An Overview of Business Ethics - Assignment

Part One
An Overview of
Business Ethics
Chapter 1
The Importance
of Business
Ethics
© 2019 Cengage. All rights reserved.

© 2019 Cengage. All rights reserved.
2
Learning Objectives
• Explore conceptualizations of business ethics
from an organizational perspective
• Examine the historical foundations and evolution
of business ethics
• Provide evidence that ethical value systems
support business performance
• Gain insight into the extent of ethical misconduct
in the workplace and the pressures for unethical
behavior

© 2019 Cengage. All rights reserved.
3
The Basic Concepts in
Business Ethics (1 of 4)
• Morals: Personal philosophies that define right
and wrong.
• Business ethics: Organizational principles,
values, and norms that may originate from
individuals, organizational statements, or from
the legal system that primarily guide individual
and group behavior in business.

© 2019 Cengage. All rights reserved.
4
The Basic Concepts in
Business Ethics (2 of 4)
• Principles: Specific boundaries for behavior that
often become the basis for rules (human rights,
freedom of speech).
• Values: Enduring beliefs and ideals that are
socially enforced (trust and integrity).

© 2019 Cengage. All rights reserved.
5
The Basic Concepts in
Business Ethics (3 of 4)
• Moral dilemma: Two or more morals in conflict
with one another.
• Value dilemma: Two or more beliefs/ideals in
conflict with one another.

© 2019 Cengage. All rights reserved.
6
The Basic Concepts in
Business Ethics (4 of 4)
• Ethical culture: Organizational principles,
values, and norms that are adhered to by the
company and its personnel.
• Corporate social responsibility: Actions
associated by firms with various stakeholder
(other than investors) interests as a priority.
• Sustainability: Relates specifically to the
environment (air, land, and water).

© 2019 Cengage. All rights reserved.
7
Bottom Line for Business Ethics
• Firm survival
• Profitability, revenues, sales
• Stakeholders: customers, employees, channel
members (manufacturers, wholesalers, retailers)
• Contribute to societal goals: community,
country, world

© 2019 Cengage. All rights reserved.
8
Why Study Business Ethics?
• Identify ethical issues.
• Recognize approaches for resolving ethical
issues.
• Cope with conflicts between your own personal
values and those of the organization in which you
work.
• Gain knowledge to make more ethical business
decisions.

© 2019 Cengage. All rights reserved.
9
TABLE 1-1 Observed Misconduct
in the U.S. Workforce
Observed misconduct 30%
Abusive behavior 22%
Lying to stakeholders 22%
Conflict of interest 19%
Pressure to compromise standards 22%
Report observed misconduct 76%
Experience retaliation for reporting 53%
Source: Ethics and Compliance Initiative, 2016 Global Business Ethics Survey™: Measuring Risk and Promoting Workplace Integrity
(Arlington, VA: Ethics and Compliance Initiative 2016), 43.

© 2019 Cengage. All rights reserved.
10
The Process of Legal to Unethical
to Illegal Business Practice
Steps in the process:
1. A major event occurs that negatively sensitizes the
public to a business practice.
2. The public uses social media to increase
awareness.
3. Legislators (local, state, and federal) become
sensitized to the negative business practices.
4. Bills, laws, and local, state or federal agencies are
introduced to make specific items illegal or
regulated.

© 2019 Cengage. All rights reserved.
11
The Development of Business
Ethics in the U.S.—Before 1960
• Capitalism dictated business practices.
• 1920s: Provide a living wage—income sufficient
for education, recreation, health, and retirement.
• 1930s: The New Deal (President Franklin D.
Roosevelt)—blamed business as the cause for
U.S. problems.
• 1950s: The Fair Deal (President Harry S.
Truman)—defined such matters as environmental
responsibility as ethical issues that businesses
had to address.

© 2019 Cengage. All rights reserved.
12
The Development of Business Ethics in
the U.S.—The 1960s: The Rise of Social
Issues in Business (1 of 2)
• Development of anti-business trend.
• Decay of inner cities; growth of ecological
problems.
• President John F. Kennedy: The Consumers’ Bill
of Rights
• Right to safety.
• Right to be informed.
• Right to choose.
• Right to be heard.

© 2019 Cengage. All rights reserved.
13
The Development of Business Ethics in
the U.S.—The 1960s: The Rise of Social
Issues in Business (2 of 2)
• President Lyndon B. Johnson: The Great Society
• Extended national capitalism with the U.S.
government’s responsibility to provide all citizens
with some degree of economic stability, equality,
and social justice.

© 2019 Cengage. All rights reserved.
14
The Development of Business Ethics in
the U.S.—The 1970s: Business Ethics
as an Emerging Field (1 of 2)
• Business ethics becomes a common expression.
• Academic researchers seek to identify ethical
issues and describe how business people might
choose to act in particular situations.
• Ethical/Illegal issues defined: bribery, deceptive
advertising, price collusion, product safety, and
ecology.

© 2019 Cengage. All rights reserved.
15
The Development of Business Ethics in
the U.S.—The 1970s: Business Ethics
as an Emerging Field (2 of 2)
• Limited success was made to describe how the
ethical decision-making process in business
worked and to identify the many variables that
influenced the process.

© 2019 Cengage. All rights reserved.
16
The Development of Business Ethics in
the U.S.—The 1980s: Business Ethics
Reaches Maturity (1 of 2)
• Centers for business ethics provided publications,
courses, conferences, and seminars.
• Stakeholder theory developed.
• Defense Industry Initiative on Business Ethics and
Conduct (DII) was developed to guide corporate
support for ethical conduct.
1. Codes of conduct must be understandable and cover
substantive areas in detail.
2. Member companies expected to provide ethics training
and continuous support for employees.

© 2019 Cengage. All rights reserved.
17
The Development of Business Ethics in
the U.S.—The 1980s: Business Ethics
Reaches Maturity (2 of 2)
3. Defense contractors must create an open atmosphere
in which employees feel comfortable reporting
violations without fear of retribution.
4. Companies must perform extensive internal audits and
develop effective internal reporting and voluntary
disclosure plans.
5. Member companies must preserve the integrity of the
defense industry.
6. Member companies must adopt a philosophy of public
accountability.
• Reagan–Bush Era: Self-regulation rather than regulation by
government was in the public’s interest.

© 2019 Cengage. All rights reserved.
18
The Development of Business Ethics in
the U.S.—The 1990s:
Institutionalization of Business Ethics
• President Bill Clinton: Continued to support
self-regulation and free trade.
• Government action with health-related social
issues such as teenage smoking.
• Federal Sentencing Guidelines for
Organizations (FSGO): Set the tone for
organizational ethical compliance programs.

© 2019 Cengage. All rights reserved.
19
The Development of Business Ethics in
the U.S.—The Twenty-First Century of
Business Ethics (1 of 3)
• President George W. Bush: Misconduct at Enron,
WorldCom, Halliburton, and the accounting firm
Arthur Andersen caused the government and the
public to look for new ways to encourage ethical
behavior.
• 2002 Congress passed the Sarbanes–Oxley Act,
the most far-reaching change in organizational
control and accounting regulations since the
Securities and Exchange Act of 1934.

© 2019 Cengage. All rights reserved.
20
The Development of Business Ethics in
the U.S.—The Twenty-First Century of
Business Ethics (2 of 3)
• Amendments to the FSGO required governing
authority be well informed about its ethics
program with respect to content, implementation,
and effectiveness. Placed responsibility on firm’s
leadership (usually the board of directors).
• The Sarbanes–Oxley Act and the FSGO
institutionalized the need to discover and address
ethical and legal risk.

© 2019 Cengage. All rights reserved.
21
The Development of Business Ethics in
the U.S.—The Twenty-First Century of
Business Ethics (3 of 3)
• President Barack Obama: Inherited the great
global financial recession.
• The Dodd–Frank Wall Street Reform and
Consumer Protection Act addressed some of the
issues related to the financial crisis and
recession.
• President Donald Trump: Decreased
environmental and financial regulations.
Questioned sustainability.

© 2019 Cengage. All rights reserved.
22
TABLE 1-2 Timeline of Ethical and
Socially Responsible Concerns
1960s 1970s 1980s 1990s 2000s
Environmental
issues
Employee militancy Bribes and illegal
contracting
practices
Sweatshops and
unsafe working
conditions in third-
world countries
Cybercrime
Civil rights issues Human rights issues Influence peddling Rising corporate
liability for personal
damages (for example,
cigarette companies)
Financial misconduct
Increased
employee–employer
tension
Covering up rather
than correcting
issues
Deceptive advertising Financial
mismanagement
and fraud
Global issues,
product safety,
bribery
Changing work ethic Disadvantaged
consumers
Financial fraud (for
example, savings and
loan scandal)
Organizational ethical
misconduct
Sustainability
Rising drug use Transparency issues Intellectual property
theft
Source: Adapted from Ethics & Compliance Initiative, “Business Ethics and Compliance Timeline,” https://www.ethics.org/resources/free-toolkit/ethics-timeline
(accessed April 9, 2017).

© 2019 Cengage. All rights reserved.
23
The Benefits of Business
Ethics (1 of 4)
• Ethics Contributes to Employee Commitment
• Willingness to sacrifice for the organization.
• Increases group creativity and job satisfaction;
decreases turnover.
• Less pressure to compromise ethical standards,
• Greater absence of misconduct.
• Strong community involvement increases loyalty
and positive self identity.

© 2019 Cengage. All rights reserved.
24
The Benefits of Business
Ethics (2 of 4)
• Ethics Contributes to Investor Loyalty
• Provides a foundation for efficiency, productivity,
and profits.
• Negative publicity, lawsuits, and fines can lower
stock prices, diminish customer loyalty, and
threaten a company’s long-term viability.
• Demand for socially responsible investing is
increasing.

© 2019 Cengage. All rights reserved.
25
The Benefits of Business
Ethics (3 of 4)
• Ethics Contributes to Customer Satisfaction
• High levels of perceived corporate misconduct
decreases customer trust.
• Companies viewed as socially responsible
increase customer trust and satisfaction.
• Consumer respondents stated they would pay
more for products from companies that give back
to society in a socially responsible and
sustainable manner.

© 2019 Cengage. All rights reserved.
26
The Benefits of Business
Ethics (4 of 4)
• Ethics Contributes to Profits
• Better business performance.
• Part of strategic planning toward obtaining the
outcome of higher profitability.
• Business ethics is becoming more than just a
function of compliance; It’s becoming an integral
part of management’s efforts to achieve
competitive advantage.