Chapter One

Business Ethics, The

Changing Environment,
And Stakeholder
Management
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 Chapter Topics
Business ethics and the changing environment
1. Morals and Ethics

2.What is business ethics? Why does it matter?

3.Levels of business ethics

4.Five myths about business ethics

5.Why use ethical reasoning in business?

6.Can business ethics be taught and trained?

7.Plan of the book

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Definition of Morals
 Morals are the social, cultural and
religious beliefs or values of an
individual or group which tells us what
is right or wrong.
 They are the rules and standards made
by the society or culture which is to be
followed by us while deciding what is
right. Some moral principles are:

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 Do not cheat
 Be loyal
 Be patient
 Always tell the truth
 Be generous
 Example
 If the son of a big politician has committed a crime
and he uses his powers to free his son from legal
consequences. Then this act is immoral because the
politician is trying to save a culprit.
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 Definition of ethics
 Ethics is a branch of philosophy that deals
with the principles of conduct of an
individual or group. It works as a guiding
principle as to decide what is good or
bad. They are the standards which
govern the life of a person. Some ethical
principles are:

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 Truthfulness
 Honesty
 Loyalty
 Respect
 Fairness
 Integrity Morals are dictated by society, culture or
religion while Ethics are chosen by the person himself
which governs his life.

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Example

A very close friend or relative of an interviewer

comes for an interview and without asking a
single question, he selects him. This act is
unethical because the selection process must be
transparent and unbiased.

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Why Business Ethics Are
Important
 It’s important for organizations to
operate with good business ethics to
avoid legal and regulatory problems.
However, it’s also vital to exhibit strong
ethical behavior to maintain a positive
reputation, both with the public and
employees.

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Relationship between business
and ethics
 Ethical relationships concerning your
company`s interaction with customers
can have a direct impact on the success
of your company.
 Ethical customer relationships should
include honesty with customers,
delivering a good product or service.

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A company policy that encourages
positive relationships with customers
can help position your company as
trusted one .
While unethical behavior, such as making
false claims, may gain you immediate
customers, this same behavior will
those customers for you in the long run.
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 Why Does Ethics Matter In
Business?
 “Doing the right thing” matters to employers,
employees, stakeholders, and the public.
 For companies, it means saving billions of dollars
each year in lawsuits, settlements, and theft

 Costs to businesses include:

Fall of relationships
Damage to reputation

Declining employee productivity, creativity, and

loyalty
Ineffective information flow throughout the

organization
Absenteeism

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 Environmental Forces and
Stakeholders
 Local, national, and international environments
are increasingly moving toward and into a global
system of dynamically interrelated interactions
among local, national, and regional politics,
economies, regulations, technologies,
demographics, and international law.
 Economic environment
 Technological
 Political
 Governmental and regulatory
 Legal
 Demographic

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 Why Business Ethics Is
Important
 1. Business ethics is an essential skill
 Almost every company now has a business ethics program. In part,
that’s because technology and digital communication have made it
easier to identify and publicize ethical missteps. To avoid the negative
implications, companies are devoting more resources to business
ethics.
 2. Business ethics drives employee behavior
 Companies that advocate for business ethics motivate their
employees to perform their roles with integrity. a complete ethics
program should touch on all of the business functions. That includes
operations, human resources, and marketing etc.

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 Why Business Ethics Is
Important
 3. Business ethics benefits the bottom
line.
 Another reason why business ethics is important
is that it can improve profitability. A well-
implemented ethics program can also reduce
losses. 
  Business ethics cultivates trust, which
strengthens branding and sales.

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 What Are Unethical
Business Practices?
 Surveys have identified the following periodic themes
to prominent everyday ethical issues facing businesses
and their stakeholders:
 Managers lying to employees
 Office nepotism and favoritism
 Taking credit for other’s work
 Receiving/offering kickbacks
 Stealing from the company
 Firing an employee for whistle-blowing

 Terminating employment without sufficient notice

 Using company property/materials for personal use

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 What Are Unethical
Business Practices?
 The most unethical behavior, per one survey,
happens in the following areas:
 Government
 Sales
 Law
 Media
 Finance
 Banking
 Manufacturing

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Levels of Business Ethics
 Because ethical problems are not only an
individual or personal matter, it is helpful to
see the different levels at which issues
originate and how they move to other levels.
 Five levels are:
 Individual
 Organizational
 Association
 Societal
 International

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Individual level
At the individual level, ethical issues arise when, for

example, a sales man is asked to sale the product by telling

a lie to the customers.
Organizational level
At the organizational level, ethical issues arise, for example,

when employee is asked to perform an unethical or illegal

act to earn division or work unit profit.
Members should examine the firm's policies and procedures

and code of ethics, if one exists, before making a decision or

taking action.
Association level
At the association level, accountant, information

technology (IT) professionals, lawyers, physicians, and

management consultants must follow the ethics to
facilitate the people.
Societal level
At the societal level, laws, norms, customs, and

traditions govern the legal and moral acceptability of

behaviors. For example activities in china may be not
acceptable in uk.

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Dimensions of Ethics

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 Five Myths About Business
Ethics
 A myth is “a widely held but false belief or idea.”
 a traditional story, especially one concerning the
early history of a people
 Myth 1: Ethics is a personal, employees are
ethical so we don’t need to business ethics
 Myth 2: Business ethics is nothing but following
laws
 Myth 3:business ethics and social responsibility
are same thing
 Myth 4: Ethics cant be manageable
 Myth 5: managing ethics in the work place has
little practical relevance. 21