CHAPTER 1

The Importance of Business Ethics

Chapter Objectives
To explore conceptualizations of business ethics from an organizational perspective To examine the historical foundations and evolution of business ethics To provide evidence that ethical value systems support business performance To gain insight into the extent of ethical misconduct in the workplace and the pressures for unethical behavior

Chapter Outline
Why Study Business Ethics? The Development of Business Ethics Developing an Organizational and Global Ethical Culture The Benefits of Business Ethics Our Framework for Studying Business Ethics

Business Ethics
Comprises principles and standards that guide behavior in the world of business Right or wrong, acceptable or unacceptable behavior within the organization

Determined by you and key stakeholders

A Crisis in Business Ethics

Consumer trust of businesses is declining No sector is exempt from ethical misconduct Stakeholders determine what is ethical/unethical Investors Employees Customers Interest groups Legal system Community

Why Study Business Ethics?

Reports of unethical behavior are on the rise Societys evaluation of right or wrong affects its ability to achieve its business goals Studying business ethics is a response to Sarbanes-Oxley, FSGO, and stakeholder demands for ethics initiatives Individual ethics alone is not sufficient Studying business ethics helps identify ethical issues to key stakeholders

Before 1960: Ethics in Business

A living wage
Theologys domain

Philosophys domain

The 1960s: The Rise of Social Issues in Business

Consumers Bill of Rights Ralph Nader

The 1970s: Business Ethics as an Emerging Field

Bribery Deceptive advertising Price collusion Product safety
The environment

The 1980s: Consolidation

Organized field of study
Business ethics centers Business ethics courses

Defense industry initiative Multinationals

Self-regulation (Reagan/Bush)

The 1990s: Institutionalization of Business Ethics

Free trade Self-regulation

Federal Sentencing Guidelines for Organizations (FSGO)

More multinationals

The Federal Sentencing Guidelines for Organizations

Standards and procedures capable of detecting and preventing misconduct High level oversight Care in delegation of authority Effective communication (training) Systems to monitor, audit, and report misconduct Consistent enforcement Continuous improvement

The 21st Century: A New Focus

Continued issues with corporate non-compliance Sarbanes-Oxley Act (2002) FSGO reform (2004) Firms greatest danger is not discovering misconduct early Basic assumptions of capitalism being debated

Organizational and Global Ethical Culture

Ethical culture describes the component of corporate culture that captures the values and norms that an organization defines as appropriate conduct

Benefits of Business Ethics

Better ethical climate

Employee commitment and trust Investor loyalty and trust

Customer satisfaction and trust Long term profits