Chapter 2: Business Ethics and Social Responsibility
2.1 Misgoverning Corporations
Ethical. To know right from wrong and to know when you’re practicing one instead of
Business ethics. Application of ethical behavior in a business context, personal view to
do what is right even if it is difficult or personally disadvantageous
. Obey laws and regulations
. Being honest
. Doing no harm to others
. Competing fairly
. Decline to put your own interests above those of your company, its owners and workers
Corporate Social Responsibility: Deals with actions that affects a variety of parties in a
company’s environment, show concern for stakeholders
Stakeholders: Aperson, group or organization that has interest or concern in an
organization, can be affected by actions of a business as a whole
Recognizing an Ethical Organization
• Treating employees, customers, investors, and the public fairly
• Making fairness a top priority
• Holding every member personally accountable for his or her action
• Communicating core values and principles to all members
• Demanding and Rewarding integrity from all members in all situations
Recognize if you employee is unethical
2.2 The IndividualApproach to Ethics
Ethical Dilemma: morally problematic situation “Right-versus-right” decision
Morally Problematic Situation: Picking between two or more acceptable but often
opposing alternatives that are important to different groups. How to face an ethical dilemma?
1. Define the problem and collect relevant facts
2. Identify feasible options
3. Asses the effect of each option on stakeholders
4. Establish criteria for determining the most appropriate action
5. Pick the best option based on the criteria
Ethical decision: situation in which there is a right ethical choice and wrong
unethical/illegal choice “right-versus-right”
Ethical Lapse: when you have made a decision that’s unethical or illegal
How to avoid an Ethical Lapse?
1. Is this action illegal?
2. Is it unfair to some parties?
3. If I take it will I feel badly about it?
4. Will I be ashamed to tell my family, friends, coworkers, or boss?
5. Will I be embarrassed if my action is written up in the local newspaper?
2.3: Identifying Ethical Issues
Bribes vs. Gifts: fine line between a gift and bribe, the cost of item, the timing of
the gift, type of gift, connection between giver and receiver. It is a good idea to
refuse overly generous gifts, or gifts given with the purpose of influencing your
Conflicts of Interests : occur when individuals must choose between taking
actions that promote their personal interests over the interests of others or taking
actions that don’t. Also an employee shouldn’t use private information about an
employer for personal financial benefit.
Conflicts of Loyalty: Sometimes you find yourself in a bind between being loyal
either to your employer or to a friend or family member. In business, as in all aspects of your life, you should act with honesty and
HOW TO MAINTAIN HONESTYAND INTERGRETY?
Whistle-blower: an individual who exposes illegal or unethical behavior in an
Despite all the good arguments in favor of doing the right thing, some
businesspeople still act unethically (at least at times). Sometimes they use
one of the following rationalizations to justify their conduct:
• The behavior isn’t really illegal or immoral.
• The action is in everyone’s best interests.
• No one will find out what I’ve done.
• The company will condone my action and protect me 2.4 The OrganizationalApproach to Ethics
. Ethics is more than a matter of individual behavior; it’s also about organizational
behavior. Employees’ actions aren’t based solely on personal values; they’re also
influenced by other members of the organization.
Ways to create and sustain an ethical company?
Ethical Leadership: Organizations have unique cultures—ways of doing things that
evolve through shared values and beliefs. For example an organization’s culture is
strongly influenced by senior executives, who tell members of the organization what’s
considered acceptable behavior and what happens if it’s violated.
Exercising Ethical Leadership: Leaders should be in touch with subordinated about
ethical policies and expectations, be available to help employees identify and solve
ethical issues. They should be like role models, if managers behave ethically,
subordinates will probably do the same.
Tighten the Rules: Take steps to encourage employees to behave according to specific
standards and to report wrongdoing
Code of Conduct: Many organizations have a formal code of conduct that describes the
principles and guidelines that all members must follow in the course of job-related
2.5 Corporate Social Responsibility
Ccorporate social responsibility: The approach that an organization takes in balancing
its responsibilities toward different stakeholders when making legal, economic, ethical
and social decisions
Ways in which companies can be socially responsible-:
1.Owners: Invest money in companies in return the people who run a company has
responsibility to increase the value of owners investments through profitable
operations. Mangers are responsible to provide owners and other stakeholders with
accurate reliable financial information.