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1. The Importance of Business
Ethics
CHAPTER 1
Ethical Decision Making for Business 8e Fraedrich/ Ferrell/ Ferrell

2. 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

3. 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

4. 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

5. 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

6. Why Study Business Ethics?
•Reports of unethical behavior are on the rise
•Society’s 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

7. Before 1960: Ethics in Business
•A living wage
•Theology’s domain
•Philosophy’s domain

8. The 1960s: The Rise of Social Issues in
Business
•Consumer’s Bill of Rights
•Ralph Nader

9. The 1970s: Business Ethics as an
Emerging Field
•Bribery
•Deceptive advertising
•Price collusion
•Product safety
•The environment

10. The 1980s: Consolidation
•Organized field of study
•Business ethics centers
•Business ethics courses
•Defense industry initiative
•Multinationals
•Self-regulation (Reagan/Bush)

11. The 1990s: Institutionalization of
Business Ethics
•Free trade
•Self-regulation
•Federal Sentencing Guidelines for Organizations
(FSGO)
•More multinationals

12. 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

13. The 21st Century: A New Focus
•Continued issues with corporate non-compliance
•Sarbanes-Oxley Act (2002)
•FSGO reform (2004)
•Firm’s greatest danger is not discovering misconduct
early
•Basic assumptions of capitalism being debated

14. 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

15. Benefits of Business Ethics
•Better ethical climate
•Employee commitment and trust
•Investor loyalty and trust
•Customer satisfaction and trust
•Long term profits