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Business 100
Chapter 5
Business Ethics and the Legal Environment of Business
Ethical Environment of Business
Ethics - A set of moral principles or values (may change over time)
Ethical Dilemma – the problem that people experience when they must decide whether
or not they should act in a way that benefits someone else even if it harms others and is
not in their own self interest.
Stockholders have ownership in a business and their goal is to maximize profits (i.e.,
people who own the businesses stock)
Stakeholders are influenced by a business (i.e., employees, customers, suppliers,
community as a whole)
Rules for ethical decision making
1. The Utilitarian Rule – an ethical decision should produce the greatest good for
the greatest number of people
2. The Moral Rights Rule – an ethical decision should protect the fundamental or
inalienable rights (life and safety, freedom, privacy, free speech) of people
affected by it.
3. The Justice Rule – an ethical decision should distribute benefit and harm among
people and groups in fair and impartial ways
4. The Practical Rule – an ethical decision that a manager has no hesitation about
communicating to society because the typical person would find it acceptable
Sources of Business Ethics
1. Societal Ethics – standards that govern how members of a society should deal
with one another in matters involving fairness, justice, poverty, and the rights of
individuals.
 Comes forth as a result of the society’s laws, customs, and practices
(ingrained in the moral fabric of a society).
 Societal ethics vary among societies
i. Germany, Japan, Sweden, and Switzerland have been identified as
some of the most ethical countries with strong values about social
order and protecting the welfare of all people.
ii. In general, the poorer the country is, the more likely employees are
to be treated with little regard.
2. Occupational Ethics – standards that govern how members of a profession
conduct themselves when performing work-related activities. (i.e., Lawyers
should act in the best interest of their clients rather than choosing the route that
will pay the most)
3. Individual Ethics – personal standards and values that determine how people
should act towards others when their own self interests are at stake.
4. Organizational Ethics – the values and beliefs that guide an organization’s
behavior toward its stakeholders
 Whistleblower – a stakeholder (usually an employee) who reveals an
organization’s misdeeds to the public
Legal Environment of Business
Laws affecting business commerce (see handout for additional information)
1. Antitrust Laws – curb power of big business and make it illegal for companies to
conspire with one another to limit supply and keep process high
a. Rockefeller formed a monopoly with Standard Oil company
b. The Securities and Exchange Commission (SEC) charged with overseeing
corporate behavior and business commerce
2. Consumer Safety and Protection Laws
3. Environmental Protection Laws – govern how companies treat the natural
environment.
4. Employee Relations Laws