Intro to Business Chapter 4

Business in Business in Action 8e Action 8e Bovée/ThillBovée/Thill

Developing a Business Mindset

Chapter 4Chapter 4Business Ethics and Business Ethics and

CorporateCorporateSocial ResponsibilitySocial Responsibility

Learning Objectives

1. Discuss what it means to practice good business ethics, and highlight three factors that influence ethical decision making.

2. Define corporate social responsibility (CSR), and explain the difference between philanthropy and strategic CSR.

3. Distinguish among the four perspectives on corporate social responsibility.

Copyright © 2017 Pearson Education, Inc. 4-2

Learning Objectives (cont.)

4. Discuss the role of business in protecting the natural environment, and define sustainable development.

5. Identify four fundamental consumer rights and the responsibility of business to respect them.

6. Explain the responsibilities businesses have toward their employees.


Copyright © 2017 Pearson Education, Inc.

Exhibit 4.1 Public Perceptions of Business Ethics

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What is Ethical Behavior?


• Ethics The rules or

standards governing the conduct of a person or group

• Transparency The degree to

which affected parties can observe relevant aspects of transactions or decisions

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What is Ethical Behavior? (cont.)


• Insider trading The use of unpublicized information that an

individual gains from the course of his or her job to benefit from fluctuations in the stock market

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What is Ethical Behavior? (cont.)


• Competing fairly and honestly• Communicating truthfully• Being transparent• Not causing harm to others

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Factors Influencing Ethical Behavior


Organizational Behavior


• Code of ethics A written statement that sets forth the

principles that guide an organization’s decisions

• Whistle-blowing The disclosure of information by a company

insider that exposes illegal or unethical behavior by others within the organization

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Ethical Decision Making


• Ethical lapse A situation in which an individual or a group

makes a decision that is morally wrong, illegal, or unethical

• Ethical dilemma A situation in which more than one side of an

issue can be supported with valid arguments

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Finding the Right Answer When Faced with an Ethical Dilemma


• Make sure you frame the situation accurately, taking into account all relevant issues and questions.

• Identify all parties who might be affected by your decision.

• Be as objective as possible.

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Finding the Right Answer When Faced with an Ethical Dilemma (cont.)


• Don’t assume that other people think the way you do.

• Watch out for conflicts of interest.• Conflict of interest

A situation in which competing loyalties can lead to ethical lapses, such as when a business decision may be influenced by the potential for personal gain

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Exhibit 4.3 Approaches to Resolving Ethical Dilemmas

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Corporate Social Responsibility


• Corporate social responsibility (CSR) The idea that business has obligations to

society beyond the pursuit of profits

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The Relationship between Business and Society


• Consumers in contemporary societies enjoy and expect a wide range of benefits, from education and healthcare to credit and products that are safe to use.

• Profit-seeking companies are the economic engine that powers modern society; they generate the vast majority of the money in a nation’s economy.

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The Relationship between Business and Society (cont.)


• Much of what we consider when assessing a society’s standard of living involves goods and services created by profit-seeking companies.

• Companies cannot hope to operate profitably without the many benefits provided by a stable, functioning society.

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Philanthropy vs. Strategic CSR


• Philanthropy The donation of money, time, goods, or

services to charitable, humanitarian, or educational institutions

• Strategic CSR Social contributions that are directly aligned

with a company’s overall business strategy

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Exhibit 4.4 Perspectives on Corporate Social Responsibility

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Defensive CSR


• Nongovernmental organizations (NGOs) Nonprofit groups that provide charitable

services or promote social and environmental causes

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CSR: The Natural Environment


• First, the creation, delivery, use, and disposal of products that society values virtually always generate pollution and consume natural resources.

• Second, “environmental” causes are often as much about human health and safety as they are about forests, rivers, and wildlife.

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CSR: The Natural Environment (cont.)


• Third, many of these issues often require tough trade-offs, occasional sacrifice, disruptive change, and decision making in the face of uncertainty.

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Exhibit 4.5 Sources of Electricity in the United States

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Efforts to Conserve Resources and Reduce Pollution


• Cap and trade A type of environmental policy that gives

companies some freedom in addressing the environmental impact of specified pollutants, by either reducing emissions to meet a designated cap or buying allowances to offset excess emissions

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Major FederalEnvironmental Legislation


• Clean Air Act (1963)• Solid Waste Disposal Act (1965)• National Environmental Policy Act (1969) • Resource Recovery Act (1970)• Clean Water Act (1972)• Noise Control Act (1972)• Endangered Species Act (1973) • Safe Drinking Water Act (1974) • Toxic Substances Control Act (1976)• Nuclear Waste Policy Act (1982)• Marine Protection, Research, and Sanctuaries Act (1988)• Oil Pollution Act (1990)• Energy Independence and Security Act (2007)

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The Trend towards Sustainability


• Sustainable development Operating business in a manner that

minimizes pollution and resource depletion, ensuring that future generations will have vital resources

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CSR: Consumers


• Consumerism A movement that pressures businesses to

consider consumer needs and interests

• Identity theft A crime in which thieves steal personal

information and use it to take out loans and commit other types of fraud

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CSR: Consumers (cont.)


• The right to buy safe products – and to buy them safely

• The right to be informed• The right to choose which products to buy• The right to be heard

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CSR: Employees


• Discrimination In a social and economic sense, denial of

opportunities to individuals on the basis of some characteristic that has no bearing on their ability to perform in a job

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CSR: Employees (cont.)


• Affirmative action Activities undertaken by businesses to recruit

and promote members of groups whose economic progress has been hindered through either legal barriers or established practices

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Exhibit 4.8 Fatal Occupational Injuries

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Applying What You’ve Learned


1. Discuss what it means to practice good business ethics, and highlight three factors that influence ethical decision making.

2. Define corporate social responsibility (CSR), and explain the difference between philanthropy and strategic CSR.

3. Distinguish among the four perspectives on corporate social responsibility.

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Applying What You’ve Learned (cont.)


4. Discuss the role of business in protecting the natural environment, and define sustainable development.

5. Identify four fundamental consumer rights and the responsibility of business to respect them.

6. Explain the responsibilities businesses have toward their employees.

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