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Chapter 2. Business Ethics and Social Responsibility. Learning Goals. Discuss how organizations shape ethical behavior. Describe how businesses’ social responsibility is measured. Summarize the responsibilities of business to the general public, customers, and employees.

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chapter 2

Chapter 2

Business Ethics and Social Responsibility


Learning Goals

Discuss how organizations shape ethical behavior.

Describe how businesses’ social responsibility is measured.

Summarize the responsibilities of business to the general public, customers, and employees.

Explain why investors are concerned with business ethics and social responsibility.



Explain the concepts of business ethics and social responsibility.

Describe the factors that influence business ethics.

List the steps for dealing with an ethical

Identify common ethical dilemmas in the workplace.








Concern for Ethical

and Societal Issues

Business Ethics

The standards of conduct and moral values governing actions and decisions in the work environment.

  • Social responsibility.
  • Balance between what’s right and what’s profitable.
  • Often no clear-cut choices.
  • Often shaped by the organization’s ethical climate.

Sarbanes-Oxley Act

2002 law that added oversight for the nation’s major companies and a special oversight board to regulate public accounting firms that audit the financial records of these corporations.


The Contemporary

Ethical Environment

  • High profile investigations and arrests in headlines.
  • Vast majority of businesses ethical.
  • New corporate officers charged with deterring wrongdoing and ensuring ethical standards.

Johnson & Johnson Website


Individuals Make

A Difference

  • Individuals can make the difference in ethical expectations and behavior
    • Putting own interest ahead of the organization
    • Lying to employee
    • Misrepresenting hours
    • Safety violations
    • Internet Abuse
  • Technology is expanding unethical behavior

Ethical Questions

  • Important Questions to Ask…
  • Is it against the law? Does is violate company or professional policies?
  • Even if everyone is doing it, how would I feel if someone did this to me?
  • Am I sacrificing long-term benefits for short-term gains?

Ethical Decision Making Process

  • Identify the ethical dilemma
  • Discover alternative actions
  • Decide who might be affected
  • List the probable effects of the alternatives
  • Select the best alternative

On-the-Job Ethical


Telling the truth and adhering to deeply felt ethical principles in business decisions.

Situation in which a business decision may be influenced for personal gain.

Businesspeople expect employees to be loyal and truthful, but ethical conflicts may arise.

Employee’s disclosure of illegal, immoral, or unethical practices in the organization.


How Organizations

Shape Ethical Conduct


Ethical Awareness

Code of ConductFormal statement that defines how the organization expects and requires employees to resolve ethical questions.


Ethical Education

Codes of conduct cannot detail a solution for every ethical situation, so corporations provide training in ethical reasoning.


Ethical Action

Helping employees recognize and reason through ethical problems and turning them into ethical actions.


Ethical Leadership

Executives must demonstrate ethical behavior in their actions.


Acting Responsibly to

Satisfy Society

  • Social Responsibility
  • Management’s consideration of profit, consumer satisfaction, and societal well-being of equal value in evaluating the firm’s performance.
  • Contributions to the overall economy, job opportunities, and charitable contributions and service.
  • Organizations measure through social audits.

Responsibilities to


  • Public Health Issues. What to do about inherently dangerous products such as alcohol, tobacco, vaccines, and steroids.
  • Protecting the Environment. Using resources efficiently, minimizing pollution.
  • Recycling.Reprocessing used materials for reuse.
  • Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives.
  • Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees.

Responsibilities to Customers

  • The Right to Be Safe. Safe operation of products, avoiding product liability.
  • The Right to Be Informed.Avoiding false or misleading advertising and providing effective customer service.
  • The Right to Choose.Ability of consumers to choose the products and services they want.
  • The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties.

Responsibilities to Employees

  • Workplace Safety. Monitored by Occupational Safety and Health Administration.
  • Quality-of-Life Issues. Balancing work and family through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993.
  • Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by law.
  • Age Discrimination.Age Discrimination in Employment Act of 1968 protects workers age 40 or older.
  • Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender.

Responsibilities to Creditors & Owners

  • Obligation to make profits for shareholders.
  • Expectation of ethical and moral behavior.
  • Investors protected by regulation by the Securities and Exchange Commissionand state regulations.