THE IMPORTANCE OF BUSINESS ETHICS

C H A P T E R 1
WHY STUDY BUSINESS ETHICS?
BUSINESS DECISIONS UNDER GREAT
SCRUTINY
GLOBAL FINANCIAL CRISIS
CREATED DIMINISHED
STAKEHOLDER TRUST
DEALS WITH QUESTIONS ABOUT
WHETHER PRACTICES ARE ACCEPTABLE
NO UNIVERSALLY-ACCEPTED
APPROACH FOR RESOLVING ISSUES
Source: Jack Hollingsworth/Corbis
BUSINESS ETHICS
COMPRISES PRINCIPLES, VALUES, AND STANDARDS THAT
GUIDE BEHAVIOR IN THE WORLD OF BUSINESS
PRINCIPLES: SPECIFIC BOUNDARIES FOR BEHAVIOR THAT ARE
UNIVERSAL AND ABSOLUTE
FREEDOM OF SPEECH, CIVIL LIBERTIES
VALUES: USED TO DEVELOP SOCIALLY ENFORCED NORMS
INTEGRITY, ACCOUNTABILITY, TRUST
AMERICANS TRUST IN BUSINESS
(% OF RESPONDENTS WHO SAY THEY TRUST THE
FOLLOWING BUSINESS CATEGORIES A GREAT DEAL)
A CRISIS IN BUSINESS ETHICS
CONSUMER TRUST OF BUSINESSES IS DECLINING
NO SECTOR IS EXEMPT FROM ETHICAL MISCONDUCT
STAKEHOLDERS DETERMINE WHAT IS ETHICAL/UNETHICAL
INVESTORS
EMPLOYEES
CUSTOMERS
INTEREST GROUPS
LEGAL SYSTEM
COMMUNITY
Source: Stockbyte
WHY STUDY BUSINESS ETHICS?
REPORTS OF UNETHICAL BEHAVIOR ARE ON THE RISE
SOCIETYS EVALUATION OF RIGHT OR WRONG AFFECTS
ITS ABILITY TO ACHIEVE ITS BUSINESS GOALS
STUDYING BUSINESS ETHICS IS A RESPONSE TO
SARBANES-OXLEY, FSGO, AND STAKEHOLDER DEMANDS
FOR ETHICS INITIATIVES
INDIVIDUAL ETHICS ALONE IS NOT SUFFICIENT
STUDYING BUSINESS ETHICS HELPS IDENTIFY ETHICAL
ISSUES TO KEY STAKEHOLDERS
A TIMELINE OF ETHICAL AND SOCIALLY
RESPONSIBLE CONCERNS
BEFORE 1960: ETHICS IN BUSINESS
THEOLOGICAL DISCUSSIONS OF ETHICS EMERGED
CATHOLIC SOCIAL ETHICS INCLUDED A CONCERN FOR
MORALITY IN BUSINESS, WORKERS RIGHTS AND LIVING
WAGES
PROTESTANTS DEVELOPED ETHICS COURSES IN THEIR
SEMINARIES AND SCHOOLS OF THEOLOGY
THE PROTESTANT WORK ETHIC ENCOURAGED HARD WORK
THE 1960S: THE RISE OF SOCIAL ISSUES
IN BUSINESS
SOCIETAL SOCIAL CONSCIOUSNESS EMERGED
ANTI-BUSINESS SENTIMENT ROSE
JFKS CONSUMER BILL OF RIGHTS-
A NEW ERA OF CONSUMERISM
RIGHT TO SAFETY, TO BE
INFORMED, TO CHOOSE,
AND TO BE HEARD
CONSUMER PROTECTION GROUPS
FOUGHT FOR CONSUMER
PROTECTION LEGISLATION
RALPH NADER
Source: Hisham Ibrahim
THE 1970S: BUSINESS ETHICS AS AN EMERGING
FIELD
BUSINESS PROFESSORS BEGAN TO WRITE ABOUT SOCIAL
RESPONSIBILITY
AN ORGANIZATIONS OBLIGATION TO MAXIMIZE POSITIVE
IMPACT AND MINIMIZE NEGATIVE IMPACT ON
STAKEHOLDERS
PHILOSOPHERS BECAME INVOLVED
BUSINESSES BECAME CONCERNED WITH PUBLIC IMAGE
CONFERENCES WERE HELD AND CENTERS DEVELOPED
ISSUES:
BRIBERY PRODUCT SAFETY
DECEPTIVE ADVERTISING ENVIRONMENT
PRICE COLLUSION
THE 1980S: CONSOLIDATION
MEMBERSHIP IN BUSINESS ETHICS ORGANIZATIONS
INCREASED
ETHICS CENTERS PROVIDED:
PUBLICATIONS, COURSES, CONFERENCES AND
SEMINARS
FIRMS ESTABLISHED ETHICS COMMITTEES
DEFENSE INDUSTRY INITIATIVE ON BUSINESS ETHICS AND
CONDUCT (DII) EMERGED
FOUNDATION FOR THE FEDERAL SENTENCING
GUIDELINES FOR ORGANIZATIONS
CORPORATE SUPPORT FOR ETHICS
THE 1990S: INSTITUTIONALIZATION OF BUSINESS
ETHICS
THE FEDERAL SENTENCING GUIDELINES FOR
ORGANIZATIONS (FSGO)
SET TONE FOR COMPLIANCE
PREVENTATIVE ACTIONS AGAINST MISCONDUCT
A COMPANY COULD AVOID/MINIMIZE POTENTIAL
PENALTIES
THE FEDERAL SENTENCING GUIDELINES FOR
ORGANIZATIONS
STANDARDS AND PROCEDURES CAPABLE OF DETECTING AND
PREVENTING MISCONDUCT
HIGH LEVEL OVERSIGHT
CARE IN DELEGATION OF AUTHORITY
EFFECTIVE COMMUNICATION (TRAINING)
SYSTEMS TO MONITOR, AUDIT, AND REPORT MISCONDUCT
CONSISTENT ENFORCEMENT
CONTINUOUS IMPROVEMENT
THE 21ST CENTURY: A NEW FOCUS
CONTINUED ISSUES WITH CORPORATE NON-COMPLIANCE
GROWING PUBLIC/POLITICAL DEMAND FOR IMPROVED ETHICAL
STANDARDS
SARBANES-OXLEY ACT (2002)
MOST EXTENSIVE ETHICS REFORM
INCREASED ACCOUNTING REGULATIONS
FSGO REFORM (2004)
REQUIRES GOVERNING AUTHORITIES TO BE WELL-INFORMED
REGARDING BUSINESS ETHICS PROGRAMS
FIRMS GREATEST DANGER IS NOT DISCOVERING
MISCONDUCT EARLY
BASIC ASSUMPTIONS OF CAPITALISM BEING DEBATED
FEARS IN THE WAKE OF GLOBAL RECESSION AND FINANCIAL
MELTDOWN
ORGANIZATIONAL AND GLOBAL
ETHICAL CULTURE
ETHICAL CULTURE DESCRIBES THE COMPONENT OF
CORPORATE CULTURE THAT CAPTURES THE VALUES AND
NORMS THAT AN ORGANIZATION DEFINES AS
APPROPRIATE CONDUCT
CREATES SHARED VALUES
GOAL IS TO:
MINIMIZE NEED FOR ENFORCED COMPLIANCE
MAXIMIZE UTILIZATION OF PRINCIPLES/ ETHICAL
REASONING
Source: Triangle Images
PREVALENCE OF MISCONDUCT BY
INDUSTRY
ETHICS CONTRIBUTES TO EMPLOYEE
COMMITMENT
COMES FROM EMPLOYEES WHO BELIEVE THEIR
FUTURE IS TIED TO THE ORGANIZATIONS
ARE WILLING TO MAKE PERSONAL SACRIFICES FOR
THE ORGANIZATION
THE MORE DEDICATION ON THE PART OF THE
COMPANY, THE GREATER THE EMPLOYEE DEDICATION
CONCERNS INCLUDE A SAFE WORK ENVIRONMENT,
COMPETITIVE SALARIES AND BENEFIT PACKAGES, AND
FULFILLMENT OF CONTRACTUAL OBLIGATIONS
ETHICS CONTRIBUTES TO INVESTOR
LOYALTY
COMPANIES PERCEIVED BY THEIR EMPLOYEES AS
HAVING A HIGH LEVEL OF HONESTY AND INTEGRITY
ARE MORE PROFITABLE THAN COMPANIES WITH A
LOW LEVEL OF HONESTY AND INTEGRITY
ETHICAL CLIMATES IN ORGANIZATIONS PROVIDE
PLATFORM FOR:
EFFICIENCY
PRODUCTIVITY
PROFITABILITY
ETHICS CONTRIBUTES TO CUSTOMER
SATISFACTION
CONSUMERS RESPOND POSITIVELY TO SOCIALLY
CONCERNED BUSINESSES
BEING GOOD CAN BE EXTREMELY PROFITABLE
CUSTOMER SATISFACTION DICTATES BUSINESS SUCCESS
A STRONG ORGANIZATIONAL ETHICAL CLIMATE
PLACES CUSTOMERS INTERESTS FIRST
RESEARCH SHOWS A STRONG RELATIONSHIP BETWEEN
ETHICAL BEHAVIOR AND CUSTOMER SATISFACTION
ETHICS CONTRIBUTES TO PROFITS
CORPORATE CONCERN FOR ETHICAL
CONDUCT IS BEING INTEGRATED WITH
STRATEGIC PLANNING
MAXIMIZE PROFITABILITY
CORPORATE CITIZENSHIP IS
POSITIVELY ASSOCIATED WITH:
RETURN ON INVESTMENT AND
ASSETS
SALES GROWTH
STUDIES HAVE FOUND A POSITIVE
RELATIONSHIP BETWEEN CITIZENSHIP
AND PERFORMANCE
Source: PhotoLink