Aim:

We will be able to:

• define basic terms of Business Ethics
and Social Responsibility; and
• realize the importance of Business
Ethics and the need to be socially
responsible.
 Activity:
Using the definition that you have; construct a bubble
map for the words/phrases/sentences for the words
Business, Ethics, Social and Responsibility.
Then, combine the meaning of Business and Ethics
and Social and Responsibility to have your own
definition of Business Ethics and Social Responsibility.
The class will be divided into five groups. You will be
given 20 minutes to do the activity and choose 2
presenters per group. A maximum of 5 minutes is
given for each group to present.
A Definition for Business
Ethics

by: Paul Merchant

A Definition for Business Ethics

Business ethics is the accepted set

of moral values and corporate
standards of conduct in a business
organization. The specifics of what
this actually means can vary from
one organization to another.
A Definition for Business Ethics
The Meaning of Business Ethics

According to Kirk O. Hanson, a

renowned ethics expert who also
doubles as the Executive Director of the
Markkula Center for Applied Ethics,
"business ethics is the study of the
standards of business behavior which
promote human welfare and the good.
A Definition for Business Ethics
Business ethics manifests both as written and
unwritten codes of moral standards that are critical
to the current activities and future aspirations of a
business organization. They can differ from one
company to another because of differences in
cultural perspectives, operational structures and
strategic orientations. The guiding framework of
business ethics permeates all levels of the
organization. It is about having the wisdom to
determine the difference between right actions and
wrong decisions.
A Definition for Business Ethics
In simpler terms, business ethics
fundamentally epitomizes the
organization's codes of corporate
governance. It stipulates the morality
standards and behavioral patterns
expected of individuals and the business
as a whole. These moral benchmarks
can be perceived in terms of the
microenvironment and macro
A Definition for Business Ethics
• Stakeholder Versus Shareholder
There are two schools of thought
regarding how companies should
approach a definition for business
ethics: the shareholder perspective and
the stakeholder perspective. The
underlying frameworks of the
shareholder and the stakeholder
perspectives are primarily enshrined in
A Definition for Business Ethics
Shareholder Perspective
• Those who approach ethical decision
making from a shareholder perspective
focus on making decisions that are in the
owners' best interest. Decisions are guided
by a need to maximize return on investment
for the organization's shareholders.
Individuals who approach ethics from this
perspective feel that ethical business
practices are ones that make the most
A Definition for Business Ethics
Shareholder Perspective
• The prioritization of the shareholder
perspective, however, may sometimes
compromise business ethics. The
perspective, indeed, is influenced by the
profit-driven motives that are biased toward
the optimization of the interests of
shareholders. Such biases can prompt
corporate managers to commit or omit
extremely consequential actions.
A Definition for Business Ethics
Shareholder Perspective
• In 2002, for example, Enron Corporation
collapsed following the revelation of a mega
scandal that involved authoring financial reports
to hide the company's losses from shareholders.
In a bid to please shareholders, the management
of the giant energy conglomerate at the time
published false financial information that reported
profitability when the company was actually
incurring huge losses. Enron finally collapsed in
2002 when a whistleblower voluntarily revealed
A Definition for Business Ethics
Stakeholder Perspective
• The phrase corporate social responsibility is
often used in discussions of business
ethics. The idea behind this concept is the
belief that companies should consider the
needs and interests of multiple stakeholder
groups, not just those with a direct financial
stake in the organization's profits and
losses.
A Definition for Business Ethics
Stakeholder Perspective
• Organizations that approach business
ethics from a stakeholder perspective
consider how decisions impact those inside
and outside the organization. Stakeholders
are individuals and groups who affect or
who are affected by a company's actions
and decisions. Shareholders are definitely
stakeholders, but they are not the only ones
who fall under the definition of stakeholder.
A Definition for Business Ethics
Stakeholder Perspective
• Stakeholders may include: employees,
suppliers, customers, competitors,
government agencies, the news media,
community residents and others. The idea
behind stakeholder based ethical decision
making is to make sound business
decisions that work for the good of all
affected parties.
 Let’s Recall:

• What is business ethics?

• What is social responsibility?
• What is the difference between
shareholders perspective and
stakeholders perspective on business
ethics?
A Definition for Business Ethics
What Is Ethical Behavior?
• Different people have different beliefs about
what constitutes ethical behavior. The law
defines what is and is not legal, but the
distinctions between moral right and wrong
are not always so clear. In many situations
lines between right and wrong are blurred.
Such situations can lead to ethical
dilemmas.
A Definition for Business Ethics

What Is Ethical Behavior?

• When faced with ethical dilemmas, it's
important to consider outcomes of the
decision-making process. One way of
dealing with ethical dilemmas is to use the
four way test to evaluate decisions.
A Definition for Business Ethics
This test involves asking four questions:
• Is my decision a truthful one?
• Is my decision fair to everyone affected?
• Will it build goodwill for the organization?
• Is the decision beneficial to all parties who
have a vested interest in the outcome?
When these four questions can truthfully be
answered with a "yes," it is likely that the
decision is an ethical one
A Definition for Business Ethics
Another way of making sure decisions are
truly ethical is by using the publicity test. Ask
yourself how you would feel if your actions
were published in your hometown
newspaper. If you would be comfortable
having your parents, grade school teachers,
and other people find out what you did,
chances are that your decision is an ethical
one. However, if you would not want these
individuals to learn about your actions, you
A Definition for Business Ethics
Management and Business Ethics
• A company's managers play an important role in
establishing its ethical tone. If managers behave
as if the only thing that matters is profit,
employees are likely to act in the same manner.
A company's leaders are responsible for setting
standards for what is and is not acceptable
employee behavior. It's vital for managers to play
an active role in creating a working environment
where employees are encouraged and rewarded
for acting in an ethical manner.
A Definition for Business Ethics
Management and Business Ethics
• Managers who want employees to behave
ethically must exhibit ethical decision making
practices themselves. They have to remember
that leading by example is the first step in
fostering a culture of ethical behavior in their
companies. No matter what the formal policies
say or what they are told to do, if employees see
managers behaving unethically, they will believe
that the company wants them to act in a like
manner
A Definition for Business Ethics
Importance of Ethical Business Decisions
• Companies and business people who wish to
thrive long-term must adopt sound ethical decision-
making practices. Companies and people who
behave in a socially responsible manner are much
more likely to enjoy ultimate success than those
whose actions are motivated solely by profits.
Knowing the difference between right and wrong
and choosing what is right is the foundation for
ethical decision making. In many cases, doing the
right thing often leads to the greatest financial,
 A Definition for Business Ethics
There have been many instances in the past when businesses
experienced catastrophic consequences for failure to adhere to ethical
business practices. News Corp, a New York-based international media
company owned by Rupert Murdoch, provides a vivid example of the
disastrous consequences of unethical business behaviors. In June 2011,
the world was treated to a shock when accusations that the company's
team of journalists collected news stories through illegal hacking into
telephone communications of unsuspecting victims. The phone hacking
conspiracy affected Britain's general population as well as the royal
family and prominent celebrities. This scandal was allegedly committed
by employees of News International, a subsidiary of News Corp in
A Definition for Business Ethics
The Costly Consequences
• The public anger and hostility that soared in
Britain within days of the revelations was too
unbearable for Murdoch that he ordered the
closure of News of the World newspapers. News
of the World, a leading print media that had been
in existence for 168 years, was News
International's flagship brand. News International
even abandoned its pursuit of a $12 billion
takeover bid for the British Sky Broadcasting.
A Definition for Business Ethics
The Costly Consequences
• The scandal led to the arrest of some of News
International's top executives while a number of
high-ranking personalities in Britain's security
enforcement agencies were sent packing.
Murdoch and his son, James, experienced more
embarrassments when they were summoned for
questioning before a committee of the British
Parliament. These unfortunate experiences that
came out of the phone hacking scandal
demonstrate the significance of ethics in
 Quiz #1
1. What is business ethics?
2. What is social responsibility?
3. What is the difference between shareholders
perspective and stakeholders perspective about
business ethics?
4. How to know if a behavior is ethical or not?
5. You are one of the heads of a company. Then, one
day, one of the heads said that he will give you
Php 2 000 000 if you will hide one document about
some unethical work of the company. What will you