ETHICAL THEORY

• Ethics is the activity of examining ones moral

standards or moral standards of a society,
asking how these standards apply to our lives
and whether these standards are reasonable
or unreasonable, and in order to apply them
to concrete situations and issues.
• Ethics involves concept of right and wrong, fair
and unfair, moral and immoral.
 MORAL RESPONSIBITY
• Morality can be defined as the standards that an
individual or a group has about what is right and wrong ,
or good and evil.
• Moral standards include the norms we have about the
kind of actions we believe are morally right and wrong as
well as the values we place on the kind of objects we
believe are morally good and morally bad.
• Moral norms can usually be expressed as general rules or
statements such as “Always tell the truth.” “ It is wrong to
kill innocent people.” or “ Actions are right to extend that
they produce happiness.”
 MORAL RESPONSIBILITY
• Five characteristics that pin down moral values
1. Most people in American society hold moral
standards against theft , rape, enslavement ,
murder, child abuse , assault, slander, fraud ,
law breaking etc. These are matters people feel
are quite serious form of injury.
2. Moral values are not changed by decisions of
particular authoritative bodies. The validity
rests on reasons that are taken to justify them.
 MORAL RESPONSIBILITY
3. Moral values should be preferred to other
values including self interest.
4. Moral value are based on impartial
consideration eg you will benefit from a lie or
that I will be harmed
5. Moral values are associated with special
emotions and special vocabulary.
 Importance of ethics to business and
individuals
• Reasons why ethics is very important for organisations.
• Ethics is a driver for profitability rather than a burden
• Ethics is a part of good corporate governance
• Ethics reassures investors about the company's approach towards risk
management
• Ethics create a warm environment in which employees are more
motivated to work
• The following points highlight the importance of ethics to the individual:
• Consumers may choose to buy ethical items, for example fair-trade
products even if they are not always the cheapest
• Employees will not blindly accept orders to act in a manner that they
personally perceive to be unethical
 ETHICS IN MORDERN BUSINESS
• Business ethics is the study of moral
standards and how these apply to the systems
and organisations through which modern
societies produce and distribute goods and
services, and to the people who work within
these organisations
• Do moral standards apply to corporations or
only to individuals?
 ETHICS IN MORDERN BUSINESS
• When ethics conflict with profits, they imply,
business always choose profit over ethics.
Merck company spend millions of dollars
developing a product (drug for river
blindness) that they knew had little chance of
being profitable because they knew they had
ethical obligation to make its potential
benefits available to people.
 ORGANISATIONAL VALUES/PRINCIPLES WHICH
PROMOTE ETHICAL BEHAVIOUR

• Values are psychological constructs, internal to a person.

• Organizations as such don't have values but, because they are
composed of people, their cultures are shaped by values that are
shared in varying degrees.
• Organisational values act as guiding principles to their employees.
• OPENESS
• TRUST
• HONEST
• RESPECT
• EMPOWERMENT
• ACCOUNTABILITY
 THE BENEFITS OF A CORPORATE CODE OF ETHICS TO THE ORGANISATION AND ITS EMPLOYEES

• Directors, owners and senior management are in the process of realising

that they and their employees need to understand that appropriate
ethical values are to be considered when decisions are being made.
• Organisational, professional and personal values provide the framework
to decision making, therefore, it is vital that organisations create an
environment or culture where appropriate shared values are created,
understood, fostered and committed to by all concerned.
• This cannot be reliably achieved by simply leaving ethics solely to the
judgment of individuals in a workforce of divergent experiences and
backgrounds to work out by trial and error.
• Nor can it be achieved by simply sending a letter urging employees to be
on their best behaviour, or by just publishing a code of conduct.
 THE BENEFITS OF A CORPORATE CODE OF ETHICS TO THE
ORGANISATION AND ITS EMPLOYEES

• In order to ensure commitment to the ethical principles or values considered appropriate

for the organization, it must be evident to the members of the organization that top
management is fully supportive and that such support is evident throughout the
organization’s governance system.
• A code of ethics promotes an environment of respect based on integrity.
• When people know the code of ethics and follow it, this creates an atmosphere of trust,
respect and confidence in the actions of each person involved in the organization or
group.
• In the presence of a written code of ethics, employees at a company, for instance, are
expected to behave a certain way toward each other and toward customers.
• The practical result of this is a more peaceful atmosphere in which to work, and one that
is free of such widespread problems as work-based sexual harassment, violence and other
forms of misconduct.
• A code of ethics is only effective in this way when group members are confident that the
rules will be enforced.
 SOCIAL RESPONSIBILTY
• Social responsibility is an ethical framework which suggests that
an entity, be it an organization or individual, has an obligation to
act for the benefit of society at large. Social responsibility is a duty
every individual has to perform so as to maintain a balance
between the economy and the ecosystems. A trade-off may exist
between economic development, in the material sense, and the
welfare of the society and environment. Social responsibility
means sustaining the equilibrium between the two. It pertains not
only to business organizations but also to everyone whose any
action impacts the environment.This responsibility can be passive,
by avoiding engaging in socially harmful acts, or active, by
performing activities that directly advance social goals.
 Case study
Corporate social responsibility

Corporate social and environmental awareness has become essential for companies as they
realise that they must listen to all stakeholders if they are to achieve their objectives. Judging
from his public statements, Bill Ford Jr, former chairman of Ford, has changed his greater and
father’s most quoted statement to reflect a different hue. It might now read: ‘Any colour as
long as it’s green.’ Speaking at a Greenpeace conference in London, the head of the world’s
third-largest car manufacturer said that he would like to see the end of the internal
combustion engine and also predicted the decline of car ownership. However, he combined
this environmental commitment with an equally strong desire to ensure Ford’s continued
profitability. Such a combination of environmental responsibility, ethics and profits is one that
is attracting increasing attention. The Business Leaders Forum’s Human Capitalism campaign
disagrees with the idea that the interests of shareholders and those of other stakeholders (i.e.
employees, community, customers) must always conflict. The campaign seeks to
weld these two seemingly opposite forces so that doing good and doing good business
become one and the same thing. Members of the campaign include Andersen Consulting,
Coca-Cola, Diageo, The Financial Times, Time Magazine and the WPP Group.
 Case study
Corporate social responsibility

Social and environmental responsibility has moved from a ‘nice to do’ to a ‘need to do’. One of the main
findings of a recent report by the International Business Leaders Forum is a focus on employees and their views
of the companies they work for or may wish to work for. When asked to rank their principal reasons for
admiring certain companies, nearly a quarter (24%) of all respondents said respect for employees. That
compared to 21% who rated environmental responsibility, 12% financial stability and 4% who thought creativity
the most important aspect of an admirable company. The importance of the employee has been highlighted by
the so-called ‘war for talent’. Recruiting the brightest and best has become a key concern of corporate strategy.
Says Tom Cooper, of PricewaterhouseCoopers: ‘There is such a limited number of the right type of graduates
right now, and they are choosy about the type of company they will work for. The cost of recruiting and
retaining staff is likely to be higher if you are deemed not to be an ethical employer and organisation.’ A
company’s reputation also has significant implications for its financial performance. Some analysts believe it is
one of the key factors in valuation of companies. One company could have a higher stock market valuation
than another one solely due to its good social and environmental reputation. Shell, a company with
traditionally one of the worst
reputations among environmental and social pressure groups, has made enormous eff orts to reinvent itself
from being the environmentalists’ favourite whipping boy to pioneer a socially responsible business. It has
stated its aims as nothing less than to become ‘the leading multinational in economic, environmental and
social responsibility’. Shell’s chairman has said that the reason for Shell’s conversion to sustainability is
commercial: ‘We won’t achieve our business goals unless we are listening to – and learning from – the full
range of our stakeholders in society
 Case study
Corporate social responsibility

[30 marks, 40 minutes]

1 a Define the term ‘socially responsible business’. [2]
b Briefly explain the term ‘ethics’. [3]
2 Examine two factors given in the article that could encourage
a business to adopt an ethical and environmentally aware
strategy. [8]
3 Why did the chairman of Ford express ‘an equally strong
desire to ensure Ford’s continued profitability’? [6]
4 Discuss the likely costs and benefits for Shell of being seen as
‘the leading multinational in economic, environmental and
social responsibility’. [11]