Discussion Case: Enron

December 2, 2001 Enron declares bankruptcy

Disclosure of significant debts concealed by
complicated and fraudulent accounting practices
Top executives were involved and had received
millions of dollars
Arthur Anderson, a top five accounting firm, implicated
Employees prevented from selling stock; retirement
funds collapse
1

Are Ethics and Business Compatible?

Alan Wolfe, Professor of Political Science at Boston
College, Washington and Lee Law Review, 1993:
[The corporation is] a device through which human
beings, who have moral obligations, come together for the
purpose of ridding themselves of their capacity to exercise
their moral obligations.
mechanism of responsibility displacement
If chimpanzees could be trained to count, they would be just
as good, if not better, managers than human beings.

Read to Learn
Define ethics and business ethics.
Describe why ethical behavior is good for
business.
List the steps for dealing with an ethical
dilemma.

The Main Idea

Ethics are moral principles by which people
conduct themselves personally, socially, and
professionally. Business ethics are rules that guide
the behavior of a business and its employees.
Business ethics are generally based on moral
principles. In business, good ethics is beneficial for
long-term profitability and success.

Key Terms
ethics

moral principles by which people

conduct themselves personally,
socially, or professionally

business
ethics

rules based on moral principles about

how businesses and employees ought
to conduct themselves

Key Terms
code of
ethics

a set of guidelines for maintaining

ethics in the workplace

a shop or factory in which workers are

sweatshop employed for long hours at low wages
and under unhealthy conditions

Key Terms

conflict of
interest

a conflict between self-interest and

professional obligation

The Nature of Ethics

When you are guided
by ethics, you do not
cheat on a test or lie to
friends or family.

ethics
moral principles by which
people conduct
themselves personally,
socially, or professionally

The Nature of Ethics

Most businesses are
guided by business
ethics.
Different cultures,
businesses, and industries
have different ethical
standards

business ethics
rules based on moral
principles about how
businesses and
employees ought to
conduct themselves

Graphic Organizer
Business Ethics
Creating safe
products

Environmental
protection

Creating
jobs

Fair treatment
of
employees

Truthful about
financial
status

Cultural Etiquette
In Thailand, it is customary to exchange gifts
during a second business meeting.
In China, gift giving is considered a form of
bribery and is illegal.

Law and Ethics

In business, people
follow rules as well as
a code of ethics.

code of ethics
a set of guidelines for
maintaining ethics in the
workplace

Law and Ethics

A sweatshop is an
example of an
unethical practice
outlawed in the United
States.

sweatshop
a shop or factory in which
workers are employed for
long hours at low wages
and under unhealthy
conditions

Law and Ethics

The Occupational Safety and Health
Administration (OSHA) sets and enforces
work-related health and safety rules.

Ethics as Good Business

Unethical business practices include:
Lying
Offering merchandise known to be
substandard
Treating customers or employees unfairly

Ethics as Good Business

If a business violates government regulations,
the owner can be fined or go to jail.
If an employee violates a company or
professional code, the employee might be fired
or lose his or her license.

Ethics as Good Business

Unethical business practices can result in bad
word of mouth and result in lost sales.
Unethical behavior toward employees can
lead to legal action or a high rate of employees
quitting.

Conflicts of Interest
Conflict of interest
is a major ethical
question that is
generally not illegal.

conflict of interest
a conflict between selfinterest and professional
obligation

Graphic Organizer
Ethical 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?

Graphic Organizer
The Ethical Decision-Making Process
1. Identify the ethical dilemma.
2. Discover alternative actions.
3. Decide who might be affected.
4. List the probable effects of the alternatives.
5. Select the best alternative.

Figure 4.1

Ethical Observations by Employees

1. What is the difference between personal and

business ethics?
Personal ethics: moral principles that guide an
individual; business ethics: rules, based on
moral principles, used by a business.

2. Describe some of the ways that unethical

business practices can affect a business.
Customers will not patronize the business.
It is hard to retain employees. If the behavior is
illegal, the business might be fined.

3. What is the relationship between illegal

behaviors of business and unethical
behaviors of business?
Generally, illegal behaviors of business are also
considered unethical but there are some
unethical behaviors that are not illegal.

End of
Chapter 4

Business Ethics
and Social
Responsibility
Section 4.1

Business Ethics