Introduction to Business Ethics CHAPTER 1 Business Ethics Instructor: sihem smida

Chapter Objectives  To explore conceptualizations of business ethics from an organizational perspective  To examine the historical foundations and evolution of business ethics  To provide evidence that ethical value systems support business performance  To gain insight into the extent of ethical misconduct in the workplace and the pressures for unethical behavior

Chapter Outline  Why Study Business Ethics?  The Development of Business Ethics  Developing an Organizational and Global Ethical Culture  The Benefits of Business Ethics  Our Framework for Studying Business Ethics

Introduction  Business ethics is a branch of ethics which prescribes standards of how the business is to be carried out.  Guidelines to stakeholders  The responsibility of the managers and employees  The application of ethical judgments to business activities.

WHAT IS ETHICAL BEHAVIOUR?  Business ethics is a specialized study of right and wrong applied to business policies, institutions, and behaviors.  The advantages of ethical behavior include: 1.Cultivates strong teamwork and productivity. 2.Supports employee growth and meaning. 3.Helps to ensure that policies are legal. 4.Helps to avoid criminal acts of “omission” 5.Promotes a strong public image. 6.Improves trust in relationships. 7.Legitimizes managerial actions.

Relationship between business and ethics  Businesses that exhibit and promote strong corporate codes of ethics are more prosperous in the long run  Enhances a company's reputation  The highly competitive environment in today's global economy puts pressures on company leaders to remain profitable

Why Study Business Ethics? Global financial crisis created diminished stakeholder trust  Reports of unethical behavior are on the rise  Society’s evaluation of right or wrong affects its ability to achieve its business goals  Studying business ethics is a response to stakeholder demands for ethics initiatives  Individual ethics alone is not sufficient  Studying business ethics helps identify ethical issues to key stakeholders

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

Code of ethics  Also called code of conduct and ethical code.  A code of ethics will start by setting out the values that underpin the code and will describe a company's obligation to its stakeholders.  The code is publicly available and addressed to anyone with an interest in the company's activities and the way it does business.  It will include details of how the company plans to implement its values and vision, as well as guidance to staff on ethical standards and how to achieve them.

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

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

Ethics Contributes to Employee Commitment  Comes from employees who believe their future is tied to the organization’s  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