623386711-CH01.pptx

business ethics

1. The Importance of Business Ethics Chapter 1 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2. Learning Objectives By the end of this chapter, you should be able to: Explore conceptualizations of business ethics from an organizational perspective Examine the historical foundations and evolution of business ethics Provide evidence that ethical value systems support business performance Describe the extent of ethical misconduct in the workplace and the pressures for unethical behavior

3. Business Ethics Defined 1-1 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

4. Business Ethics Defined 1 of 2 Morals – A person’s personal philosophies about what is right or wrong Business ethics – Comprises organizational principles, values, and norms that may originate from individuals, organizational statements, or from the legal system that primarily guide individual and group behavior in business Principles – Specific and pervasive boundaries for behavior that should not be violated These often become the basis for rules (human rights, freedom of speech). Values – Enduring beliefs and ideals that are socially enforced

5. Business Ethics Defined 2 of 2 Ethics – Behavior or decisions made within a group’s values or morals Right or wrong behavior is defined by the group. Within corporate culture there are rules and regulations that determine right/wrong.

6. Why Study Business Ethics? 1-2 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

7. Why Study Business Ethics? 1 of 4 A Crisis in Business Ethics Business ethics has become a major concern. Workplace integrity – The pressure to compromise organizational standards, observed misconduct, reporting of misconduct when observed, and retaliation against reports

8. TABLE 1-1 Observed Misconduct in the U.S. Workforce Response Percentage Observed misconduct 49% Abusive behavior 22% Lying to employees and external stakeholders 25% Conflicts of interest 23% Health violations 22% Pressure to compromise standards 30% Report observed misconduct 81% Experience retaliation for reporting 79%

9. Why Study Business Ethics? 2 of 4 Specific Issues There are a number of ethical issues that must be addressed to prevent misconduct. Ethics plays an important role in the public sector as well. Every organization has the potential for unethical behavior. Most decisions are judged as right or wrong, ethical or unethical. Legislation usually follows.

10. Why Study Business Ethics? 3 of 4 The Reasons for Studying Business Ethics Business ethics is more than an extension of an individual’s personal values. Professionals must deal with individuals’ personal moral dilemmas. Moral dilemma – Two or more morals in conflict with one another Value dilemma – Two or more beliefs/ideals in conflict with one another Being a good person may not be sufficient to handle ethical issues in business.

11. Why Study Business Ethics? 4 of 4 Studying business ethics will help you: Identify ethical issues when they arise Recognize approaches for resolving ethical issues Cope with conflicts between your own personal values and those of the organization in which you work Gain knowledge to make more ethical business decisions

12. The Development of Business Ethics 1-3 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

13. The Development of Business Ethics 1 of 9 Before 1960: Ethics in Business Capitalism dictated business practices. 1920s: Provide a living wage—income sufficient for education, recreation, health, and retirement 1930s: The New Deal (President Franklin D. Roosevelt)—blamed business as the cause for U.S. problems 1950s: The Fair Deal (President Harry S. Truman)—defined such matters as environmental responsibility as ethical issues that businesses had to address

14. The Development of Business Ethics 2 of 9 The 1960s: The Rise of Social Issues in Business Antibusiness trend; decay of inner cities; growth of ecological problems President John F. Kennedy: Consumers’ Bill of Rights Right to safety Right to be informed Right to choose Right to be heard President Lyndon B. Johnson: The “Great Society” Extended national capitalism with the U.S. government’s responsibility to provide all citizens with some degree of economic stability, equality, and social justice

15. The Development of Business Ethics 3 of 9 The 1970s: Business Ethics as an Emerging Field Business ethics became a common expression. Corporate social responsibility – An organization’s obligation to maximize its positive impact on stakeholders and minimize its negative impact Academic researchers sought to identify ethical issues and describe how businesspeople might choose to act in particular situations. Limited efforts were made to describe how the ethical decision-making process in business worked and to identify the many variables that influenced the process.

16. The Development of Business Ethics 4 of 9 The 1980s: Business Ethics Reaches Maturity Centers for business ethics provided publications, courses, conferences, and seminars. Stakeholder theory was developed.

17. The Development of Business Ethics 5 of 9 Defense Industry Initiative on Business Ethics and Conduct – An organization developed to guide corporate support for ethical conduct Codes of conduct must be understandable and cover substantive areas in detail. Members are expected to provide ethics training and continuous support for employees. Defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution. Companies must perform extensive internal audits and develop effective internal reporting and voluntary disclosure plans. Members must preserve the integrity of the defense industry. Members must adopt a philosophy of public accountability. Reagan–Bush Era: Belief that self-regulation rather than regulation by government was in the public’s interest

18. The Development of Business Ethics 6 of 9 The 1990s: Institutionalization of Business Ethics President Bill Clinton: Continued to support self-regulation and free trade Government action with health-related social issues such as teenage smoking Federal Sentencing Guidelines for Organizations (FSGO) – Guidelines that codified into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs

19. The Development of Business Ethics 7 of 9 The 2000s: Twenty-First Century Business Ethics President George W. Bush: Misconduct at Enron, WorldCom, Halliburton, and Arthur Andersen caused the government and the public to look for new ways to encourage ethical behavior. Sarbanes–Oxley Act – The most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934, which made securities fraud a criminal offense and stiffened penalties for corporate fraud The Sarbanes–Oxley Act and the FSGO institutionalized the need to discover and address ethical and legal risk. President Barack Obama: Inherited the great global financial recession

20. The Development of Business Ethics 8 of 9 The 2010s: New Challenges in Business Ethics Dodd–Frank Wall Street Reform and Consumer Protection Act – Legislation that addressed some of the issues related to the financial crisis and recession and designed to make the financial services industry more ethical and responsible Enforcement of the FCPA, created in the 70s, became a top priority for the SEC; outside of the U.S., the United Kingdom instituted the Bribery Act. Distrust of corporate America coincided with influx of Millennials into workforce Tension between increasing transparency and protecting privacy emerged President Donald Trump: Decreased environmental and financial regulations; questioned sustainability

21. The Development of Business Ethics 9 of 9 The 2020s and Beyond Environmental social governance (ESG) – A framework for evaluation of firm performance in the areas of environmental, social, and governance Sustainability issues are causing firms and government to find solutions. There is increasing demand for responsible ethical conduct to be a part of organizational culture. Future ethical issues will relate to artificial intelligence (AI) and big data.

22. Developing Organizational and Global Ethical Cultures 1-4 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

23. Developing Organizational and Global Ethical Cultures 1 of 2 Ethics and compliance are designed to establish appropriate conduct and core values. Ethical culture – Acceptable behavior as defined by the company and industry Reflects the integrity of decisions made Is a function of many factors, including: Corporate policies Top management’s leadership on ethical issues The influence of coworkers The opportunity for unethical behavior

24. Developing Organizational and Global Ethical Cultures 2 of 2 Globally, businesses are working closely together to establish standards of acceptable behavior. ISO 19600 is a global compliance management standard that addresses risks, legal requirements, and stakeholder needs. Many companies demonstrate their commitment toward acceptable conduct by adopting globally recognized principles. Global compact – Set of 10 principles concerning human rights, labor, the environment, and anti-corruption; the purpose is to create openness and alignment among business, government, society, labor, and the United Nations

25. The Benefits of Business Ethics 1-5 O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

26. FIGURE 1-2 The Role of Organizational Ethics in Performance

27. The Benefit of Business Ethics 1 of 4 Ethics Contributes to Employee Commitment There is a willingness to sacrifice for the organization. It increases group creativity and job satisfaction and decreases turnover. There is less pressure to compromise ethical standards. It leads to a greater absence of misconduct. Strong community involvement increases loyalty and positive self identity.

28. The Benefit of Business Ethics 2 of 4 Ethics Contributes to Investor Loyalty Ethics provides a foundation for efficiency, productivity, and profits. Negative publicity, lawsuits, and fines can lower stock prices, diminish customer loyalty, and threaten a company’s long-term viability. The demand for socially responsible investing is increasing.

29. The Benefit of Business Ethics 3 of 4 Ethics Contributes to Customer Satisfaction High levels of perceived corporate misconduct decrease customer trust. Companies viewed as socially responsible increase customer trust and satisfaction. Consumer respondents stated they would pay more for products from companies that give back to society in a socially responsible and sustainable manner.

30. The Benefit of Business Ethics 4 of 4 Ethics Contributes to Profits Being ethical leads to better business performance. Corporate concern for ethical conduct is becoming a part of strategic planning toward obtaining the outcome of higher profitability. Business ethics is becoming more than just a function of compliance; it’s becoming an integral part of management’s efforts to achieve competitive advantage.