Chapter 3
Business Ethics, Social Responsibility
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Business Ethics
“doing well by doing good”
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Why Study Business Ethics
• Perhaps when business people ask why they should
be ethical, they have a different question in mind:
what is the motivation for being good? Is their
something in it for them?
• There is no denying that one can often do well by
doing good.
• An ethical company is more likely to build a good
reputation, which is more likely to bring financial
rewards over the long term.
What is Ethics?
• Ethics: defined as the set of moral principles
that distinguish what is right from what is wrong.
Arguments Supporting Business Ethics
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Ethics applies to all human activities.
Business cannot survive without ethics.
Ethics is consistent with profit seeking.
Customers, employees, and people in general care
about ethics.
• Studies suggest ethics does not detract from profits
and seems to contribute to profits.
Why Behave Ethically?
• Managers should behave ethically to avoid
harming others.
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Managers are responsible for protecting and
nurturing resources in their charge.
• Unethical managers run the risk for loss of
reputation.
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This is a valuable asset to any manager!
Reputation is critical to long term management
success.
All stakeholders are judged by reputation.
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Stakeholders and Ethics
Stakeholders:
• A person, group, or organization that has direct or
indirect stake in an organization because it can affect or
be affected by the organization's actions, and policies.
• Key stakeholders in a business organization include
creditors, customers, directors, employees, owners
(shareholders), suppliers, and the community from which
the business draws its resources.
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Types of Company Stakeholders
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Sources of Ethics
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1. Social Ethics
• Social Ethics
– Standards that direct how members of a society
should deal with one another in matters involving
issues such as fairness, justice, poverty, and the
rights of the individual
• People behave ethically because they have
certain values, beliefs, and norms
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2. Occupational Ethics
• Occupational Ethics
– Standards that direct how members of a
profession, trade should conduct themselves
when performing work-related activities
– Medical & legal ethics
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3. Individual Ethics
• Individual Ethics
– Personal standards and values that determine
how people view their responsibilities to other
people and groups
– How they should act in situations when their own
self-interests are at stake
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4. Organizational Ethics
• Organizational Ethics
– Guiding practices and beliefs through which a
particular company and its managers view their
responsibility toward their stakeholders
– Top managers play a crucial role in determining a
company’s ethics
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Company Practices and Business Ethics
• Encouraging Ethical Behavior Involves:
A company can encourage ethical behavior in a number of
ways. These include:
– Adopting written codes of conduct
– Having top management support of ethical
standards
– Instituting ethics programs
– Establishing ethical hotlines for reporting and
discussing unethical behavior and activities
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Code of Ethics
• Code of ethics: is a written document that clearly
states what acceptable and unacceptable behaviors
are for all of the employees in the organization.
• Employees working under the code of ethics have a
standard by which they can judge their own
behavior and that of others within the organization.
• Worldwide, McDonald's employees follow a
standard ethical code.
Corporate Social Responsibility
• Corporate social responsibility refers to a
corporation’s responsibilities or obligations
toward society.
Managers Response to Social Responsibility
There are many ways managers respond to this duty:
1. Obstructionist response (‫(ممانع‬: managers choose not to be
socially responsible.
– Managers behave illegally and unethically.
– They hide and cover-up problems.
2. Defensive response )‫) مدافع‬: managers stay within the law
but make no attempt to exercise additional social
responsibility.
– Put shareholder interest above all other stakeholders.
– Managers say society should make laws if change is
needed.
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3. Accommodative response:(‫ )متكييف‬managers realize the
need for social responsibility.
– Try to balance the interests of all stakeholders.
4. Positive response: managers actively support social
responsibility.
– Go out of their way to learn about and help
stakeholders.
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Levels of Responsibility
Obstruction
response
Low
Defensive
response
Accommodative
response
Social responsibility
Proactive
response
High
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