Business Ethics, Social Responsibility Business Ethics, Social Responsibility

Chapter 3

1

Business Ethics “doing well by doing good”

1

Why Study Business Ethics

• Perhaps when business people ask why they should be ethical, they have a different question in mind: what is the motivation for being good? Is their something in it for them?

• There is no denying that one can often do well by doing good.

• An ethical company is more likely to build a good reputation, which is more likely to bring financial rewards over the long term.

What is Ethics?

• Ethics: defined as the set of moral principles

that distinguish what is right from what is wrong.

Arguments Supporting Business Ethics

• Ethics applies to all human activities.• Business cannot survive without ethics.• Ethics is consistent with profit seeking.• Customers, employees, and people in general care

about ethics.• Studies suggest ethics does not detract from profits

and seems to contribute to profits.

Why Behave Ethically?

• Managers should behave ethically to avoid harming others.– Managers are responsible for protecting and

nurturing resources in their charge.• Unethical managers run the risk for loss of

reputation.– This is a valuable asset to any manager!– Reputation is critical to long term management

success.– All stakeholders are judged by reputation.

6

Stakeholders and Ethics

Stakeholders: • A person, group, or organization that has direct or

indirect stake in an organization because it can affect or be affected by the organization's actions, and policies.

• Key stakeholders in a business organization include creditors, customers, directors, employees, owners (shareholders), suppliers, and the community from which the business draws its resources.

7

Types of Company Stakeholders

8

Sources of Ethics

9

1. Social Ethics

• Social Ethics– Standards that direct how members of a society

should deal with one another in matters involving issues such as fairness, justice, poverty, and the rights of the individual

• People behave ethically because they have certain values, beliefs, and norms

10

2. Occupational Ethics

• Occupational Ethics– Standards that direct how members of a

profession, trade should conduct themselves when performing work-related activities

– Medical & legal ethics

11

3. Individual Ethics

• Individual Ethics– Personal standards and values that determine

how people view their responsibilities to other people and groups

– How they should act in situations when their own self-interests are at stake

12

4. Organizational Ethics

• Organizational Ethics– Guiding practices and beliefs through which a

particular company and its managers view their responsibility toward their stakeholders

– Top managers play a crucial role in determining a company’s ethics

13

Company Practices and Business Ethics

• Encouraging Ethical Behavior Involves:A company can encourage ethical behavior in a number of

ways. These include:

– Adopting written codes of conduct

– Having top management support of ethical standards

– Instituting ethics programs

– Establishing ethical hotlines for reporting and discussing unethical behavior and activities

19

Code of Ethics

• Code of ethics: is a written document that clearly states what acceptable and unacceptable behaviors are for all of the employees in the organization.

• Employees working under the code of ethics have a standard by which they can judge their own behavior and that of others within the organization.

• Worldwide, McDonald's employees follow a standard ethical code.

Corporate Social Responsibility

• Corporate social responsibility refers to a corporation’s responsibilities or obligations toward society.

Managers Response to Social Responsibility

There are many ways managers respond to this duty:1. Obstructionist response ((ممانع: managers choose not to

be socially responsible.– Managers behave illegally and unethically.– They hide and cover-up problems.

2. Defensive response مدافع)): managers stay within the law but make no attempt to exercise additional social responsibility.– Put shareholder interest above all other stakeholders.– Managers say society should make laws if change is

needed.

18

3. Accommodative response:(متكييف) managers realize the need for social responsibility. – Try to balance the interests of all stakeholders.

4. Positive response: managers actively support social responsibility.– Go out of their way to learn about and help

stakeholders.

19

Levels of ResponsibilityLevels of Responsibility

Obstructionresponse

Defensiveresponse

AccommodativeAccommodativeresponseresponse

ProactiveProactiveresponseresponse

Low HighSocial responsibility

20