Ethics- The standards of moral behavior. Behaviors that are accepted by society as right versus wrong.

Ethical
standards are set based on the code of conduct or the commonly accepted principles of behavior by society, firm,
industry and individual personal values.
Common factors of basic moral values: Integrity, Respect for human life, Self-control, honesty, courage, and self-
sacrifice are right. However, cheating, cowardice and cruelty are wrong.
Business Ethics: The principles and standards that define acceptable conduct in business.
Social Responsibility: A business’s obligation to maximize its positive impact and minimize its negative impact on
society.
Reasons for Not Reporting Observed Misconduct: The most common types of observed misconduct are lying,
withholding information, and abusive / intimidating behavior.
• Fear of not being considered a team player
• Didn’t believe corrective action would be taken
• Feared retribution or retaliation from supervisor or management
• No one else cares about business ethics so why should I
• Didn’t trust organization to keep report confidential
Ethical Behavior in business: In business, besides obeying all laws and regulations, practicing good ethics means
competing fairly and honestly, communicating truthfully, and not causing harm to others.
• competing fairly and honestly: Businesses are expected to compete fairly and honestly and not knowingly
deceive, intimidate, or misrepresent customers, competitors, clients, or employees. While most companies
compete within the boundaries of the law, some do knowingly break laws or take questionable steps in their zeal
to maximize profits and gain a competitive advantage.
• communicating truthfully: Today’s companies communicate with a wide variety of audiences. Communicating
truthfully is a simple concept: tell the truth, the whole truth, and nothing but the truth. However, sometimes
matters are not so clear. The timing and content of business messages are important.
• Not Harming others: Placing one’s personal welfare above the welfare of the organization can cause harm to
others. For instance, every year tens of thousands of people are the victims of investment scams. Insider trading
is illegal and is closely checked by the Securities and Exchange Commission (SEC). Another way that
businesspeople can harm others is by getting involved in a conflict of interest situation. A conflict of interest
exists when choosing a course of action will benefit one person’s interests at the expense of another or when an
individual chooses a course of action that advances his or her personal interests over those of his or her
employer.
Factors Influencing Ethical Behavior: Although a number of factors influence the ethical behavior of
businesspeople, four in particular appear to have the most impact: cultural differences, knowledge, organizational
behavior, and legislation.
• Cultural Differences: Globalization exposes businesspeople to a variety of different cultures and business
practices. What does it mean for a business to do the right thing in Thailand? In Africa? In Norway? What may
be considered unethical in the United States may be an accepted practice in another culture.
• Knowledge/communication Gap: In most cases, a well-informed person is in a position to make better
decisions and avoid ethical problems. Making decisions without all the facts or a clear understanding of the
consequences could harm employees, customers, the company, and other stakeholders.
• Corporate Behavior/relation: The foundation of an ethical business climate is ethical awareness.
Organizations that strongly enforce company codes of conduct and provide ethics training help employees
recognize and reason through ethical problems. Similarly, companies with strong ethical practices set a good
example for employees to follow. On the other hand, companies that commit unethical acts in the course of
doing business open the door for employees to follow suit.
• Reporting Systems: Another way companies support ethical behavior is by establishing a system for reporting
unethical or illegal actions at work, such as an ethics hotline. Companies that value ethics will try to correct
reported problems. If a serious problem exists, or in cases where management may be involved in the act, an
employee may choose to blow the whistle. Whistle-blowing is an employee’s disclosure to the media or
government authorities of illegal, unethical, or harmful practices by the company.
 Ethical Situations
Ethical Dilemma: An ethical dilemma is a situation in which one must choose between two conflicting but
arguably valid sides. All ethical dilemmas have a common theme: the conflict between the rights of two or more
important groups of people . Example: A company faces an ethical dilemma when it must decide whether to
continue operating a production facility that is suspected, but not proven, to be unsafe.
Ethical Lapse: Ethical Lapse type of situation is an ethical lapse, in which an individual makes a decision that is
clearly wrong, such as divulging trade secrets to a competitor. Example; A company makes an ethical lapse when it
continues to operate the facility even after the site has been proven unsafe.

Factors That Cause Workers To Act Top Five Unethical/Illegal Behaviors of Workers:
Unethically: • Cut corners in quality control
• Pressure to meet sales, budget or • Covered up incidents
profit goals • Abused or lied about sick days
• Lack of recognition • Lied to or deceived customers
• Personal financial worries • Put inappropriate pressure on others
• Balancing work & family
• Poor Communication
 Fostering Ethical Behavior
Leadership: Leadership may therefore be the most important lever in an ethical system designed to support ethical
conduct.
Codes of Conduct/ETHICS CODES: An increasing number of companies have adopted written codes of ethics. There
are 2 types of ethics codes, those are-
• Compliance-Based Ethics Code -- Emphasize preventing unlawful behavior by increasing control and by penalizing
wrongdoers.
• Integrity-Based Ethics Code -- Define the organization’s guiding values, create an environment that supports ethically
sound behavior and stress a shared accountability among employees.
SOCIAL AUDIT: A systematic evaluation of an organization’s progress toward implementing programs that are socially
responsible and responsive. Many consider workplace issues, the environment, product safety, community relations,
military weapons contracting, human rights and respect for the rights of local people.
Four Types of Social Audit Watchdogs:
• Socially conscious investors insist that a company extend its own high standards to its suppliers. Social responsibility
investing (SRI) is on the rise, with nearly $3 trillion invested in SRI funds in the United States already.
• Environmentalists apply pressure by naming companies that don't abide by environmentalists' standards After months
of protests coordinated by the San Francisco-based Rainforest Action Network JPMorgan Chase & Co. adopted
guidelines that restrict its lending and underwriting practices for industrial projects likely to have a negative impact on
the environment. RAN activists first go after an industry leader, like JPMorgan, then tackle smaller companies. `We
call it, 'Rank 'em and spank 'em," says RAN's executive director.
• Union officials hunt down violations and force companies to comply to avoid negative publicity .
• Customers make buying decisions based on their social conscience.
Whistle Blowing: Whistleblowers are the Insiders who report illegal or unethical behavior to top management in an
organization.
Steps to Improve Business Ethics:
1. Top Management: Top management must adopt and unconditionally support an explicit corporate code of
conduct.
2. Employees: Employees must understand that senior management expects all employees to act ethically.
3. Managers: Managers and others must be trained to consider the ethical implications of all business decisions.
4. Ethics Office: An ethics office must be set up with which employees can communicate anonymously.
Whistleblowers -- People who report illegal or unethical behavior.
5. Outsiders: Involve outsiders such as suppliers, subcontractors, distributors and customers.
6. Enforcement: The ethics code must be enforced.
INTERNATIONAL ETHICS:
Many businesses want socially responsible behavior from their international suppliers. The Joint Initiative on
Corporate Accountability and Workers’ Rights was designed to make creating a single set of labor standards and
inspecting factories easier. In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign
businesses or government leaders in order to get business.
Social Responsibility in Business: People with equally good intentions can arrive at different
conclusions based on different assumptions about the role of business in society. These perspectives can
be grouped into three general categories:
1. Maximize Profit: In the nineteenth and early twentieth centuries, the prevailing view among U.S.
industrialists was that business had only one responsibility: to make a profit. Caveat emptor was the
rule of the day—"Let the buyer beware." If you bought a product, you paid the price and took the
consequences. No consumer groups or government agencies would help you if the product was
defective or caused harm.
2. Provide Jobs and Pay Taxes: In the mid-twentieth century, Milton Friedman’s view of a
company’s responsibility toward society was representative and remained influential for many years:
“There is only one social responsibility of business,” said Friedman. “To use its resources and
engage in activities designed to increase its profits so long as it stays within the rules of the game,
which is to say, engages in open and free competition without deception or fraud.” As he saw it, the
only social responsibility of business was to provide jobs and pay taxes.
3. Balance Ethics and Profits: Most people in the USA now reject the notion that a corporation’s only
role is to make money. Therefore, investors and managers support a broader view of social
responsibility. They argue that a company has an obligation to society beyond the pursuit of profits
and that becoming more socially responsible can actually improve a company’s profits. An emerging
perspective is called dynamically balancing ethics and profits. This “third view” asserts that ethics
needs to be one of the cornerstones of business but that in the real world, profits and ethics are often
at odds. Therefore, managers need to evaluate every situation with the context of the organization’s
“moral personality.”
The Nature/ Four Dimensions of Social Responsibility: There are 4 dimension of social responsibility, those are-
1. Economic – earn profits
2. Legal – comply with the law
3. Ethical – not just “for profit” only
4. Voluntary & Philanthropic – promote human welfare and goodwill
Arguments for Social Responsibility:
1. Business helped to create many of the social problems that exist today, so it should play a significant role in
solving them, especially in the areas of pollution reduction and cleanup.
2. Businesses should be more responsible because they have the financial and technical resources to help solve
social problems.
3. As members of society, businesses should do their fair share to help others.
4. Socially responsible decision making by businesses can prevent increased government regulation.
5. Social responsibility is necessary to ensure economic survival: If businesses want educated and healthy
employees, customers with money to spend, and suppliers with quality goods and services in years to come,
they must take steps to help solve the social and environmental problems that exist today.
Arguments Against Social Responsibility:
1. It sidetracks managers from the primary goal of business–earning profits. Every money donated to social
causes or otherwise spent on society's problems is a money less for owners and investors.
2. Participation in social programs gives businesses greater power, perhaps at the expense of particular segments
of society.
3. Some people question whether business has the expertise needed to assess and make decisions about social
problems.
4. Many people believe that social problems are the responsibility of government agencies and officials, who can
be held accountable by voters.
Three Levels of Social Responsibility:
1. Responsibility to Employees: Working Conditions, Equal Employment Opportunity, Affirmative Action,
Diversity Training, Economic Security, Child Care/Parental Leave, Employee Dignity, Conflict of Interest.
2. Responsibility to Customers/Environment:
• Right To Safety: Right to Safety protects the consumer from products, manufacturing practices or services that
could prove detrimental to the health or life of the individual consumer.
• Right To Be Informed: Companies supply all of the information that would be necessary to make an intelligent
decision about purchasing a particular product.
• Right to Choose: Ensures that consumers be able to choose from a variety of products and services.
• Right To Be Heard: Means that government entities should hold the consumer's interests at heart when
implementing policies. Also, businesses should address customer concerns in the development and production
of goods and services.
3. Responsibility to Society, Investors, & Suppliers: Fairness, Honesty, Timely Action, Appropriate
Compensation, Philanthropy
 Classifying Business Decisions

Ethical Ethical Ethical

but and
Illegal Legal

Unethical Unethical
and but
Unethical Illegal Legal

Illegal Legal