CHAPTER 2
Business Ethics
and
Social Responsibility
Quotes of the Day
“The one and only social responsibility of
business is to increase its profits.”
Milton Friedman (b. 1912),
Nobel laureate in economics
“The business of business is serving society,
not just making money.”
Dayton Hudson corporate constitution
Ethics
Ethics is the study of how
people ought to act.
• Law and ethics may not always agree...
• Sometimes it is ethical to commit an illegal act...
• And some legal acts are unethical!
4
Law and Morality
Actions may be legal, but immoral to some
people.
Actions may be required by both
moral standards and the law.
LAW
Actions may be moral, but not required by law.
MORALITY
5
Law and Morality
Actions
The casemay be legal,(fetus);
of abortion but immoral to some
people.
or voluntary euthanasia
Actions
Drunk may is
driving beboth
required by both
immoral and illegal.
moral standards and the law.
LAW
Actions amay
Helping hurtbeperson
moral,isbut not required
required by law.
by moral
standards, but is not mandated by the law.
MORALITY
Debate
Abortion
Supporting side Opposing side
Nature of Business Ethics
● Ethics is the study of right and wrong behavior in
the world of business; the fairness, rightness or
justness of a course of conduct.
● In business, ethical decisions are the application
of moral and ethical principles to the marketplace
and workplace.
Defining Business Ethics
● Morals are universal guidelines or “revealed”
truths. Ethics is a reasoned set of principals of
conduct derived from morals.
● Ethical Reasoning - the process by which an
individual links her moral and ethical convictions
to the choice of actions to be taken in a particular
situation.
Why Bother With Ethics?
There is little evidence that ethical behavior increases
profits or that unethical behavior decreases profits…
so why bother?
iPhone 11 and earlier
iPhone 12: No charger and
headphone in box
Apple in 2030 be like:
This is iPhone 20, we didn’t include
a phone because we care about
the environment and we assume
you already have a iPhone
Why Bother With Ethics?
There is little evidence that ethical behavior increases
profits or that unethical behavior decreases profits…
so why bother?
• Society as a whole benefits by encouraging
economic competition; no one wants to compete
with unfair competitors.
• People feel better when they behave ethically.
• Unethical behavior can be costly, if there is public
outrage leading to a boycott.
Ethical Decision Making
● A sound ethical decision-making model will include
consideration of:
○ The legality of the contemplated action.
○ The ethicality of the contemplated action, as
determined by reference to the relevant code of ethics,
established ethical priorities, and public opinion.
What is Ethical Behavior?
Questions to Ensure Ethical Behavior:
● What are the facts?
● What are the critical issues?
● Who are the stakeholders?
● What are the alternatives?
● What are the implications of each choice?
○ Are the alternatives legal?
○ Do they “look bad?”
○ What are the consequences of this choice?
○ Does this action violate important values?
● Is more than one alternative right?
Corporate Compliance
● A number of contexts, within the employer-
employee relationship, are fraught with
ethical considerations, such as:
○ Having a system in place to detect, prevent,
eliminate, and punish behavior of a harassing
nature toward employees.
○ Avoiding wrongful discharge, either actual or
constructive.
○ Adhering to ethical principles during corporate
restructuring and downsizing.
Responsibility To Society
p To customers
• Is a business responsible if its decisions create a
financial hardship for someone else? What if a
decision leaves someone homeless?
p To employees
• Should employers be required to treat all employees
the same in regard to benefits?
p To shareholders
• Questions are often raised about uses of a company’s
profits -- distributed to shareholders, raising
executives’ salaries, improving business?
• Should a company be allowed to intentionally lower
profits to improve in other areas?
Other Responsibilities
p To -- and in -- foreign countries
• Companies with operations in foreign countries are
often criticized for deplorable working conditions
and low wages.
• Response to these criticisms is often that even low-
wage jobs are better than destitution and that these
jobs are the beginnings of economic growth.
p Employees’ responsibility to company
• Should employees report unethical behavior among
co-workers? Should promotion decisions be made
based on friendships?
• These questions show the difficult choices that
have to be made every day in the work place.
The Best Insurance
• Even employees who are ethical in their
personal lives may find it difficult to
uphold their standard at work if those
around them behave differently
• The surest way to infuse ethics throughout
an organization is for top executives to
behave ethically themselves.
“Ethical behavior offers significant
advantages: society as a whole benefits;
executives who behave ethically have
happier, more fulfilled lives; and unethical
behavior can destroy a company.”
Case study
Apple –
iPhone Slowdown Lawsuit
