Chapter 4: Business Ethics and Social Responsibility

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Business Ethics

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The Nature of Ethics

• Ethics are moral principles by which people conduct themselves personally, socially, or professionally.
• Business ethics are rules based on moral principles about how businesses and employees ought to conduct themselves.
  • Most businesses are committed to providing safe products, creating jobs, treating their employees fairly, protecting the environment, and being truthful about their financial situation.
• Different cultures, businesses, and industries have different ethical standards.
• Ethics involve a system of moral principles that govern the appropriate conduct for a person or group.
• Laws involve rules for conduct that may be used to punish violators.
  • In business, people follow rules as well as a code of ethics.
• A code of ethics is a set of guidelines for maintaining ethics in the workplace.
• A sweatshop is a shop or factory in which workers are employed for long hours at low wages and under unhealthy conditions.
  • The Occupational Safety and Health Administration (OSHA) is a division of the U.S. Department of Labor.
  • OSHA sets and enforces work-related health and safety rules.

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Ethics as a Good Business

• A code of ethics can cover issues such as employee behavior and environmental safety.
• Unethical business practices include lying, offering merchandise known to be substandard, or treating customers or employees unfairly.
• The fact is that most businesses (especially small businesses) rely on repeat customers and word of mouth to get new customers.
• Treating employees unethically can also backfire.
• Another major ethical question that is generally not illegal relates to conflict of interest.
• A conflict of interest is a conflict between self-interest and professional obligation.
• When making business decisions, employees have an ethical obligation to act in the best interest of the company.

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Ethical Questions

• When you encounter an ethical decision and must choose a course of action, ask yourself these important questions:

  • Is it against the law? Does it violate company or professional policies?
  • Even if everyone is doing it, how would I feel if someone did this to me?
  • Am I sacrificing long-term benefits for short-term gains?

• Here are some steps to take if you find yourself in an ethical dilemma: \n 1. Identify the ethical dilemma. \n 2. Discover alternative actions. \n 3. Decide who might be affected. \n 4. List the probable effects of the alternatives.

  5. Select the best alternative.

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Social Responsibility

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Business and Social Responsibility

• Social responsibility is the duty to do what is best for the good of society.
• Businesses that follow ethical standards value integrity and honesty in employees.
• Customers are a business’s first responsibility.
  • Businesses should offer a good, safe product or service at a reasonable price.
• The Food and Drug Administration (FDA) is a federal government agency that protects consumers from dangerous or falsely advertised products.
• Some companies use unethical tactics to eliminate competition.
  • One of the most common means is to conspire with other companies to control the market for a product.
• Businesses have a social responsibility to provide employees with safe working conditions, equal treatment, and fair pay.
• Businesses have responsibilities not only to customers and employees but also to society.
• One of the biggest social issues facing businesses today is environmental responsibility.
• In the late l990s and the early part of the 21st century, a number of major corporations reportedly kept inaccurate accounting records.
  • Records showed that the firms had higher profits than they reported.
• The Sarbanes-Oxley Act mandates truthful reporting and makes the CEO more accountable for the actions of the financial managers of a firm.

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