CHAPTER 9

1- Ethics in business
Ethics
The standards of moral behavior; that is, behavior that is
accepted by society as right versus wrong.
Golden rule
Do not do unto others as you would not have them do unto.
Hint:
Keep in mind that ethics are not the same thing as the law.
Generally, something that is illegal is also unethical, but the
reverse is not always the case.

Illegal
An action for which you could be fined or imprisoned.

2- Personal ethics
- There are five main approaches we can use when trying to
make an ethical decision:
a- The utilitarian approach.
b- The rights approach.
c- The fairness or justice approach.
d- The common good approach.
e- The virtue approach.
- Another framework we can use when making ethical decisions
was developed by the Markkula Center for applied ethics at
Santa Clara University:
a- Concern for the well-being of others.
b- Respect for the autonomy of others.
c- Trustworthiness and honesty.
d- Willing compliance with the law (with the exception of civil
disobedience).
e- Basic justice; being fair.
f- Refusing to take unfair advantages.
g- Benevolence; doing good.

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 h- Preventing harm to others and the world around us.
- The five-step process to ethical decision making to help make
ethical decision in our personal lives:
a- Recognize an ethical issue.
b- Get the facts.
c- Evaluate alternatives actions.
d- Act on your decision.
e- Reflect on your decision.

3- Corporate ethics
- Although ethics codes vary greatly, they can be classified into
two major categories:
a- Compliance-based ethics codes
Prevent unlawful behavior by increasing control
and penalizing violations.
b- Integrity-based ethics code
Define the organization's guiding values and create
an environment that supports ethically sound
behavior.
- The five-step process can help improve America's business
ethics:
a- Top management must adopt and unconditionally support
an explicit corporate code of conduct.
b- Employees must understand that expectations for ethical
behavior begin at the top and that senior management
expects all employees to act accordingly.
c- Managers and others must trained to consider the ethical
implications of all business decisions.
d- Outsiders such as suppliers, subcontractors, distributers,
and customers must be told about the ethics program.
e- The ethics code must be enforced.
- Sarbanes-Oxley Act (SOX)
Legislation passed in 2002 that set new standards for
ethical codes of conduct within organizations.

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 The act has several components:
a- Whistleblowers
People who report illegal or unethical behavior.
b- The act set forth new penalties for boards of directors,
accounting firms, and management if inaccurate or
fraudulent reporting is found.
c- The act founded a new public agency that oversees,
regulates, and inspects accounting firms.
4- Corporate Social Responsibility (CSR) defined
CSR
The level of concern a business has for the welfare of
society.
There are three determinants or categories by which we can judge
social performance of a company:
a- Corporate philanthropy
An indicator of social responsibility that includes
charitable donations.
b- Corporate responsibility
An indicator of social responsibility that includes the
actions the company takes that could affect others.
c- Corporate policy
The position a firm takes on social and political issue.

5- Responsibility to stakeholders
a- Customers
- The importance of pleasing customers.
- The important point to remember is that customers
prefer to do business with companies they trust.
b- Investors
Social responsibilities to investors means doing the right thing
to make money for stockholders and avoiding potential legal
issues by trading stocks fairly and keeping financial records

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 Insider trading (potential legal issue)
Insiders of a company (such as employees) using
private company information to further their own
financial situation.
c- Employees
Businesses have several responsibilities to employees:
- Create jobs.
- Pension
A promise made by a company to pay a monthly
dollar amount to employees who have worked a
minimum number of years.
- Retain employees.
- Diversity.
d- Society and the Environment
- Create new wealth.
- Promote social justice.
- A public good for environment.

6- Measuring social responsibility

- There is one measure of a company's responsibility:
Social audit
A systematic evaluation of a company's progress
toward implementing programs that are socially
responsible.
- Measuring a company's performance in social audits:
a- Negative actions positive actions = +ve or ve.
b- Just record positive actions.
- There are four types of groups that serve as watchdogs
regarding how well companies enforce their ethical and
social responsibility policies:
a- Socially conscious investors.
b- Environmentalists.
c- Union officials.

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 d- Customers.

7- Ethics and social responsibility globally

NOTE : OECD

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