Chapter 4 Key Terms Business 101

Ethics

A set of beliefs about right and wrong, good and bad

• related to individuals and their day-to-day decision making

• A country’s legal system provides a solid starting point for examining ethical standards

Universal ethical standards

Ethical norms that apply to all people across a broad spectrum of situations

• trustworthiness

• respect

• responsibility

• fairness

• caring

• citizenship

Mahatma Gandhi preached about the following seven sins

1. Politics without principles

2. Commerce without morality

3. Wealth without work

4. Education without character

5. Science without humanity

6. Pleasure without conscience

7. Worship without sacrifice

Business ethics

The application of right and wrong, good and bad, in a business setting

Ethical dilemma

A decision that involves a conflict of values; every potential course of action has some significant negative consequences

Ethics and the Individual: The Power of One

• Influenced by personal needs, family, culture, religion, and personality traits

• A recent study shows that business leaders who score high on personal empathy exhibit high levels of ethical leadership

Ethics and the Organization: It Takes a Village

Organizations influence the ethical conduct of employees

Creating and Maintaining an Ethical Organization

Elements of a strong culture
- Involves displaying ethics-related actions at all levels of an organization and accountability for those actions
Establishing an ethical culture
- Involves backing up ethical words with documented practices, processes, and procedures well known around the world

Code of ethics

A formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations

Steps for implementing a code of ethics

1. Get executive buy-in and commitment to follow through

2. Establish expectations for ethical behavior at all levels of the organization

3. Integrate ethics into mandatory staff training

4. Ensure that the ethics code is global and local in scope

5. Build and maintain a clear, trusted reporting structure for ethical concerns

6. Establish protection for whistle-blowers

7. Enforce the code of ethics

Stakeholders

any groups that have a stake - or a personal interest - in the performance and actions of an organization

Core stakeholders

Customers, employees, investors, and the broader community

Consumerism

A social movement that focuses on four key consumer rights:

1. the right to be safe

2. the right to be informed

3. the right to choose

4. the right to be heard

Planned obsolescence

The strategy of deliberately designing products to fail in order to shorten the time between purchases

Sarbanes-Oxley Act

Federal legislation passed in 2002 that sets higher ethical standards for public corporations and accounting firms

Corporate philanthropy

All business donations to nonprofit groups, including money, products, and employee time

Cause-related marketing

Marketing partnerships between businesses and nonprofit organizations, designed to spike sales for the company and raise money for the nonprofit

Corporate responsibility

Business contributions to the community through the actions of the business itself rather than donations of money and time

Sustainable development

doing business to meet the needs of the current generation, without harming the ability of future generations to meet their needs

Green marketing

Developing and promoting environmentally sound products and practices to gain a competitive edge

Social audit

A systematic evaluation of how well a firm is meeting its ethics and social responsibility