1. Today’s Environment for Business Ethics and Related Issues
CHAPTER 02
Today’s Environment for Business Ethics
and Related Issues

2. Business Ethics and Societal Issues
Business ethics—standards of business conduct and moral values.
Constituencies to which businesses are responsible:
Business Ethics
1. The standard of conduct and moral values governing actions and decisions in the work environment
2. Wide range of social issues, including how a decision will affect the environment, employees, customers and investors

3. The New Ethical Environment
High profile investigations and arrests in headlines.
Yet vast majority of businesses ethical.
New corporate officers charged with deterring wrongdoing and ensuring ethical standards.

4. The New Ethical Environment
Individuals make a difference
Development of individual ethics
Stages of Moral and Ethical Development
Current status of individual business ethics in U.S.
1. 30% of recently polled U.S. employees knew of or suspected unethical behavior in their companies
2. Lying, withholding information, abusing or intimidating employees, inaccurately reporting the amount of time worked, and discrimination were the main types of unethical behavior observed
3. U.S. organizations lose more than $400 billion to fraud
4. Technology seems to have expanded the range and impact of unethical behavior
5. Nearly every employee, regardless of industry or organizational level, faces ethical issues
Preconventional
1. Individuals primarily consider their own needs and desires in making decisions
2. Obey external rules to avoid punishment or receive rewards
Conventional
1. Individuals are aware of and act in response to their duty to others
2. Obligations to family, coworkers and organizations become important
3. The expectations of these groups influence decision making
Postconventional
1. The individual is able to move beyond mere self-interest and duty
2. Takes the larger needs to society into consideration

5. The New Ethical Environment
Common Business Ethical Challenges

6. On-the-Job Ethical Dilemmas
Conflict of Interest—situation in which a business decision may be influenced for personal gain.
Honesty and Integrity—telling the truth and adhering to deeply felt ethical principles in business decisions.
Conflict of Interest
1. When an action benefiting one person or group has the potential to harm another
2. Ethical ways to handle conflicts of interests can be avoiding them or disclosing them
Honesty and Integrity
1. Honesty – when a person can be counted on to tell the truth
2. Integrity – involves adhering to deeply felt ethical principles; includes doing what you say you are going to do
3. Violations are widespread

7. On-the-Job Ethical Dilemmas
Loyalty vs. Truth—businesspeople expect their employees to be loyal and truthful. But ethical conflicts may arise.
Whistleblowing—employee’s disclosure to government authorities or the media of illegal, immoral, or unethical practices in the organization.
Whistle-blower must weigh numerous issues
1. The more loyal approach may be considered going to a higher authority within the company
2. Going to outside authorities if significant damage or harm could result if action is not taken
3. What retaliation or retribution can occur

8. How Organizations Shape Ethical Conduct
Structure of an Ethical Environment

9. Ethical Awareness Ethical Education
Code of Conduct—a formal statement that defines how the organization expects and requires employees to resolve ethical questions.
Ethical Education
Codes of conduct cannot detail a solution for every ethical situation. So corporations provide training in ethical reasoning.
Ethical Awareness – the foundation of shaping ethical conduct in an organization
1. Helps employees identify ethical problems
2. Provides guidance as to how to respond

10. Ethical Action Ethical Leadership
Helping employees recognize and reason through ethical problems and turning them into ethical actions.
Ethical Leadership
Executives must demonstrate ethical behavior in their actions.
Ethical Action
1. Firms must also provide structures and approaches that allow decisions to become ethical actions
2. Individual, departmental and organizational goals can affect ethical behavior
3. Ethical action can be encouraged by providing support, such as hotlines to report wrong doing
Ethical Leadership
1. Executives must demonstrate ethical behavior, especially in extreme or emergency situation
2. All employees must be personally committed to the company’s core values and be willing to behave accordingly
3. Must charge and challenge every employee with the responsibility to be an ethical leader
4. Everyone should be aware of transgressions and be willing to defend the organization’s standards.

11. Acting Responsibly to Satisfy Society
Social Responsibility—management’s acceptance of the obligation to consider profit, consumer satisfaction, and societal well-being of equal value in evaluating the firm’s performance.
Social Audits—formal procedures that identify and evaluate all company activities relate to social issues such as conservation, employment practices, environmental protection, and philanthropy.
Social Responsibility
1. Recognition that business must be concerned with qualitative dimensions of consumers, employees, and society benefits, as well as the quantitative measures of sales and profits.
2. Historically, social performance was measured by the organization’s contribution to the overall economy and employment opportunities.
3. Today additional factors include:
a. providing equal employment opportunities
b. respecting cultural diversity of employees and customers
c. responding to environmental concerns
d. providing a safe, healthy workplace
e. producing safe, high-quality products

12. Acting Responsibly to Satisfy Society
Responsibilities of Business

13. Responsibilities to the General Public

14. Responsibilities to the General Public
Public Health Issues
Protecting the Environment
Recycling—reprocessing of used materials for reuse.
Green marketing—marketing strategy that promotes environmentally safe products and production methods.
Public Health Issues
1. What is the firm’s responsibilities regarding the production, distribution and marketing of inherently dangerous products, such as tobacco, alcohol and handguns?
2. Substance abuse is a serious issue and affects the workplace.
3. Particular concerns about the impact of certain products on vulnerable groups, such as children, teens, and senior citizens
4. Companies have had to train their employees about dealing with and working with colleagues and customers who may have AIDS
Protecting the Environment
1. Businesses consumer large amounts of energy, which increases use of fossil fuels, and results in increased releases of carbon dioxide and sulfur
2. Finding ways to minimize pollution and other environmental damage caused by a firm is increasingly important
3. Recycling – reprocessing used materials for reuse – sometimes provides raw materials that manufacturing needs, thus conserving world’s natural resources and reduced landfills
4. Consumers tend to favor industries that are environmentally friendly
a. thus encouraging green marketing – a strategy that promotes environmentally safe products and production methods
b. Environmental concerns are creating new technologies, which raises new issues, such as concerns about genetic engineering

15. FTC Guidelines for Environmental Claims in Green Marketing

16. Responsibilities to the General Public
Developing the Quality of the Workforce
Corporate Philanthropy—act of an organization giving something back to the communities in which it earns profits.
Developing the Quality of the Workforce
1. A country’s true wealth lies in its people, and to remain competitive, businesses have had to become increasingly responsible for enhancing the workforce
2. Businesses must encourage students to stay in school
3. Businesses must help women and diverse peoples to contribute fully to the economy – failing to do so wastes up to half the nation’s workforce
Corporate Philanthropy
1. Not-for-profits are crucial for enhancing the public good and improving communities, which thus affects businesses ability to be successful
2. Corporate philanthropy – including cash donations, in-kind services and equipment, and volunteers – is critical for the success of not-for-profits.
3. Corporate philanthropy can assist businesses by:
a. providing altruistic opportunities
b. increasing employee morale
c. enhancing the business’ image
d. improving customer relationships
e. making communities better places for businesses to exist
f. providing an opportunity to align company marketing with their charitable giving

17. Responsibilities to Customers
Consumerism—public demand that a business consider the wants and needs of its customers in making decisions.

18. Right to Be Safe Right to Be Informed
Consumers should feel assured that what they purchase will not harm them in normal use
Product Liability
Right to Be Informed
Consumers should have enough access to education and product information to make responsible buying decisions
The Right to Be Safe
1. Businesses have both moral and legal obligations to ensure the safe operation of their products
2. Product Liability – the responsibility of the manufacturer for injuries and damages caused by their products
3. Many companies undertake rigorous testing.
4. Many companies provide warnings.
5. When threats to customer safety do exist, immediate action by the company to correct the problem or recall the product is essential.
The Right to Be Informed
1. Consumers should have access to enough education and product information to make wise decisions
2. False advertising is a violation of the Wheeler-Act
3. FTC and other federal and state agencies enforce additional such regulations, prohibiting businesses from making misleading claims about performance

19. Wacky Warning Labels

20. The Right to Choose The Right to Be Heard
To select which goods and services they want and need to purchase
The Right to Be Heard
Should be able to express legitimate complaints to appropriate parties
The Right to Choose
1. Consumers have the right to determine which goods and services they need and want to purchase.
2. Socially responsible firms attempt to preserve this right, even if their own sales are diminished.
The Right to Be Heard
1. Consumers need to be able to express legitimate complaints to appropriate parties.
2. Many companies expend considerable effort to ensure full hearings of consumer concerns

21. Responsibilities to Employees
Workplace Safety.
Quality of Life Issues.
Ensuring Equal Opportunity in the Job.
Age Discrimination.
Sexual Harrassment and Sexism—inappropriate actions of a sexual nature in the workplace.
Workplace Safety
1. OSHA – The Occupational Safety and Health Administration – is the main federal force in setting health and safety standards at work.
2. Although many companies complain about the number of OSHA regulations, most companies find they also need to establish their own additional standards specific to their workplace
Quality of Life Issues
1. Balancing work and family is becoming an increasingly difficult task due to additional demands, such as caring for elderly parents and children, and running more complex households and schedules
2. Companies respond in a number of ways, including:
a. flexible work arrangements
b. subsidized or on-site child care
c. subsidized education
d. assistance with household tasks
3. The Family and Medical Leave Act of 1993 also assists families
a. requires companies of more than 50 employees to allow up to 12 weeks of leave
b. to care for children, aging parents or due to personal illness
c. However, since the leave is unpaid, many workers cannot utilize the benefit

22. Responsibilities to Investors and the Financial Community
Fundamental goal of any business is to make a profit.
Investors and the financial community demand that businesses behave ethically as well as legally.
Responsibilities to Investors and the Financial Community
1. Although the primary goal of business is to make a profit, investors and owners still want the company to behave ethically.
2. State and federal agencies protect investors from financial misdeeds
a. At federal level, the Securities and Exchange Commission investigates suspicions that publicly traded firms engaged in unethical or illegal behavior
b. Accounting practices cannot be faulty or inaccurately portray the financial resources or profits
3. Providing highly qualified managerial talent to run the company is another responsibility to investors

23. Ethics Across Cultures