DISCOVERING WHAT ETHICS IS AND CHAPTER 1

WHERE IT FITS IN BUSINESS

 PUTTING ETHICS TO WORK IN BUSINESS
OBJECTIVES:

Determining what the terms business and ethics really mean

Understanding the difference between legal and ethical
Weaving ethics into daily business operations and long-range planning
 DEFINING THE PURPOSE OF BUSINESS AND
BUSINESS ETHICS
Peter Ducker
“The purpose of a business is to create and keep a customer”

Milton Friedman
“The purpose of a public company is to create as much wealth as possible for its stockholders.

TODAY
“The purpose of business is to create more value than one person can create alone.”
 SO, WHERE DOES ETHICS FIT IN?
•Ethics is the code of moral standards by which people judge the actions
and behaviours of themselves and others.
•Business Ethics brings those moral standards into the workplace.
•Business Ethics is the application of a moral code of conduct to the
strategic and operational management of a business. (Applied
Corporate Governance Website)
 SO, WHERE DOES ETHICS FIT IN?
Ethicists and business experts disagree on what ethics should mean in business:
 Some believe that business is an amoral institution and that traditional notions of ethics don’t belong in
the corporate setting.
 Others, believe that If you’re not in business to do good things, you shouldn’t be in business at all.

Business people have a moral obligation to obey the law and a general obligation to
turn a profit.
During the latter half of the 20th century, companies put increasing emphasis on
developing codes of ethics, employing corporate ethics ombudsmen, using ethics
hotline of ensuring ethical compliance.
Today, the focus is on building a moral corporate culture that has integrity, which a
culture that can survive ethical challenges and remain committed to doing the right
thing.
 FACTORS THAT BROUGHT BUSINESS ETHICS INTO
THE SPOTLIGHT
Media coverage of corporate conduct
Heightened consumer awareness of ethical considerations in business
Greater government pressure
The realization among many business executives that failure to take
ethical considerations into account
 THE DIFFERENCE BETWEEN LEGAL AND ETHICAL

Legal simply means within the Law

Ethical means the right thing
Assumption: morally acceptable as long as stayed within the law. But the
law often lags behind community standards, especially when the ethical
questions involved.
UNDERSTANDING WHERE ETHICS FITS IN
BUSINESS
Everything a business does affects someone somewhere and those other someones
deserve consideration from every business that affects them. Ethics can fits into
business operations to make a company not just more responsible, but more profitable.

Example:
1. Johnson&Johnson gains positive popularity by operating the Baby Center Website,
which provides helpful, how-to information for expecting and new mothers, as well
as product details.
2. Disney gets its good reputation from families who visit its theme parks and watch
Disney movies.
 THE WAYS ETHICS FITS INTO BUSINESS OPERATION
Creating A Moral Organization

 Ethics programs generally fall into one of the following three catagories

Codes and compliance programs

Are similar to legal regulations of corporate behavior and are the most common ethics initiatives taken by companies. Codes
often specify the kind of behavior that a company prohibits. They’re designed to restrict and punish bad behavior rather than
promote good behavior.
Many companies adopt third-party codes and compliance standards, like the International Organization for Standardization
(ISO) e.g. on quality management systems, environmental consideration.
Code and compliance programs deal with problems already known to exist, but they’re not much good in coping with new
ethical issues.
Corporate identity and values programs
It focus on the good qualities the company wants its employees to exhibit. It works best when company leaders integrate them
into their day-to-day decision making and review them from time to time.
Social outreach programs
It stem from a company’s position as a “citizen of the world’ with many of the same kinds of civic responsibilities that
individuals have.
In the USA, it’s more closely tied to a company’s core business. E.g. TOMS Shoes was founded expressly to conduct a
competency-based program: It gives one pair of shoes to a child in need for every pair it sells.
 USING ETHICS TO INCREASE PROFIT
Sometimes making the ethical choice can be expensive in the short run.
In the long run, ethical companies survive longer and perform better than their unethical or
amoral counterparts.
Companies with a good reputation for ethical behavior can charge a premium in retail
transactions and can lower their operating costs by stream-lining arrangements with
suppliers, vendors, and retailers.
They also enjoy greater customer retention and loyalty, which translate into more repeat
sales over a longer period.
 AVOIDING THE SLIPPERY SLOPE
Slippery slope means the small lapses, if not corrected, can erode a company’s
ethical culture almost without anyone noticing it.
To avoid it:
Communicate the company’s values to employees in regular communication vehicles, such as employee
newsletters.
Reward employees for outstanding ethical behavior
Protect and reward employees who speak up against unethical behavior.
Apply punishment fairly, without regard to whether the offender is a high performer
Stress long-term sustainability over short-term performance measures.
Be as transparent as possible in all facets of the company’s operations, including those related to
finances.