond the sphere of morality.
• Example- A petrol bunk owner engaged in selling
both Petrol and Diesel to the customer for profit
• But if the owner indulges in mixing petrol with
kerosene , then his act is said to be immoral.
 Philosophers viewed ethics as a system of
moral principles and the method for
applying.

 It is now considered that emerging ethical

beliefs to be ‘State of Act’ legal matters i.e.
what is ethical guideline today is often
translated to a law or regulation.
Individual Values and
Codes
 Sources of Personal Codes of Ethics
– Childhood responses to adult behavior
– Influence of peers
– Experiences in adulthood
– Developed morals and values
Business and Managerial Ethics
 Managerial Ethics
– The standards of behavior that guide individual
managers in their work
– Ethics affect a manager’s behavior toward:
• employees
• the organization
• other economic agents—customers, competitors,
stockholders, suppliers, dealers, and unions
 Ethical Concerns
– Ambiguity (e.g., financial disclosure)
– Global variation in business practices (e.g.,
bribes)
 Social Responsibility
 Social Responsibility
– The overall way in which a business attempts to
balance its commitments to relevant groups and
individuals (stakeholders) in its social environment
 Organizational Stakeholders
– Groups, individuals, and organizations that are directly
affected by the practices of an organization and,
therefore, have a stake in its performance
Major
MajorCorporate
CorporateStakeholders
Stakeholders
 The Stakeholder Model of Responsibility
 Customers
– Businesses strive to treat customers fairly and honestly
 Employees
– Businesses treat employees fairly, make them a part of the team, and
respect their dignity and basic human needs
 Investors
– Businesses follow proper accounting procedures, provide information to
shareholders about financial performance, and protect shareholder rights
and investments
 Suppliers
– Businesses emphasize mutually beneficial partnership arrangements with
suppliers
 Local and International Communities
– Businesses try to be socially responsible
Contemporary Social
Consciousness
 The Concept of Accountability
– The expectation of an expanded role for
business in protecting and enhancing the
general welfare of society
Areas of Social
Responsibility
 Responsibility Toward the Environment
– Controlling air, water, and land pollution
– Properly disposing of toxic waste
– Engaging in recycling
Areas of Social Responsibility
 Responsibility Toward Customers
– Involves providing quality products and pricing products fairly
 Consumerism
– Social activism dedicated to protecting the rights of consumers
in their dealings with businesses
 Basic Consumer Rights
– To possess safe products
– To be informed about all relevant aspects of a product
– To be heard
– To choose what to buy
– To be educated about purchases
– To courteous service
Consumer Rights
(cont’d)
 Unfair Pricing
– Collusion: When two or more firms agree to
collaborate on such wrongful acts as price fixing
– Price gouging: Responding to increased demand
with overly steep (and often unwarranted) price
increases
 Ethics in Advertising
– Truth in advertising
– Morally objectionable advertising
 Areas of Social Responsibility
 Responsibility Toward Employees
– Legal and social commitments to:
• not practice illegal discrimination
• provide a physically and socially safe workplace
• provide opportunities to balance work and life
• provide protection for whistleblowers (an employee who
discovers and tries to put an end to a company’s unethical,
illegal, or socially irresponsible actions by publicizing them)
 Responsibility Toward Investors
– Proper financial management (no insider trading)
– Proper representation of finances
 Myths about Ethics
 Business Ethics is more a matter or religion
than management.

 Our employees are ethical so we don’t need

attention to business ethics.

 Business Ethics is a discipline led by

philosophers, academics and theologians.
Myths about Ethics
 Business Ethics is superfluous – it asserts
the obvious: “do good!”

 Ethics is a matter of the good guys

preaching to the bad guys.

 Business Ethics is the new police on the

block
 Myths about Ethics
 Ethics can’t be managed.

 Ethics and social responsibility are the same thing.

 Our organization is not in trouble with the law, so we

are ethical.

 Managing ethics in the workplace has little practical

relevance.
Benefits to Managing Ethics
 Attention to business ethics has improved
our society.

 Ethics programs help maintain a moral

course in turbulent times.

 Ethics cultivate strong teamwork and

productivity.
Benefits to Managing Ethics
 Ethics programs support employee growth
and meaning.

 Ethics programs are insurance – they ensure

that policies are legal.

 Ethics programs help avoid criminal acts

“of omission” and can lower fines.
Benefits to Managing Ethics
 Ethics programs help manage values
associated with quality management,
strategic planning and diversity.

 Ethics promote a strong public image.

 Formal Attention to Ethics –

“It is the right thing to do.”
 The Four Functions of a Manager

Controlling Planning

Leading Organizing
However…….
As managers who have the ability to
influence our employees behaviors, is
this unethical?

What about our customers?

Consumers?
A major corporation hires a psychologist who has
conducted applied research on cognitive errors that
result from the way in which a message is
presented. Some of her research suggests that
consumer brand preferences can be manipulated by
techniques that make listeners think they heard
something other than what was actually said. The
vice president for the marketing division, who is not
trained in behavioral research, pressures her to
incorporate her research findings in the design of a
new marketing campaign. The psychologist
complies. IS THIS ETHICAL? WHAT WOULD YOU
DO? WHAT FACTORS INFLUENCE YOUR
DECISION? WHAT IS THE RIGHT THING TO DO?