Introduction To Ethics

Ethics in Business World

Ethics has risen to the top of the business agenda
because the risks associated with inappropriate behavior
have increased.
Ex: Collapse of big Organization (Unethical decision
making)
Ex: Unethical behaviour of Senior managers
Unethical behaviour increases due to
First, for many organizations, greater globalization has
created a much more complex work environment that
spans diverse cultures and societies, making it more
difficult to apply principles and codes of ethics
consistently
Second, in today’s difficult and uncertain economic
climate, organizations are extremely challenged to
maintain revenue and profits. Some organizations are
sorely tempted to resort to unethical behavior to maintain
profits.
Employees 🡪 Violate Internet Usage policies, Misuse of
company time, lying to outside stakeholders
employee misconduct
• Misuse of company time 33%
• Abusive behavior 21%
• Lying to employees 20%
• Company resource abuse 20%
• Violating company Internet-use policies 16%
• Discrimination 15%
• Conflicts of interest 15%
• Inappropriate social networking 14%
• Health or safety violations 13%
• Lying to outside stakeholders 12%
• Stealing 12%
• Falsifying time reports or hours worked 12%
Corporate Social Responsibility
Corporate social responsibility (CSR) is the concept that
an organization should act ethically by taking
responsibility for the impact of its actions on the
environment, the community, and the welfare of its
employees.
Setting CSR goals encourages an organization to
achieve higher moral and ethical standards.
Ex: CISCO
Supply chain sustainability is a component of CSR that
focuses on developing and maintaining a supply chain
that meets the needs of the present without
compromising the ability of future generations to meet
their needs.
Each organization must decide if CSR is a priority and, if
so, what its specific CSR goals are.
some CSR goals can lead to increased profits
Some CSR goal leads to a decrease in profits
Organizations have at least five good
reasons for pursuing CSR goals and for
promoting a work environment in which
employees are encouraged to act ethically
when making business decisions:
Gaining the goodwill of the community
Creating an organization that operates
consistent
Fostering good business practices
Protecting the organization and its
employees from legal action
Avoiding unfavorable publicity
 Gaining the goodwill of the community

organizations exist primarily to earn profits or provide

services to customers, they also have some fundamental
responsibilities to society
All successful organizations, including technology firms,
recognize that they must attract and maintain loyal
customers.
Philanthropy is one way in which an organization can
demonstrate its values in action and make a positive
connection with its stakeholders.
many organizations initiate or support socially
responsible activities, which may include
making contributions to charitable organizations and
nonprofit institutions
providing benefits for employees in excess of any legal
requirements
devoting organizational resources to initiatives that are
more socially desirable than profitable.
The goodwill that CSR activities generate can make it
easier for corporations to conduct their business.
For example, a corporation that pollutes the environment
may find that adverse publicity reduces sales,
 Creating an Organization That Operates
Consistently

Organizations define a consistent approach for dealing

with the needs of their stakeholder shareholders,
employees, customers, suppliers, and the community
Consistency ensures that employees know what is
expected of them
Consistency also means that shareholders, customers,
suppliers, and the community know what they can
expect of the organization
Each company’s value system is different, many share the
following values:
Operate with honesty and integrity, staying true to
organizational principles.
Operate according to standards of ethical conduct, in
words and action.
Treat colleagues, customers, and consumers with
respect.
Strive to be the best at what matters most to the
organization.
Make decisions based on facts and principles
 Fostering Good Business Practices
Companies that produce safe and effective products
avoid costly recalls and lawsuits.

Companies that provide excellent service

retain their customers instead of losing them to
competitors.
Companies that develop and maintain strong
employee relations enjoy lower turnover rates and
better employee morale.
Suppliers and other business partners often place a
priority on working with companies that operate in a
fair and ethical manner.
All these factors tend to increase revenue and profits
while decreasing expenses.
As a result, ethical companies tend to be more
profitable over the long term than unethical
companies
 Fostering Good Business Practices

Bad ethics can lead to bad business results.

Bad ethics can have
a negative impact on employees, many of whom may
develop negative attitudes if they perceive a difference
between their own values and those stated or implied by an
organization’s actions.
In such an environment, employees may suppress their
tendency to act in a manner that seems ethical to them and
instead act in a manner that will protect them against
anticipated punishment.
When such a discrepancy between employee and
organizational ethics occurs, it destroys employee
commitment to organizational goals and objectives, creates
low morale, fosters poor performance, erodes employee
involvement in organizational improvement initiatives, and
builds in difference to the organization’s needs
Protecting the Organization and Its Employees
from Legal Action

In a 1909 ruling the U.S. Supreme Court

established that an employer can be held
responsible for the acts of its employees even
if the employees act in a manner contrary to
corporate policy and their employer’s
directions. The principle established is called
respondeat superior, or “let the master
answer.”
Ex: top executives were punished for the acts
of several unidentified employee
 Avoiding Unfavorable Publicity
The public reputation of a company strongly
influences the
value of its stock
how consumers regard its products and services,
the degree of oversight it receives from government
agencies
the amount of support and cooperation it receives from its
business partners.
many organizations are motivated to build a
strong ethics program to avoid negative
publicity.
If an organization is perceived as operating
ethically, customers, business partners,
shareholders, consumer advocates, financial
institutions, and regulatory bodies will usually
regard it more favorably.