Chapter 1 Importance of Business Ethics_094744.pdf

Business ethics slide

10. THE DEVELOPMENT OF BUSINESS ETHICS
BEFORE 1960: ETHICS IN BUSINESS
•Business ethics before 1960 was not formalized. There was no formal code of
conduct or widely accepted ethical framework for businesses.
•It was primarily based on traditional moral and religious principles
•Ethical consideration were mostly subordinated to economic interests

11. THE DEVELOPMENT OF BUSINESS ETHICS
THE 1960s: The rise of social issues in business
•The 1960s marked the beginning of the modern era of business ethics
•This period was influenced by social and political changes
•Businesses started recognizing their social responsibilities
•Companies became more aware of issues like civil rights, equal employment opportunities,
and environmental concerns

12. THE DEVELOPMENT OF BUSINESS ETHICS
THE 1970s: Business Ethics as an emerging field
•Business ethics began to develop as an independent field of study in the 1970s

•Academics and practitioners began to explore ethical issues and attempting to
understand how individuals and organizations make ethical decisions.

•These experts began to teach and write about the idea of corporate social
responsibility, an organization’s obligation to maximize its positive impact on
stakeholders and minimize its negative impact.

13. THE DEVELOPMENT OF BUSINESS ETHICS
THE 1980s: Consolidation
•In the 1980s, centers of business ethics provided publications, courses, conferences, and
seminars, and many companies established ethics committees and social policy
committees.

14. THE DEVELOPMENT OF BUSINESS ETHICS
THE 1990s: Institutionalization of business ethics
•Less government regulation and an increase in businesses with international operations
raised new ethical issues.
•In the 1990s, government continued to support self-regulation.
•The fsgo sets the tone for organizational ethics programs by providing incentives for
companies to take action to prevent organizational misconduct.

15. THE DEVELOPMENT OF BUSINESS ETHICS
THE TWENTY-FIRST CENTURY OF BUSINESS ETHICS
•The twenty-first century ushered in a new set of ethics scandals, suggesting many
companies had not embraced the public’s desire for higher ethical standards.

•The Sarbanes–Oxley act stiffened penalties for corporate fraud and established an
accounting oversight board.

•The Dodd–Frank wall street reform and consumer protection act was later passed to
reform the financial system.

16. THE BENEFITS OF BUSINESS ETHICS
1.ETHICS CONTRIBUTE TO EMPLOYEES’ COMMITMENT
•Employee commitment comes from workers who believe their future is tied to that of
the organization and from a willingness to make personal sacrifices for the
organization
•The more a company is dedicated to taking care of its employees, the more likely
the employees will take care of the organization.
•An ethical culture for employees include the absence of abusive behavior, a safe
work environment, competitive salaries, and the fulfillment of all obligations toward
employees.
•An ethics and compliance program can support values and appropriate conduct.
•Social programs improving the ethical culture range from work–family programs to
stock ownership plans to community service.

17. THE BENEFITS OF BUSINESS ETHICS
1.… ETHICS CONTRIBUTE TO EMPLOYEES’ COMMITMENT

•Because employees spend a considerable number of their waking hours at
work, a commitment by an organization to goodwill and respect for its
employees usually increases the employees’ loyalty to the organization and
their support of its objectives.

•Employees’ perceptions that their firm has an ethical culture lead to
performance enhancing outcomes within the organization.

18. THE BENEFITS OF BUSINESS ETHICS
1.… ETHICS CONTRIBUTE TO EMPLOYEES’ COMMITMENT

•A corporate culture that integrates strong ethical values and positive
business practices has been found to increase group creativity and job
satisfaction and decrease turnover

•An ethical culture also result in trusting relationship between top
management and employees and among employees, which ultimately leads
to organizational performance.

19. THE BENEFITS OF BUSINESS ETHICS
2. ETHICS CONTRIBUTE TO INVESTORS LOYALTY
•Ethical conduct results in shareholder loyalty and contributes to success
•Investors today are increasingly concerned about the ethics and social
responsibility that creates the reputation of companies in which they
invest
•Investors also recognize that an ethical culture provides a foundation
for efficiency, productivity, and profits. They also know that negative
publicity, lawsuits, and fines can lower stock prices, diminish customer
loyalty, and threaten a company’s long-term existence.

20. THE BENEFITS OF BUSINESS ETHICS
2. …ETHICS CONTRIBUTE TO INVESTORS LOYALTY

•Investors look at the bottom line for profits or the potential for
increased stock prices or dividends, but they also look for any
potential flaws in the company’s performance, conduct, and financial
reports.

•Therefore, gaining investors’ trust and confidence is vital to sustaining
the financial stability of the firm.

21. THE BENEFITS OF BUSINESS ETHICS
3. ETHICS CONTRIBUTE TO CUSTOMER SATISFACTION
•Customer satisfaction is one of the most important factors in a successful
business strategy.
•High levels of perceived corporate misconduct decreases customer trust.
•Companies viewed as socially responsible increase customer trust and
satisfaction
•Trust is essential to a good long-term relationship between a business and
consumers. The perceived ethicality of a firm is positively related to brand
trust, emotional identification with the brand, and brand loyalty

22. THE BENEFITS OF BUSINESS ETHICS
3. …ETHICS CONTRIBUTE TO CUSTOMER SATISFACTION

•When an organization has a strong ethical environment, it usually
focuses on the core value of placing customers’ interests first.
•Employees working in an ethical environment support and contribute
to the process of understanding customers’ demands and concerns.

23. THE BENEFITS OF BUSINESS ETHICS
4. ETHICS CONTRIBUTE TO PROFITS
•It is important for a company to have a sound financial position to
conduct ethical and socially responsible business.
•Research shows that building an ethical reputation among employees,
customers, and the general public provides benefits such as increased
efficiency in daily operations, greater employee commitment,
increased investor willingness to entrust funds, improved customer trust
and satisfaction, and better financial performance.
•The reputation of a company has a major effect on its relationships
with employees, investors, customers, and many other parties, and thus
has the potential to affect its profits

24. ASSESSMENT
1. BUSINESS ETHICS FOCUSES MOSTLY ON PERSONAL ETHICAL ISSUES.
YES NO
2. BUSINESS ETHICS DEALS WITH RIGHT OR WRONG BEHAVIOR WITHIN A PARTICULAR ORGANIZATION.

YES NO
3. AN ETHICAL CULTURE IS BASED UPON THE NORMS AND VALUES OF THE COMPANY. YES NO
4. BUSINESS ETHICS CONTRIBUTES TO INVESTOR LOYALTY.
YES NO
5. THE TREND IS AWAY FROM CULTURAL OR ETHICALLY BASED INITIATIVES TO LEGAL INITIATIVES IN
ORGANIZATIONS.
YES NO
6. INVESTMENTS IN BUSINESS ETHICS DO NOT SUPPORT THE BOTTOM LINE. YES
NO