1-1Copyright © Houghton Mifflin Company Business Ethics Ethical Decision Making and Cases 4 th Edition Ferrell, Fraedrich, Ferrell Yousef Y. Alyazji (MBA)

1-2 Copyright © Houghton Mifflin Company1-2 Chapter 1... An Overview of Business Ethics

1-3Copyright © Houghton Mifflin Company Introduction Ethical decision is different than ordinary decision. In order for a business to survive, it must make a profit. However, if this profit is realized by misconduct, this means that the life of the organization will be short. Therefore, business must balance their desires for profits against the needs and desires of society. Maintaining this balance often requires compromises or tradeoffs. This balance requires developing rules to guide business in their efforts to earn profits in a way that don't harm individuals or society as a whole.

1-4Copyright © Houghton Mifflin Company Introduction ( Cont.) Business ethics “comprises principles and standards that guide behavior in the world of business”. Whether behavior is right or wrong, acceptable or unacceptable, it is determined by key stakeholders within the organization. Examples of Stakeholders are: investors, customers, interest groups, employees, legal system, community.

1-5Copyright © Houghton Mifflin Company Social Responsibility... Social responsibility is the obligation a business assumes toward society. Is designed to maximize the positive influence & minimize the negative effects on society. The idea became prominent during the 1960s in a response to changing social values. Many business have tried to determine what relationships, obligations and duties are appropriate between the business organization and society. There are four obligation a business assumes toward society: economic, legal, ethical, and philanthropic obligations.

1-6Copyright © Houghton Mifflin Company Obligations of social responsibility: a- Economic responsibilities: are to produce goods and services that society needs and wants at a price that can perpetuate the business and satisfy its obligations to investors. b- Legal responsibilities: are the laws that they must obey. c- Ethical responsibilities: are defined as behaviors or activities that are expected of business by society but are not codified in law. d- Philanthropic responsibilities: are those behaviors and activities that society desires and business values dictate. Social Responsibility...(Cont.)

1-7Copyright © Houghton Mifflin Company Social Responsibility...(Cont.) Social responsibility can be viewed as a contract with society, whereas business ethics relates to moral rules and principles that guide decision makers.

1-8Copyright © Houghton Mifflin Company The Development of Business Ethics The study of business ethics evolved through different stages: Before1960; from religious perspectives. 1960s: the rise of many social issues (Consumer’s Bill of Rights, Clean Water 1972, Toxic Substances 1976) 1970s: began to develop as an independent field of study. 1980s: companies started to establish ethics committees and social policy committees. 1990s: government started to encourage companies to develop ethics programs by providing guidelines and beyond: ethics are a part of core organizational values.

1-9Copyright © Houghton Mifflin Company Why study business ethics & social issues? in a National Business Ethics Survey, observed misconduct was higher in large organizations (37%) than in small organizations (27%) observed misconduct differs by employment sector: for-profit (31%); government (38%); nonprofit (29%)

1-10Copyright © Houghton Mifflin Company Why study business ethics & social issues?... (Cont.) There are difference between everyday ethical issues and those of business ones. Individual’s personal values and moral philosophies are only one factor in the ethical decision-making process. Being a good person may not be sufficient to handle the ethical issues that arise in a business organization. A high level of personal moral development may not prevent an individual from violating the law in an organization. Cultural diversity requires organizational ethics. Years of experience in a particular industry may be required to know what is acceptable.

1-11Copyright © Houghton Mifflin Company Why study business ethics & social issues? (Cont.) Recent incidents of unethical activity in business underscore the need for a better understanding of: - ethical issues and the approaches available to resolve them. - ethical decision-making process. - the factors that contribute to ethical and unethical decisions. - ways to promote ethical behavior within the organization. - how to cope with conflicts between your own personal values and those of the organizations.

1-12Copyright © Houghton Mifflin Company Common Unethical Acts... Bribery ( Giving/Receiving gifts, Kickbacks) falsifying documents deceptive advertising defective products employee theft questionable activities of on-line companies Protecting proprietary information Discrimination Protecting proprietary information Sexual harassment Proper use of assets Conflicts of interest

1-13Copyright © Houghton Mifflin Company Benefits of Business Ethics -Better ethical climate -Employee commitment and trust -Investor loyalty and trust -Customer satisfaction and trust -Long term profits (Savings as a consequence of cutting wasted resources)

1-14Copyright © Houghton Mifflin Company Federal Sentencing Guidelines for Organizations standards & procedures (code of ethics) high level supervision care in delegation of authority effective communication (training) systems to monitor, audit, & report consistent enforcement continuous improvement