BUS 101 - Chapter 5: Ethical Decisions in Business

What is ethics?

Principles that determine what is right and wrong behavior.

What is an ethical dilemma?

A situation where a decision involves competing ethical concerns or difficult choices.

What is the Three-Question Test?

Ask:

Is it legal?

Would I want to be treated that way?

Would I want to hide it from others?

(Legal does not always mean ethical!!)

What is ethical relativism?

Right and wrong depend on cultural or societal norms.

What is ethical universalism?

Certain ethical principles apply to everyone, regardless of culture or background.

What is the Golden Rule?

Treat others as you want to be treated.

What is ethical utilitarianism?

Choose the action that creates the greatest overall balance of benefits over harms.

What does utilitarianism focus on?

Consequences/outcomes.

Why does ethical behavior matter to businesses?

It builds trust, reputation, customer loyalty, partnerships, and long-term success.

What is reciprocity?

The idea that a business exchange should benefit both sides.

How can unethical behavior hurt a company?

It can damage reputation, lose customers, hurt relationships, and create legal/financial problems.

What is the short-term vs. long-term ethical trade-off?

An unethical choice may produce short-term gains but create long-term damage.

What is a code of ethics/code of conduct?

Written guidelines explaining what ethical behavior is expected from employees.

Why do companies create codes of ethics?

To clarify expectations, reduce uncertainty, and guide employees' decisions.

What did the Enron example demonstrate?

A company can have a strong written ethics code but still behave unethically if its culture and incentives encourage misconduct.

What is CSR?

A company's responsibility for the social, environmental, and economic effects of its actions.

Does CSR go beyond following the law?

Yes. CSR goes beyond basic legal compliance and philanthropy.

What is the Triple Bottom Line?

People + Planet + Profits

Stakeholder vs. stockholder?

Stockholder = owns shares.

→ Stakeholder = affected by the business.

Why can stakeholders have conflicting interests?

A decision can benefit one group while hurting another.

Example: Layoffs may reduce costs and help stockholders but hurt employees.

What was Milton Friedman's view of business responsibility?

A business's main responsibility is to increase profits for stockholders while following the rules and avoiding deception/fraud.

What is the stakeholder view?

Businesses have responsibilities to all stakeholders, not just stockholders.

What is the sustainable business view?

Helping people and the planet can potentially create long-term business benefits and profits.