Description
Assigned Readings:
Chapter 1. The Importance of Business Ethics.
Chapter 2. Stakeholder Relationships, Social Responsibility, and Corporate Governance.
Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.
Also, provide a graduate-level response to each of the following questions:
Dilbert on Ethics Training – this video takes a humorous view of what constitutes ethical conduct in an organization and who should receive ethics training.
Length: 1:13
Questions:
What is your definition of business ethics?
What are the ethical issues discussed in this video?
If only subordinates receive ethics training, how could this become a challenge to employee commitment?
[Your post must be substantive and demonstrate insight gained from the course material. Postings must be in the student’s own words – do not provide quotes!]
[Your initial post should be at least 450+ words and in APA format (including Times New Roman with font size 12 and double spaced). Post the actual body of your paper in the discussion thread then attach a Word version of the paper for APA review]
Unformatted Attachment Preview
Chapter 1
The Importance of Business Ethics
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
By the end of this chapter, you should be able to:
• Explore conceptualizations of business ethics from an organizational
perspective
• Examine the historical foundations and evolution of business ethics
• Provide evidence that ethical value systems support business performance
• Describe the extent of ethical misconduct in the workplace and the
pressures for unethical behavior
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Icebreaker
•
What does the term “ethics” mean to you?
•
Why do you think ethics is important in business?
•
Can you think of an example of a time a business engaged in unethical
behavior?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1-1
Business Ethics Defined
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Business Ethics Defined 1 of 2
• Morals – A person’s personal philosophies about what is right or wrong
• Business ethics – Comprises organizational principles, values, and norms
that may originate from individuals, organizational statements, or from the
legal system that primarily guide individual and group behavior in business
• Principles – Specific and pervasive boundaries for behavior that should not
be violated
– These often become the basis for rules (human rights, freedom of speech).
• Values – Enduring beliefs and ideals that are socially enforced
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Business Ethics Defined 2 of 2
• Ethics – Behavior or decisions made within a group’s values or morals
– Right or wrong behavior is defined by the group.
– Within corporate culture there are rules and regulations that determine right/wrong.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Knowledge Check
Question: What are trust and integrity examples of?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1-2
Why Study Business Ethics?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Study Business Ethics? 1 of 4
A Crisis in Business Ethics
• Business ethics has become a major concern.
• Workplace integrity – The pressure to compromise organizational
standards, observed misconduct, reporting of misconduct when observed,
and retaliation against reports
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
TABLE 1-1 Observed Misconduct
in the U.S. Workforce
Response
Observed misconduct
Percentage
49%
Abusive behavior
22%
Lying to employees and external stakeholders
25%
Conflicts of interest
23%
Health violations
22%
Pressure to compromise standards
30%
Report observed misconduct
81%
Experience retaliation for reporting
79%
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Study Business Ethics? 2 of 4
Specific Issues
• There are a number of ethical issues that must be addressed to prevent
misconduct.
• Ethics plays an important role in the public sector as well.
• Every organization has the potential for unethical behavior.
• Most decisions are judged as right or wrong, ethical or unethical.
– Legislation usually follows.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Study Business Ethics? 3 of 4
The Reasons for Studying Business Ethics
• Business ethics is more than an extension of an individual’s personal values.
• Professionals must deal with individuals’ personal moral dilemmas.
– Moral dilemma – Two or more morals in conflict with one another
– Value dilemma – Two or more beliefs/ideals in conflict with one another
• Being a good person may not be sufficient to handle ethical issues in
business.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Study Business Ethics? 4 of 4
• Studying business ethics will help you:
– Identify ethical issues when they arise
– Recognize approaches for resolving ethical issues
– Cope with conflicts between your own personal values and those of the organization
in which you work
– Gain knowledge to make more ethical business decisions
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1-3
The Development of Business Ethics
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 1 of 9
Before 1960: Ethics in Business
• Capitalism dictated business practices.
– 1920s: Provide a living wage—income sufficient for education, recreation, health, and
retirement
– 1930s: The New Deal (President Franklin D. Roosevelt)—blamed business as the cause
for U.S. problems
– 1950s: The Fair Deal (President Harry S. Truman)—defined such matters as
environmental responsibility as ethical issues that businesses had
to address
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 2 of 9
The 1960s: The Rise of Social Issues in Business
• Antibusiness trend; decay of inner cities; growth of ecological problems
• President John F. Kennedy: Consumers’ Bill of Rights
– Right to safety
– Right to be informed
– Right to choose
– Right to be heard
• President Lyndon B. Johnson: The “Great Society”
– Extended national capitalism with the U.S. government’s responsibility to provide all
citizens with some degree of economic stability, equality, and social justice
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 3 of 9
The 1970s: Business Ethics as an Emerging Field
• Business ethics became a common expression.
• Corporate social responsibility – An organization’s obligation to maximize
its positive impact on stakeholders and minimize its negative impact
• Academic researchers sought to identify ethical issues and describe how
businesspeople might choose to act in particular situations.
• Limited efforts were made to describe how the ethical decision-making
process in business worked and to identify the many variables that
influenced the process.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 4 of 9
The 1980s: Business Ethics Reaches Maturity
• Centers for business ethics provided publications, courses, conferences,
and seminars.
• Stakeholder theory was developed.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 5 of 9
• Defense Industry Initiative on Business Ethics and Conduct – An
organization developed to guide corporate support for ethical conduct
– Codes of conduct must be understandable and cover substantive areas in detail.
– Members are expected to provide ethics training and continuous support for employees.
– Defense contractors must create an open atmosphere in which employees feel
comfortable reporting violations without fear of retribution.
– Companies must perform extensive internal audits and develop effective internal
reporting and voluntary disclosure plans.
– Members must preserve the integrity of the defense industry.
– Members must adopt a philosophy of public accountability.
• Reagan–Bush Era: Belief that self-regulation rather than regulation by
government was in the public’s interest
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 6 of 9
The 1990s: Institutionalization of Business Ethics
• President Bill Clinton: Continued to support self-regulation and free trade
• Government action with health-related social issues such as teenage
smoking
• Federal Sentencing Guidelines for Organizations (FSGO) – Guidelines
that codified into law incentives to reward organizations for taking action to
prevent misconduct, such as developing effective internal legal and ethical
compliance programs
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 7 of 9
The 2000s: Twenty-First Century Business Ethics
• President George W. Bush: Misconduct at Enron, WorldCom, Halliburton,
and Arthur Andersen caused the government and the public to look for new
ways to encourage ethical behavior.
• Sarbanes–Oxley Act – The most far-reaching change in organizational
control and accounting regulations since the Securities and Exchange Act of
1934, which made securities fraud a criminal offense and stiffened penalties
for corporate fraud
• The Sarbanes–Oxley Act and the FSGO institutionalized the need to
discover and address ethical and legal risk.
• President Barack Obama: Inherited the great global financial recession
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 8 of 9
The 2010s: New Challenges in Business Ethics
• Dodd–Frank Wall Street Reform and Consumer Protection Act –
Legislation that addressed some of the issues related to the financial crisis
and recession and designed to make the financial services industry more
ethical and responsible
• Enforcement of the FCPA, created in the 70s, became a top priority for the
SEC; outside of the U.S., the United Kingdom instituted the Bribery Act.
• Distrust of corporate America coincided with influx of Millennials into workforce
• Tension between increasing transparency and protecting privacy emerged
• President Donald Trump: Decreased environmental and financial regulations;
questioned sustainability
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Activity 1
Millennials and Generation Z highly value authenticity and transparency from
businesses and have become influential consumer groups, seeking products
that align with their values. These generations let business ethics and CSR
issues guide not only product purchase decisions but also employer choices.
Do you seek products that align with your values?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Activity 1 Debrief
• Did everyone in your group say that they seek products that align
with their values?
• Why do you think this varies by generation?
• Will you seek (or have you sought) an employer that aligns with your values?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Development of Business Ethics 9 of 9
The 2020s and Beyond
• Environmental social governance (ESG) – A framework for evaluation of
firm performance in the areas of environmental, social, and governance
• Sustainability issues are causing firms and government to find solutions.
• There is increasing demand for responsible ethical conduct to be a part of
organizational culture.
• Future ethical issues will relate to artificial intelligence (AI) and big data.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1-4
Developing Organizational
and Global Ethical Cultures
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Developing Organizational and
Global Ethical Cultures 1 of 2
• Ethics and compliance are designed to establish appropriate conduct and
core values.
• Ethical culture – Acceptable behavior as defined by the company and
industry
– Reflects the integrity of decisions made
– Is a function of many factors, including:
o Corporate policies
o Top management’s leadership on ethical issues
o The influence of coworkers
o The opportunity for unethical behavior
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Developing Organizational and
Global Ethical Cultures 2 of 2
• Globally, businesses are working closely together to establish standards
of acceptable behavior.
– ISO 19600 is a global compliance management standard that addresses risks, legal
requirements, and stakeholder needs.
• Many companies demonstrate their commitment toward acceptable
conduct by adopting globally recognized principles.
• Global compact – Set of 10 principles concerning human rights, labor,
the environment, and anti-corruption; the purpose is to create openness
and alignment among business, government, society, labor, and the
United Nations
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1-5
The Benefits of
Business Ethics
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Debate Issue: Take a Stand
• While research suggests ethical businesses have better performance, there
is also an alternate view. Many businesspeople think ethics and social
responsibility require resources that do not contribute to profits, and time
spent in ethics training could be better used for other business activities.
• Take a stand:
1. Ethical businesses are the most profitable.
2. The most ethical businesses are not the most profitable.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Debate Issue: Debrief
• Those who argue that ethical businesses are more profitable could point to
the different studies showing a positive correlation between ethics and
profitability, the goodwill gained from ethical conduct, and the additional
customer confidence associated with an ethical company. The opposition
might point out that some dishonest companies have gotten away with only
small penalties for misconduct and that companies must be more concerned
with obtaining profits than spending time worrying about ethics.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 1-2 The Role of Organizational
Ethics in Performance
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Benefit of Business Ethics 1 of 4
Ethics Contributes to Employee Commitment
• There is a willingness to sacrifice for the organization.
• It increases group creativity and job satisfaction and decreases turnover.
• There is less pressure to compromise ethical standards.
• It leads to a greater absence of misconduct.
• Strong community involvement increases loyalty and positive self identity.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Benefit of Business Ethics 2 of 4
Ethics Contributes to Investor Loyalty
• Ethics provides a foundation for efficiency, productivity, and profits.
• Negative publicity, lawsuits, and fines can lower stock prices, diminish
customer loyalty, and threaten a company’s long-term viability.
• The demand for socially responsible investing is increasing.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Benefit of Business Ethics 3 of 4
Ethics Contributes to Customer Satisfaction
• High levels of perceived corporate misconduct decrease customer trust.
• Companies viewed as socially responsible increase customer trust and
satisfaction.
• Consumer respondents stated they would pay more for products from
companies that give back to society in a socially responsible and
sustainable manner.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Benefit of Business Ethics 4 of 4
Ethics Contributes to Profits
• Being ethical leads to better business performance.
• Corporate concern for ethical conduct is becoming a part of strategic
planning toward obtaining the outcome of higher profitability.
• Business ethics is becoming more than just a function of compliance; it’s
becoming an integral part of management’s efforts to achieve competitive
advantage.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Activity 2
What are the pros and cons of business ethics?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Discussion Activity 2 Debrief
Are the pros and cons you thought of listed below?
Pros
Cons
• Ethics contributes to employee
commitment.
• Ethics eats into revenues, sales,
profitability.
• Ethics contributes to customer satisfaction. • Ethics does not maximize shareholder
benefits.
• Ethics contributes to profits.
• Ethics provides a foundation for efficiency,
productivity, and profits.
• Ethics decreases competitive edge.
• Negative publicity results in lawsuits, fines,
lower stock prices, diminished customer
loyalty.
• The demand for socially responsible
investing is increasing.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 2
Stakeholder Relationships,
Social Responsibility, and
Corporate Governance
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
By the end of this chapter, you should be able to:
• Identify stakeholders’ roles in business ethics
• Define social responsibility
• Examine the relationship between stakeholder orientation and
social responsibility
• Delineate a stakeholder orientation in creating corporate social responsibility
• Explore the role of corporate governance in structuring ethics and social
responsibility in business
• List the steps involved in implementing a stakeholder perspective in social
responsibility and business ethics
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Icebreaker
•
•
What does the term “stakeholder” mean to you?
Social responsibility is an organization’s obligation to maximize its positive
impact on stakeholders and minimize its negative impact. Can you think of
any companies that are socially responsible?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2-1
Stakeholders Define Ethical Issues in Business
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 1 of 6
• Stakeholders – Those who have a “stake” or claim in some aspect of a
company’s products, operations, markets, industry, and outcomes
Customers
Shareholders
Employees
Suppliers
Government
Agencies
Communities
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 2 of 6
• Normative – Identifies ethical guidelines that dictate how firms should treat
stakeholders
• Descriptive – Focuses on the firm’s behavior; addresses how decisions are
made for stakeholder relationships
• Instrumental – Describes what happens if firms behave in a particular way
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 2-1 The Impact of a
Strong Organizational Culture
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 3 of 6
Identifying Stakeholders
• Primary stakeholders – Those whose continued association and resources
are absolutely necessary for a firm’s survival
– Employees, customers, and shareholders, as well as the governments and communities
that provide necessary infrastructure
• Secondary stakeholders – Stakeholders who do not typically engage directly
in transactions with a company and are therefore not essential to its survival
– Media, trade associations, and special interest groups
• Stakeholder interaction model – This approach recognizes other
stakeholders and explicitly acknowledges that dialogue exists between a firm’s
internal and external environments.
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
FIGURE 2-2 Interactions Between a Company and
Its Primary and Secondary Stakeholders
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 4 of 6
A Stakeholder Orientation
• Stakeholder orientation – The degree to which a firm understands and
addresses stakeholder demands
• Activities that address stakeholder demands include:
– Organization-wide generation of data about stakeholder groups and assessment of the
firm’s effects on these groups
– Distribution of this information throughout the firm
– Responsiveness of the organization as a whole to this information
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 5 of 6
• To generate data about stakeholders:
Identify
relevant
stakeholders
Identify
concerns about
the business
that are
relevant to
each
stakeholder
group
Evaluate their
impact on the
issues of
importance to
the various
stakeholders
identified
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Stakeholders Define Ethical Issues in Business 6 of 6
• It is essential for information gathered to be circulated throughout the firm.
• A stakeholder orientation is not complete without including activities that
address stakeholder issues.
– Activities are likely specific to a particular stakeholder group or issue.
• Firms are likely to adopt a stakeholder orientation to varying degrees.
– To gauge a firm’s stakeholder orientation, evaluate:
• The extent the firm adopts behaviors that typify the generation and dissemination of
stakeholder intelligence
• The responsiveness to this intelligence
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Knowledge Check
Question: Shareholders are what type of stakeholders?
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2-2
Social Responsibility and Business Ethics
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Social Responsibility and Business Ethics 1 of 2
• Ethics and social responsibility are not the same but are interrelated.
– Social responsibility is an organization’s obligation to maximize its positive impact on
stakeholders and minimize its negative impact.
• There are four levels of social responsibility:
Economic
Legal
Ethical
Philanthropic
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Social Responsibility and Business Ethics 2 of 2
• Corporate citizenship – The extent to which businesses strategically meet
the economic, legal, ethical, and philanthropic responsibilities placed on
them by various stakeholders
• Four interrelated dimensions:
– Strong sustained economic performance
– Rigorous compliance
– Ethical actions beyond what the law requires
– Voluntary contributions that advance the reputation and stakeholder commitment of the
organization
• Reputation – A corporation’s image and an intangible asset with tangible
value
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2-3
Issues in Social Responsibility
O.C. Ferrell, John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, 13th Edition. ©2022 Cengage.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Issues in Social Responsibility 1 of 2
• Social responsibility rests on a stakeholder orientation.
– Each stakeholder is given due consideration.
– Long-term relationships with stakeholders develop trust, loyalty, and the performance
necessary to maintain profitability.
• Social issues are associated with the common good.
– These can
