Business Ethics and Social Responsibility

al s
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G
ng
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r
Lea
1

Explain the concepts of business

ethics and social responsibility.

2 Describe the factors that influence

business ethics.
3 List the stages in the development
of ethical standards.

4 Identify common ethical dilemmas

in the workplace.

Discuss how organizations shape

ethical behavior.

Describe how businesses social

responsibility is measured.

7
8

Summarize the responsibilities of

business to the general public,
customers, and employees.
Explain why investors
are concerned with
business ethics and
social responsibility.

Law and Ethics

Ethics A set of moral principles or
values that governs the conduct of an
individual or a group.
What is lawful conduct is not always
ethical conduct.
The law may permit something that would
be ethically wrong.

 Ethics
Code of moral principles.
Set standards of good and bad as
opposed to right and wrong.

Ethical behavior
What is accepted as good and right in the
context of the governing moral code.

Concern for Ethical and Societal

Issues
Business Ethics Thestandardsofconductandmoralvaluesgoverning
actionsanddecisionsintheworkenvironment.
Socialresponsibility.
Balancebetweenwhatsrightandwhatsprofitable.
Oftennoclearcutchoices.
Oftenshapedbytheorganizationsethicalclimate.

Factors influencing ethical managerial behavior

the person, organization, and environment.

Four Views of Ethical Behavior.

Moral Theories and Business Ethics

Ethical
Fundamentalis
m

Utilitarianism

Ethical Relativism

Rawlss Social
Justice Theory

Kantian Ethics

Ethical Fundamentalism
Ethical fundamentalism - When a
person looks to an outside source for
ethical rules or commands.
Critics argue that ethical
fundamentalism does not permit
people to determine right and wrong
for themselves.

Utilitarianism
A moral theory that dictates that people
must choose the action or follow the rule
that provides the greatest good to
society.
society
This does not mean the greatest good for
the greatest number of people.
Has been criticized because it is difficult to
estimate the good that will result from
different actions.

Kantian Ethics (Duty Ethics)

A moral theory that says people owe moral
duties that are based on universal rules.
rules
Based on the premise that people can use
reasoning to reach ethical decisions.
This theory would have people behave
according to the categorical imperative:
imperative
Do unto others as you would have them do
unto you.

Kantian Ethics (Duty Ethics)

(continued)

Deontologys universal rules are based

on two important principles:
1. Consistency all cases are treated

alike with no exceptions.

2. Reversibility the actor must abide by
the rule he or she uses to judge the
morality of someone elses conduct.

Kantian Ethics (Duty Ethics)

(continued)

Thus, if you are going to make an

exception for yourself, that exception
becomes a universal rule that applies
to all others.
A criticism of this theory is that it is
hard to reach a consensus as to what
the universal rules should be.

Rawlss Social Justice

Theory
Rawlss social contract
A moral theory that says each person
is presumed to have entered into a
social contract, with all others in
society, to obey moral rules that are
necessary for people to live in peace
and harmony.

Rawlss Social Justice

Theory (continued)
Rawlss Distributive Justice Theory
Fairness is considered the essence of
justice.
The principles of justice should be chosen
by persons who do not yet know their
station in society.
This veil of ignorance would permit the
fairest possible principles to be selected.

Rawlss Social Justice

Theory (continued)
There are two major criticisms of this
theory:
1. Establishing the blind original

position for choosing moral principles

is impossible in the real world.
2. Many persons in society would choose
not to maximize the benefit to the least
advantaged persons in society.

Ethical Relativism
A moral theory that holds that individuals
must decide what is ethical based on
their own feelings as to what is right or
wrong.
wrong
There are no universal ethical rules to
guide a persons conduct.
If a person meets his or her own moral
standard in making a decision, no one
can criticize him or her for it.

Ethical Relativism (continued)

A criticism of this theory is that an
action usually thought to be unethical
would not be unethical if the
perpetrator thought it was in fact
ethical.

Theories of Ethics
Theory

Description

Ethical
fundamentalism

Persons look to an outside source or

central figure for ethical guidelines.

Utilitarianism

Persons choose the alternative that

would provide the greatest good to
society.
A set of universal rules establishes
ethical duties. The rules are based on
reasoning and require (1) consistency in
application and (2) reversibility.

Kantian ethics

Theories of Ethics
Theory

Description

Rawlss social
justice theory

Moral duties are based on an implied

social contract. Fairness is justice.
Rules are established from an original
position.

Ethical relativism

Individuals decide what is ethical based

on their own feelings as to what is right
or wrong.

On-the-Job Ethical Dilemmas

Situationinwhichabusiness
decisionmaybeinfluenced
forpersonalgain.

Employeesdisclosure
ofillegal,immoral,or
unethicalpracticesin
theorganization.

Tellingthetruthand
adheringtodeeplyfelt
ethicalprinciplesin
businessdecisions.

Businesspeopleexpect
employeestobeloyal
andtruthful,butethical
conflictsmayarise.

HOW ORGANIZATIONS SHAPE

ETHICAL CONDUCT

Ethical Awareness
Code of Conduct Formalstatementthatdefineshowtheorganization
expectsandrequiresemployeestoresolveethicalquestions.

Ethical Reasoning
Codesofconductcannotdetailasolutionforeveryethicalsituation,so
corporationsprovidetraininginethicalreasoning.

Ethical Action
Helpingemployeesrecognizeandreasonthroughethicalproblemsand
turningthemintoethicalactions.

Ethical Leadership
Executivesmustdemonstrateethicalbehaviorintheiractions.

ACTING RESPONSIBLY TO SATISFY

SOCIETY
Social Responsibility Managementsacceptanceofthe
obligationtoconsiderprofit,consumersatisfaction,
andsocietalwellbeingofequalvalueinevaluatingthe
firmsperformance.
Forexample,contributionstotheoveralleconomy,job
opportunities,andcharitablecontributionsandservice.
Measuredthroughsocialaudits.

AreasofResponsibility

Responsibilities to the General

Public
Public Health IssuesWhattodoaboutinherentlydangerous
productssuchasalcohol,tobacco,vaccines,andsteroids.

Responsibilities to the General

Public
Public Health IssuesWhattodoaboutinherently
dangerousproductssuchasalcohol,tobacco,vaccines,
andsteroids.

Responsibilities to the General

Public
Public Health IssuesWhattodoaboutinherently
dangerousproductssuchasalcohol,tobacco,vaccines,
andsteroids.

Responsibilities to the General

Public
Public Health IssuesWhattodoaboutinherently
dangerousproductssuchasalcohol,tobacco,vaccines,
andsteroids.
Protecting the EnvironmentUsingresourcesefficiently,
minimizingpollution.
Recycling Reprocessingusedmaterials
forreuse.
Developing the Quality of the WorkforceEnhancing
qualityoftheoverallworkforcethrougheducationand
diversityinitiatives.
Corporate PhilanthropyCashcontributions,donationsof
equipmentandproducts,andsupportingthevolunteer
effortsofcompanyemployees.

Responsibilities to Customers

Responsibilities to Customers
The Right to Be SafeSafeoperationofproducts,avoiding
productliability.
The Right to Be Informed Avoidingfalseormisleading
advertisingandprovidingeffectivecustomerservice.
The Right to Choose Abilityofconsumers
tochoosetheproductsandservicesthey
want.
The Right to Be HeardAbilityofconsumersto
expresslegitimatecomplaintstotheappropriateparties.

Responsibilities to Employees

Responsibilities to Employees
Workplace SafetyMonitoredby
OccupationalSafetyandHealthAdministration.
Quality-of-Life Issues Balancingworkandfamily
throughflexibleworkschedules,subsidizedchild
care,andregulationsuchas
theFamilyandMedicalLeaveActof1993.
Ensuring Equal Opportunity on the Job
Providingequalopportunitiestoallemployeeswithout
discrimination;manyaspectsregulatedbylaw.
Age DiscriminationAgeDiscriminationinEmploymentAct
of1968protectsworkersage40orolder.
Sexual Harassment and SexismAvoidingunwelcome
actionsofasexualnature;equalpayforequalwork
withoutregardtogender.

Responsibilities to Investors and

the Financial Community
Obligationtomakeprofitsforshareholders.
Expectationofethicalandmoralbehavior.
Investorsprotectedbyregulationbythe
SecuritiesandExchangeCommission
andstateregulations.

Theories of Social Responsibility

Maximizing
Profits

Corporate
Citizenship

Moral
Minimum

Stakeholder
Interest

Maximizing Profits
A theory of social responsibility that says a
corporation owes a duty to take actions
that maximize profits for shareholders.
The interests of other constituencies are
not important in and of themselves.

Moral Minimum
A theory of social responsibility that
says a corporations duty is to make a
profit while avoiding harm to others.
others
As long as business avoids or corrects
the social injury it causes, it has met
its duty of social responsibility.

Moral Minimum (continued)

The legislative and judicial branches of
government have established laws
that enforce the moral minimum of
social responsibility on corporations.
e.g., Occupational safety laws
e.g., Consumer protection laws for
product safety

Stakeholder Interest
A theory of social responsibility that
says a corporation must consider the
effects its actions have on persons
other than its stockholders.
stockholders
This theory is criticized because it is
difficult to harmonize the conflicting
interests of stakeholders.

Other Stakeholders of a Business

Employees

Suppliers

Customers

Creditors

Local
Community

Corporate Citizenship
A theory of responsibility that says a
business has a responsibility to do
good.
Business is responsible for helping to
solve social problems.
Corporations owe a duty to promote
the same social goals as do
individual members of society.

Corporate Citizenship (continued)

This theory argues that corporations owe
a debt to society to make it a better
place.
This duty arises because of the social power
bestowed on corporations.

A major criticism of this theory is that the

duty of a corporation to do good
cannot be expanded beyond certain
limits.

Theories of Social Responsibility Summary

Theory

Social Responsibility

Maximizing profits

To maximize profits for stockholders.

Moral minimum

To avoid causing harm and to compensate

for harm caused.

Stakeholder interest To consider the interests of all

stakeholders, including stockholders,
employees, customers, suppliers, creditors,
and local community.
Corporate
citizenship

To do good and solve social problems