Business Ethics

Instructor :Rabia Faisal

Text References:

A Stakeholder and issues approach

4 edition, by oseph !"! "eiss

Business and Society , by a#es $ost, Annes !T!

%a&rence '( edition!

)orporate strate*y ,$ublic policy, ethics ,by

"illia# !)! Frederick a#es !e! $ost ,+eith ,a-is!

Ethics
Accepted principles of right or wrong governing the
behavior of a person, the professions members, or an
organization.

Business ethics
Accepted principles of right or wrong
governing the conduct of business people.

Ethical strategy
A strategy that doesnt violate the accepted
principles
,EFI.ITI/.

a syste# of #oral principles applied

in the co##ercial &orld!

Business ethics pro-ide *uidelines for

acceptable beha-ior by or*ani0ations in
both their strate*y for#ulation and day1
to1day operations !

"eiss: Askin* &hat is 2ri*ht and

&ron*, *ood and bad, and har#ful
and bene3cial45
Business and *o-ern#ents operate in
chan*in* technolo*ical, le*al, econo#ic
,social and political en-iron#ents &ith
co#petin* stakeholders and po&er
clai#s!
A range of levels for understanding the
A range of levels for understanding the
business-government-society relationship
business-government-society relationship
Figure 1-1a
Broad conceptual level
Society/ulture
Economy/
Business
!olitics/
"overnment
A range of levels for understanding the
A range of levels for understanding the
business-government-society relationship
business-government-society relationship
Figure 1-1b
Intermediate level
Sta#eholders
$ndustry
in general%
industry
sectors
"overnments&
national, state,
local, foreign

A range of levels for understanding the
A range of levels for understanding the
business-government-society relationship
business-government-society relationship
Figure 1-1c
Practical, applied management level
!rimary and
secondary
sta#eholders
orporation
'
Specific
government
agencies and
actors
Stakeholders

The people, *roups, and

or*ani0ations that interact &ith the
corporation and ha-e an interest in
its perfor#ance are its stakeholders!

Those #ost closely and directly

in-ol-ed &ith a business are its
pri#ary stakeholders6

those &ho are indirectly connected

are its secondary stakeholders
Relations between a business firm and its
Relations between a business firm and its
primary stakeholders
primary stakeholders
Figure 1-2
Business
firm
()anagers*
+holesalers
(,etailers*
reditors
Suppliers
ustomers
Stoc#holders
Employees
(-nions*
Invest
capital
Lend
money
Sell
materials
Buy
products
Distribute
products
Sell
labor
Relations between a business firm and
Relations between a business firm and
some of its other (secondary) stakeholders
some of its other (secondary) stakeholders
Figure 1-3
Business
.irm
()anagers*
/he
"eneral
!ublic
Business
Support
"roups
.oreign
"overnments
Social
Activist
"roups
)edia
.ederal,
State
and 0ocal
"overnments
0ocal
ommunities
Regulation,
taxes
Friendly,
hostile
Social
demands
Image,
publicity
Advice,
research
Positive,
negative
opinion
obs,
environment
Secondary
Stakeholders
%ocal co##unity *roups
Special1interest *roups
)onsu#er *roups
En-iron#ental *roups
7edia
Society1at1lar*e
A#erican )i-il %iberties *roups
Should #ana*ers pay attention to the needs of these
*roups8 "hat priority should they ha-e8
Forces that shape the business and society
Forces that shape the business and society
relationship
relationship
Economic competition&
strategic and social challenges
Ethical e1pectations and
public values
hanging role of government
and public policy
Ecological and natural resource
concerns
/echnology and new #nowledge
Business and
its
Stakeholders
What is Business Ethics?
%aura .ash has de3ned business ethics
as the study of how personal moral
norms apply to the activities and goals of
commercial enterprise,5 as dealin* &ith
three basic areas of #ana*erial decision
#akin*

)hoices about &hat the la&s should be

and &hether to follo& the#!

)hoices about econo#ic and social

issues outside the do#ain of la&!

)hoices about the priority of self1

interest o-er the co#pany9s interests
Unethical Business
Practices of Employees
Sho&in* respect to those &ho act unethically
Abusi-e or inti#idatin* beha-ior
7isrepresentation of hours &orked
%yin*
"ithholdin* infor#ation
)ontext issues:
)o#panies in transition :#er*ers, do&nsi0in*;

<oun*er #ana*ers and e#ployees &ith lo&er

tenure in the or*ani0ation
Where the Most Unethical
Behavior Happens
'! =o-ern#ent
>! Sales
?! %a&
4! 7edia
@! Finance
A! 7edicine
B! Bankin*
C! 7anufacturin*
The Costs of oin!
Business Unethically

Billions of dollars each year in la&suits

and settle#ents

,eterioration of relationships

,a#a*e to reputation

,eclinin* e#ployee producti-ity,

creati-ity, and loyalty

IneDecti-e infor#ation Eo& throu*hout

the or*ani0ation

Absenteeis# and turno-er

Theft :est! FA(( billion annually;

"i!ure #$%& Business Ethics
'evels
(ey )uestions if "aced *ith
an Ethical ilemma

"hat are #y core -alues and beliefs8

"hat are the core -alues and beliefs of #y

or*ani0ation8

"hose -alues, beliefs, and interests #ay be at

risk in this decision8 "hy8

"ho &ill be har#ed or helped by #y decision or

by the decision of #y or*ani0ation8

Go& &ill #y o&n and #y or*ani0ation9s core

-alues and beliefs be aDected or chan*ed by this
decision8

Go& &ill I and #y or*ani0ation be aDected by

the decision8
)U+C( TEST ," -,U. ETH+CS BE'+E"S
/ns*er each 0uestion *ith your 1rst reaction$ Circle the num2er3 from # to 43 that 2est
represents your 2eliefs if # represents 5Completely /!ree6 and 4 represents
5Completely isa!ree$6

+ consider myself the type of person *ho does *hatever it takes to !et the 7o2 done $
# 8 % 4
Ethics should 2e tau!ht at home and in the family3 not in professional or hi!her
education$
# 8 % 4
+ 2elieve that the 5!olden rule6 is that the person *ho has the !old rules$
# 8 % 4
.ules are for people *ho don9t really *ant to make it to the top of a company$
# 8 % 4
/ctin! ethically at home and *ith friends is not the same as actin! ethically on the 7o2$
# 8 % 4
+ *ould do *hat is needed to promote my o*n career in a company3 short of committin!
a serious crime$
# 8 % 4
Cutthroat competition is part of !ettin! ahead in the 2usiness *orld$
# 8 % 4
'yin! is usually necessary to succeed in 2usiness$
# 8 % 4
+ *ould hide truthful information a2out someone or somethin! at *ork to save my 7o2$
# 8 % 4
+ consider money to 2e the most important reason for *orkin! at a 7o2 or in an
or!ani:ation$
# 8 % 4
/dd up all the points$

Total Score is <<<<<<<<<

4
Add up all the nu#bers you circled!
"hat &as your *rade8 '(8 '@8 ?(8 4(8
44444444444444444!!
The lo&er the score, the #ore Iuestionable are your ethical
principles re*ardin* 2usiness acti-ities!
'( is the lo&est 4 4( is the hi*hest!
)onsider &hy you ans&ered as you did!

Self Grading of Test
Self Grading of Test
Why Use Ethical .easonin! in
Business
7any a ti#es la& do not co-er all aspects of a
proble#! E*: the tobacco co#panies!
Free #arket and re*ulated #arket #echanis#s do
not eDecti-ely infor# o&ners and #ana*ers ho&
to respond to co#plex issues that ha-e far
reachin* ethical conseIuences !e*: Enron!
Ethical reasonin* is necessary because co#plex
#oral proble#s reIuire an intuiti-e or learned
understandin* and concern for fairness , Justice !
Sta!es of Moral
evelopment
%a&rence +ohlber* study: a fra#e&ork for e-aluatin* ethics trainin* is based on
three
le-els of #oral de-elop#ent!
There are three levels and six stages:
'evel #&$recon-entional le-el :Self1/rientation;
Sta*e':$unish#ent a-oidance: a-oidin* punish#ent by not breakin* rules !The
person has little a&areness of others needs!
Sta*e >:Re&ards seekin* ,actin* to recei-e re&ards for oneself !The person has
a&areness of others needs but not of ri*ht and &ron*!
'evel 8&)on-entional le-el : others orientation;!
Sta*e ?: =ood person: actin* ri*ht to be a *ood person and to be accepted by
fa#ily and friends ,not to ful3ll any #oral ideal!
Sta*e 4:%a& and order: actin* ri*ht to co#ply &ith la& and nor#s in societal
institutions!
'evel %& $ost con-entional or $rinciples le-el : Kni-ersal ,Gu#an kind,
/rientation;!
Sta*e @: Social contract: actin* ri*ht to reach consensus by due process and
a*ree#ent! The person is a&are of relati-ity of -alues and tolerates diDerin*
-ie&s!
Sta*e A: Kni-ersal ethical principles : actin* ri*ht accordin* to uni-ersal ,abstract
principles of Justice and ri*hts! The person reasons and uses conscience and
#oral rules to *uide actions!
The out co#e of +ohlber* study:
'! 7ana*ers in lar*e to #ediu# si0ed
3r#s reason at lo&er #oral sta*es !
>! 7ana*ers &ho are self e#ployed or
&ho &orked at s#all 3r#s adhere
closely to reason at sta*e 4!
Assi*n#ent L'

"hy is studyin* ethics i#portant

in business !)o##ent!