The Importance of Business Ethics

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Ethical Decision Making for Business 8e
Fraedrich/ Ferrell/ Ferrell
CHAPTER 1

• The Importance of Business Ethics

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Chapter Objectives

• To explore conceptualizations of business ethics
  from an organizational perspective
• To examine the historical foundations and
  evolution of business ethics
• To provide evidence that ethical value systems
  support business performance
• To gain insight into the extent of ethical
  misconduct in the workplace and the pressures for
  unethical behavior

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Chapter Outline

• Why Study Business Ethics?
• The Development of Business Ethics
• Developing an Organizational and Global Ethical
  Culture
• The Benefits of Business Ethics
• Our Framework for Studying Business Ethics

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Business Ethics

• Comprises principles and standards that guide
  behavior in the world of business
• Right or wrong, acceptable or unacceptable
  behavior within the organization
• Determined by you and key stakeholders

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A Crisis in Business Ethics

• Consumer trust of businesses is declining
• No sector is exempt from ethical misconduct
• Stakeholders determine what is ethical/unethical
• Investors
• Employees
• Customers
• Interest groups
• Legal system
• Community

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Why Study Business Ethics?

• Reports of unethical behavior are on the rise
• Societys evaluation of right or wrong affects
  its ability to achieve its business goals
• Studying business ethics is a response to
  Sarbanes-Oxley, FSGO, and stakeholder demands for
  ethics initiatives
• Individual ethics alone is not sufficient
• Studying business ethics helps identify ethical
  issues to key stakeholders

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Before 1960 Ethics in Business

• A living wage
• Theologys domain
• Philosophys domain

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The 1960s The Rise of Social Issues in Business

• Consumers Bill of Rights
• Ralph Nader

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The 1970s Business Ethics as an Emerging Field

• Bribery
• Deceptive advertising
• Price collusion
• Product safety
• The environment

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The 1980s Consolidation

• Organized field of study
• Business ethics centers
• Business ethics courses
• Defense industry initiative
• Multinationals
• Self-regulation (Reagan/Bush)

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The 1990s Institutionalization of Business
Ethics

• Free trade
• Self-regulation
• Federal Sentencing Guidelines for Organizations
  (FSGO)
• More multinationals

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The Federal Sentencing Guidelines for
Organizations

• Standards and procedures capable of detecting and
  preventing misconduct
• High level oversight
• Care in delegation of authority
• Effective communication (training)
• Systems to monitor, audit, and report misconduct
• Consistent enforcement
• Continuous improvement

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The 21st Century A New Focus

• Continued issues with corporate non-compliance
• Sarbanes-Oxley Act (2002)
• FSGO reform (2004)
• Firms greatest danger is not discovering
  misconduct early
• Basic assumptions of capitalism being debated

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Organizational and Global Ethical Culture

• Ethical culture describes the component of
  corporate culture that captures the values and
  norms that an organization defines as appropriate
  conduct

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Benefits of Business Ethics

• Better ethical climate
• Employee commitment and trust
• Investor loyalty and trust
• Customer satisfaction and trust
• Long term profits