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CHAPTER 9
LECTURE OUTLINE
I. What Do We Mean By Business Ethics?
1. Business ethics is the application of general ethical principles and standards to business behavior.
2. Business ethics does not involve a special set of ethical standards applicable only to business
situations.
3. Ethical principles in business are not materially different from ethical principles in general.
CORE CONCEPT
Business ethics concerns the application of general ethical principles to the actions
and decisions of businesses and the conduct of company personnel.
II. Where Do Ethical Standards Come fromAre They Universal or Dependent on Local Norms and
Situational Circumstances?
A. The School of Ethical Universalism
1. According to the school of ethical universalism, some concepts of what is right and what is wrong
are universal; that is, they transcend all cultures, societies, and religions.
2. To the extent that there is common moral agreement about right and wrong actions and behaviors
across multiple cultures and countries, there exist a set of universal ethical standards to which all
societies, all companies, and all individuals can be held accountable.
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CORE CONCEPT
The school of ethical universalism holds that that the most fundamental conceptions
of right and wrong are universal and apply to members of all societies, all
companies, and all businesspeople.
3. Many ethicists believe that the most important moral standards travel well across countries and
cultures and are thus universal.
4. Universal norms include honesty or trustworthiness, respecting the rights of others, practicing the
Golden Rule, avoiding unnecessary harm to workers or to the users of the companys product or
service, and respect for the environment.
B. The School of Ethical Relativism
1. There are meaningful variations in what societies generally agree to be right and wrong in the
conduct of business activities. Ethical relativism holds that when there are cross-country or crosscultural differences in what is deemed fair or unfair, what constitutes proper regard for human
rights, and what is considered ethical or unethical in business situations, it is appropriate for local
moral standards to take precedence over what the ethical standards may be elsewhere.
CORE CONCEPT
The school of ethical relativism holds that differing religious beliefs, customs, and
behavioral norms across countries and cultures give rise to multiple sets of standards
concerning what is ethically right or wrong. These differing standards mean that
whether businesses related actions are right or wrong depends on the prevailing
local ethical standards.
2. The strength of ethical universalism is that it draws on the collective views of multiple societies
and cultures to put some clear boundaries on what constitutes ethical business behavior and what
constitutes unethical business behavior no matter what country market or culture a company or its
personnel are operating in.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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CORE CONCEPT
According to integrated social contracts theory, universal ethical principles or norms
based on the collective views of multiple cultures and societies combine to form a
social contract that all individuals in all situations have a duty to observe in all
situations. Within the boundaries of this social contract, local cultures or groups can
specify what additional actions may or may not be ethically permissible.
2. The ethical standards a company should try to uphold are governed both by a limited number of
universal ethical principles that are widely recognized as putting legitimate ethical boundaries on
actions and behavior in all situations and the circumstances of local cultures, tradition, and shared
values that further prescribe what constitutes ethically permissible behavior and what does not.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
652
CORE CONCEPT
Self-dealing occurs when managers take advantage of their position to further their
own private interests rather than those of the firm.
CORE CONCEPT
Short-termism is the tendency for managers to focus excessively on short-term
performance objectives at the expense of longer-term strategic objectives. It
has negative implications for the likelihood of ethical lapses as well as company
performance in the longer run.
4. Company Culture That Put Profitability and Business Performance Ahead of Ethical
Behavior:
a. When a companys culture spawns an ethically corrupt or amoral work climate, people have a
company-approved license to ignore whats right and engage in most any behavior or employ
most any strategy they think they can get away with.
b. In contrast, when high ethical principles are deeply ingrained in the corporate culture of a
company, culture can function as a powerful mechanism for communicating ethical behavioral
norms and gaining employee buy-in to the companys moral standards, business principles, and
corporate values.
c. Illustration Capsule 9.3 discusses Novo Nordisks approach to building an ethical culture and
putting its ethical principles into practice.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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CORE CONCEPT
Corporate social responsibility (CSR) refers to a companys duty to operate in an
honorable manner, provide good working conditions for employees, encourage
workforce diversity, be a good steward of the environment, and actively work to
better the quality of like in the local communities where it operates and in society
at large.
A. What Do We Mean By Corporate Social Responsibility?
1. The essence of socially responsible business behavior is that a company should strive to balance the
benefits of strategic actions to benefit shareholders against the duty to be a good corporate citizen.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
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2. Figure 9.2, The Five Components of Corporate Social Responsibility Strategy, depicts a
companys menu for crafting its social responsibility strategy, and includes:
a. Efforts to employ an ethical strategy and observe ethical principles in operating the business
b. Making charitable contributions, donating money and the time of company personnel to
community service endeavors, supporting various worthy organizational causes, and reaching
out to make a difference in the lives of the disadvantaged
c. Actions to protect or enhance the environment and in particular, to minimize or eliminate any
adverse impact on the environment stemming from the companys own business activities
d. Actions to create a work environment that enhances the quality of life for employees and makes
the company a great place to work
e. Actions to build a workforce that is diverse with respect to gender, race, national origin, and
perhaps other aspects that different people bring to the workplace
CORE CONCEPT
A companys CSR strategy is defined by the specific combination of socially
beneficial activities it opts to support with its contribution of time, money and other
resources.
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CORE CONCEPT
Sustainable business practices are those that meet the needs of the present without
compromising the ability to meet the needs of the future.
CORE CONCEPT
A companys environmental sustainability strategy consists of its deliberate actions
to protect the environment, provide for the longevity of natural resources, maintain
ecological support systems for future generations, and guard against ultimate
endangerment of the planet.
2. More often though, the term takes on the meaning of the relationship between the company and its
environment and its use of natural resources.
3. Many environmentally conscious companies now make a point of citing the beneficial of their
sustainability strategies in press releases and issue special sustainability reports for consumers and
investors to review.
D. Crafting Corporate Social Responsibility and Sustainability Strategies
1. A company may choose to focus its social responsibility strategy on generic social issues, but social
responsibility strategies keyed to points of intersection between a company and society may also
contribute to a companys competitive advantage.
2. Unless a companys social responsibility initiatives become part of the way it operates its business
every day, the initiatives are unlikely to be fully effective.
E. The Moral Case for Corporate Social Responsibility and Environmentally Sustainable Business
Practices
1. The moral case for why businesses should actively promote the betterment of society and act in a
manner that benefits all of the companys stakeholders boils down to a basic conceptIt is the right
thing to do.
F. The Business Case for Social Responsibility and Environmentally Sustainable Business Behavior
1. There are several reasons why the exercise of social responsibility and sustainability is good
business:
a. Such actions can lead to increased buyer patronage.
b. A strong commitment to socially responsible behavior reduces the risk of reputation-damaging
incidents.
c. Socially responsible actions and sustainable business practices can lower costs and enhance
employee recruiting and workforce retention.
d. Opportunities for revenue enhancement may also come from CSR and environmental
sustainability strategies.
e. Well-conceived CSR strategies and sustainable business practices are in the best long-term
interest of shareholders.
2. In sum, companies that take social responsibility and environmental sustainability seriously can
improve their business reputations and operational efficiency while also reducing their risk exposure
and encouraging loyalty and innovation.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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in the following areas: Commitments, Focus, and Actions. The companys actions have clearly benefited
its stakeholders, and specific activities are described in the Actions area: In the Community, Technology
Innovation, Operating Responsibly, and Privacy and Security. Microsofts Unlimited Potential program
combines advanced technologies and strong partnerships with governments, international organizations,
nongovernmental organizations (NGOs), educational institutions, and technology and service partners.
Ultimately our mission is to enable sustained social and economic opportunity for those at the middle and
bottom of the worlds economic pyramidthe next 5 billion people. In the short term, Unlimited Potential,
Aims to reach the next 1 billion people by 2015 by exploring solutions in three key interrelated areas. Each
is crucial to developing sustained economic opportunity: transforming education; fostering local innovation;
enabling jobs and opportunities. The contributions and scope of the Unlimited Potential program will
provide positive benefits to Microsoft shareholders.
5. Go to www.nestle.com and read the companys latest sustainability report. What are Nestls key environmental
sustainable environmental policies? How do these initiatives relate to the companys principles, values, and
culture and its approach to competing in the food industry?
Answer: In reviewing the Web site, Nestls overall view of sustainability can be summarized as follows,
We are committed to create shared value over the long term by increasing the worlds access to higher quality
food and beverages, while contributing to environmentally sustainable social and economic development,
in particular in rural areas. Three principles guide the companys approach to environmental stewardship:
our responsibility towards society, present and future; our desire to delight consumers; our dependence
on a sustainable environment that can provide the high quality resources we need to make good food and
beverages. Nestl identifies four priorities related to its food and beverage business: water, agricultural raw
materials, manufacturing and distribution of products, and packaging of products (see http://www.nestle.
com/Resource.axd?Id=CA5BDB64-6E13-4CDD-B310-CBF5AB826DA3 for specific details). Students
should offer support regarding the relationship of these priorities to Nestls approach to competing in the
food industry based on the companys claim, As the largest food and beverage company in the world, we
are determined to continue to provide leadership within our sphere of influence.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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