Although the aim of business is to serve customers at a profit, companies today try to give back to customers, society, and the environment. Sometimes they face difficult questions. When does self-interest conflict with society’s and customers’ well-being? And must profit-seeking conflict with right and wrong?
Business ethics refers to the standards of conduct and moral values that businesspeople rely on to guide their actions and decisions in the workplace. Businesspeople must take a wide range of social issues into account when making decisions. Social responsibility refers to management’s acceptance of the obligation to put an equal value on profit, consumer satisfaction, and societal well-being in evaluating the firm’s performance.
People develop ethical standards in three stages: preconventional, conventional, and postconventional. In the preconventional stage, individuals primarily consider their own needs and desires in making decisions. They obey external rules only from fear of punishment or hope of reward. In the conventional stage, individuals are aware of and respond to their duty to others. Expectations of groups, as well as self-interest, influence behavior. In the postconventional stage, the individual can move beyond self-interest and duty to include consideration of the needs of society. A person in this stage can apply personal ethical principles in a variety of situations.
Employees are strongly influenced by the standards of conduct established and supported within the organizations where they work. Businesses can help shape ethical behavior by developing codes of conduct that define their expectations. Organizations also can provide training to develop employees’ ethics awareness and reasoning, for instance discussing common issues like conflicts of interest, honesty and integrity, loyalty versus truth, and whistle-blowing. Executives must demonstrate ethical behavior in their decisions and actions to provide ethical leadership.
Today’s businesses are expected to weigh their qualitative impact on consumers and society, in addition to their quantitative economic contributions such as sales, employment levels, and profits. One measure is their compliance with labor and consumer protection laws and their charitable contributions. Another measure some businesses take is to conduct social audits. Public-interest groups also create standards and measure companies’ performance relative to those standards.
Consumerism protects the right to be safe, to be informed, to choose, and to be heard. It has increased product safety, provided information to consumers, increased competition, offered a wider variety of choices, promoted truth in advertising, and monitored unethical activities and fraud. Challenges include assuring product safety because contamination leaks in, causing illness or even death. Moreover, all communications with customers—from salespeople’s comments to warranties and invoices—must be controlled to clearly and accurately inform customers. Businesses that fail to comply with truth in advertising face scrutiny from the FTC and consumer protection organizations.
The responsibilities of business to the general public include protecting the public health and the environment and developing the quality of the workforce. In addition, many would argue that businesses have a social responsibility to support charitable and social causes in the communities in which they earn profits. Business also must treat customers fairly and protect consumers, upholding their rights to be safe, to be informed, to choose, and to be heard. Businesses have wide-ranging responsibilities to their workers. They should make sure that the workplace is safe, address quality-of-life issues, ensure equal opportunity, and prevent sexual harassment and other forms of discrimination.
Lastly, investors and the financial community demand that businesses behave ethically as well as legally in handling their financial transactions. Businesses must be honest in reporting their profits and financial performance to avoid misleading investors. The Securities and Exchange Commission (www.sec.gov) is the federal agency responsible for investigating suspicions that publicly traded firms have engaged in unethical or illegal financial behavior.
Business ethics refers to the standards of conduct and moral values that businesspeople rely on to guide their actions and decisions in the workplace. Businesspeople must take a wide range of social issues into account when making decisions. Social responsibility refers to management’s acceptance of the obligation to put an equal value on profit, consumer satisfaction, and societal well-being in evaluating the firm’s performance.
People develop ethical standards in three stages: preconventional, conventional, and postconventional. In the preconventional stage, individuals primarily consider their own needs and desires in making decisions. They obey external rules only from fear of punishment or hope of reward. In the conventional stage, individuals are aware of and respond to their duty to others. Expectations of groups, as well as self-interest, influence behavior. In the postconventional stage, the individual can move beyond self-interest and duty to include consideration of the needs of society. A person in this stage can apply personal ethical principles in a variety of situations.
Employees are strongly influenced by the standards of conduct established and supported within the organizations where they work. Businesses can help shape ethical behavior by developing codes of conduct that define their expectations. Organizations also can provide training to develop employees’ ethics awareness and reasoning, for instance discussing common issues like conflicts of interest, honesty and integrity, loyalty versus truth, and whistle-blowing. Executives must demonstrate ethical behavior in their decisions and actions to provide ethical leadership.
Today’s businesses are expected to weigh their qualitative impact on consumers and society, in addition to their quantitative economic contributions such as sales, employment levels, and profits. One measure is their compliance with labor and consumer protection laws and their charitable contributions. Another measure some businesses take is to conduct social audits. Public-interest groups also create standards and measure companies’ performance relative to those standards.
Consumerism protects the right to be safe, to be informed, to choose, and to be heard. It has increased product safety, provided information to consumers, increased competition, offered a wider variety of choices, promoted truth in advertising, and monitored unethical activities and fraud. Challenges include assuring product safety because contamination leaks in, causing illness or even death. Moreover, all communications with customers—from salespeople’s comments to warranties and invoices—must be controlled to clearly and accurately inform customers. Businesses that fail to comply with truth in advertising face scrutiny from the FTC and consumer protection organizations.
The responsibilities of business to the general public include protecting the public health and the environment and developing the quality of the workforce. In addition, many would argue that businesses have a social responsibility to support charitable and social causes in the communities in which they earn profits. Business also must treat customers fairly and protect consumers, upholding their rights to be safe, to be informed, to choose, and to be heard. Businesses have wide-ranging responsibilities to their workers. They should make sure that the workplace is safe, address quality-of-life issues, ensure equal opportunity, and prevent sexual harassment and other forms of discrimination.
Lastly, investors and the financial community demand that businesses behave ethically as well as legally in handling their financial transactions. Businesses must be honest in reporting their profits and financial performance to avoid misleading investors. The Securities and Exchange Commission (www.sec.gov) is the federal agency responsible for investigating suspicions that publicly traded firms have engaged in unethical or illegal financial behavior.
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