Business Ethics

Unethical Business Practices• Lying• Offering substandard merchandise• Unfair treatment of customers or

employees• Violation of ethical practices lead to:

– Fines– Jail Time– License Revoked– Termination of employment– Sometimes unethical actionsaffect businesses indirectly

Examples:• Auto-body paint shop

– charge top prices but use cheep paint– customers may complain – eventually may lose

business and be forced to close.• Small film distribution Company

– Hire graduate of business school– Fully train them to run your company– Work them hard and treat poorly– They leave and get hired by competitor– You invested money to train your competition

• Q – Any Examples you can think of?

Conflict of Interest• Conflict between personal interest and

professional obligation• When making business decisions,

employees have an ethical obligation to act in the best interest of the company– Manager hires his sister who is not qualified to

do the job– This might help the sister’s family, but create

problems with other employees.• Q – Any other examples you can share?

Social Responsibility• The duty to do what is best for the good of

society.• Business Ethics focus on what is good and

bad, correct or incorrect.• Businesses that follow ethical standards

value integrity and honesty in employees.• Social Responsibility takes into account all

that business does or does not do to solve problems of society.

Q – How could a business demonstrate social responsibility by participating in an event like this community concert?

Society vs. Environment• Some believe businesses that produce

goods to benefit society are fulfilling their social responsibility

• Others are concerned about limiting the damage done to the environment.

• L.A. Times with 1 million plus subscribers uses recyclable paper and soy-based ink.

• Honda and Toyota offer eco-cars, which reduce air pollution.

• Q – What are some other ways businesses can fulfill its social responsibilities?

Responsibility to Customers• Provide a good, safe, product or service at

a reasonable price.• Some companies use unfair competition• The market economy relies on market

forces to allocate goods, services, and other resources and determine prices.

• Some companies use unethical tactics to eliminate competition.

• They may conspire with other companies to control the market for a product.

Unfair Competition• When companies restrict competition,

consumers are affected.– Fewer choices– Might have to pay more– Quality will not be required.

• When a company doesn’t have to compete for its business, productivity decreases.

• They may not be ready when new markets open up and they aren’t prepared for the change.

Responsibility to Employees• Some businesses provide work experience

to people with limited job skills.• Purpose of such programs are to develop

skills and confidence necessary for success.• Businesses need to provide safe working

conditions, equal treatment and fair pay.• Over the years, the government has passed

laws to protect workers from:– child labor abuses– rights of workers to organize

• Q – Can you think of others?

Responsibility to Creditors/Owners• Around the turn of the century, many major

corporations kept inaccurate records showing that the firms had higher profits than were reported to others.

• Such behaviors are harmful to creditors (those who loan money) and shareholders (those who own but don’t work in the business)

• (Discussion) – Why do you think false reporting is harmful?