Chapter 2 Review

Ethics & Corporate Social Responsibility

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Ethics vs. Corporate Social Responsibility

Ethics: The principles and standards of moral behavior that are accepted by society as right versus wrong. This is partially defined by our societal norms.


Business Ethics: Application of ethical standards to business situations.


Corporate Social Responsibility: The idea that business has certain obligations to society beyond the pursuit of profits.


Society's view on the role of business has changed over the years:


  • 19th and early 20th centuries, idea of Caveat Emptor ("May the Buyer Beware") was the accepted notion
  • Mid-20th century (Friedman) the idea that business' only responsibilities to society were to create jobs and to pay taxes became the accepted norm.
  • Now there is a much broader view. The idea that not only does a company have a responsibility to society far beyond profits, but that doing so will actually end up increasing profits is the current standard.


How then is Corporate Social Responsibility related to Business Ethics?

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How Can We Behave Ethically In Business? ( At the Minimum)

  1. Compete Fairly and Honestly
  2. Being Truthful (Timing and Content)
  3. Avoid Causing Harm to Others (Avoid insider trading and conflicts of interest)
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There are MANY, MANY Factors that Influence Ethical Behaviors. Here are the Top 3:

  1. Cultural Differences (Globalization)
  2. Knowledge (the more you know, the better your capacity for making the best choices)
  3. Corporate Behavior ***
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Ways to Encourage Ethical Business Culture:

  • Establish a Code of Ethics/ Code of Conduct
  • Provide Ethics Training
  • Enforce Established Codes of Conduct
  • Make sure there is some reporting system in place (Whistle Blowing)
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Facing Ethical Dilemmas:

  • Is It Ethical (Legal/Fair/Acceptable/Feasible)
  • Stakeholder Issues (Outsiders, Superiors, Other Employees)
  • Philosophical (Utilitarianism/Rights/Justice)
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Society- Philanthropy & Sustanablility

  • Philanthropy- Social Audits (how are we doing now?), cause-related marketing, other philanthropic activities.
  • Sustainability- Decrease pollution (ecology), Environmental Protection Agency (EPA)

Consumers- Consumers' Bill of Rights (President Kennedy)

  • Driven by Consumerism- movement that put pressure on businesses to consider consumer needs and interests.
  • Consumer Product Safety Commission

  1. Product Safety
  2. Accurate Information
  3. Freedom of Choice
  4. Right to be Heard

Investors- Profits, Risk Management, Ethical Behavior

Unethical decisions and unjustified risk are unfair to the investors

Employees- Equity, Safety and Health

  • Equity
Equal Employment Opportunity Commission- Civil Rights Act of 1964 established the EEOC (job discrimination)


Affirmative action programs began being developed in the 1960's to address the serious lack of diversity in the workplace.


Americans with Disabilities Act (ADA) which helps disabled Americans. Requires employers to provide reasonable accommodations



  • Health & Safety
Occupational Safety and Health Act of 1970 created occupational Safety and Health Administration to enforce safety standards established therein.