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Business Ethics
Chapter
 Business
#1
Ethics the changing
environment and stakeholder
management
Business ethics & changing
environment.
Business Ethics
The
study and examination of moral and social
responsibility in relation to business practices and
decision making in business.

Businesses & Govts operate in changing
technological,ligal,economic,social & political
environments with competing
stakeholders & power claim.
•Stakeholders
Stakeholders are individuals,companies,groups &
even nations that cause and respond to external
issues,opportunities & threats.
Environmental Forces & Stakeholders
Economic Force
•Large and small companies are expanding
businesses and products overseas.
•Businesses are going into the global market now a
days.
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Technological Force
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The advent of electronic communication and the internet
is changing economics,industries,companies and jobs.
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Political Force
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Political situation of particular area also affect industries
and jobs.
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Legal Force
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Legal questions and issues affect all of these environmental
dimensions and every stakeholder.
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Demographic Force
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The workforce has become more diverse.
Employers & employees are faced with sexual harassment
& discrimination issues and effects the downsizing,career
changes and security.
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Stakeholder Management Approach
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Stakeholder Management Approach: It is a way of
understanding the effects of environmental forces and
groups on specific issues which affect stakeholders and
their welfare.
Example: How do companies, communication media,
political groups, consumers, employees, competitors, and
other groups respond when they are affected by an
issue, threat, or opportunity.
Beginning of Stakeholder Approach: The stakeholder
approach begins with cooperation among individuals and
groups. This cooperation is based on win-win strategies.
Base for Collaboration & win-win
Strategies
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Collaboration & win-win strategies are based
on the following points:
1. Identifying and prioritizing issues, threats, or
opportunities
2. Mapping who the stakeholders are
3. Identifying their stakes, interests, and power
sources
4. Showing who the members of coalitions are,
or may be
5. Showing what each stakeholder’s ethics are
(and should be)
6. Developing collaborative strategies and
dialogues
What are unethical business practices?

The most unethical behavior, one survey
showed, happens in the following areas :
Government
 Sales
 Law
 Finance
 Medicine
 Banking
 Manufacturing
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Levels of business ethics
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Because ethical problems are not only an
individual or personal matter, it is helpful
to see the different "levels" at which
issues originate and how they often move
to other levels.
International
Level
Societal
Level
Association
Level
Organizational
level
Individual
level
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Individual level
At the individual level, ethical issues arise
when, for example, a sales man is asked to
sale the product by telling a lie to the
customers.
Organizational level
At the organizational level, ethical issues
arise, for example, when employee is asked
to perform an unethical or illegal act to earn
division or work unit profit.
Members should examine the firm's policies
and procedures and code of ethics, if one
exists, before making a decision or taking
action.
Association level
 At the association level, accountant,
information technology (IT) professionals,
lawyers, physicians, and management
consultants must follow the ethics to
facilitate the people.
 Societal level
 At the societal level, laws, norms, customs,
and traditions govern the legal and moral
acceptability of behaviors. For example
activities in china may be not acceptable
in uk.
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Five Myths about Business Ethics
Myth
 A belief given uncritical acceptance by
members of a group, especially in support
of traditional practices and institutions.
 Five Myths
1. “ethics is a personal individual
affair, not a public or debatable
matter”
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This myth holds that individual ethics is based on
personal or religious beliefs and that one decides
what is right and wrong in the privacy of one’s own
conscience.
2. “Business and ethics do not
mix”
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This popular myth holds that; businesses
operate in a free market.
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This myth also asserts that management is
based on scientific, rather than religious
or ethical, principle.
3. “ethics in business is
relative”
This is one of the popular myths, and it
holds that no right or wrong way of
believing or acting exists. Right and wrong
are in the eyes of the beholder.
 The claim that ethics is not based solely
on absolutes has some truth in it. How
ever, to argue that all ethics is relevant
contradicts everyday experience.
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4. “good business means good
ethics”
The reasoning here is that executives and
firms that maintain a good corporate
image, practices fair and equitable dealings
with customers and employees, and earn
profits by legal means have good ethics.
 Such firms, therefore, would not have to
be concerned explicitly with ethics in the
workplace.
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5. "information and
computing are amoral"
This myth holds that information and
computing are neither moral nor immoral,
but are amoral, i.e., they are in "gray
zone," a questionable area regarding
ethics.
 Information about individuals can be used
as “a form of control, power, and
manipulation. The point here is to beware
of the dark side: the misuse and abuse of
information and computing.
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Why use ethical reasoning in
business?
Ethical reasoning is required in business
for at least three reasons.
 First: many times laws are insufficient
and do not cover all aspects or “gray
areas” of a problem.
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How could tobacco companies have been
protected by the law for decades until the
settlement in 1997, when the industry agreed to
pay $368.5 billion for the first 25 years and then
$15 billion a year indefinitely to compensate states
for the costs of health care for tobacco related
illness?
Second: free market and regulated
mechanisms do not effectively inform
owners and managers about how to
respond to complex issues and crises that
have far-reaching ethical consequences. For
example: did Microsoft act unethically while
becoming the dominant player in its
industry in free-market environment?
 A third argument holds; that ethical
reasoning is necessary because complex
moral problems require” and intuitive or
learned understanding and concern for
fairness, justice, due process to people,
groups, and communities”
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Can business ethics be taught
and trained?
Since laws are often not always sufficient
to solve complex human problems
relating to business situations, the
questions arise: can ethics help?
If so how?
 A useful framework for evaluating ethics
training is Lawrence kohl berg’s study of
the stages of moral development.
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Stages of moral development
Kohl berg’s three levels of moral
development (which encompass six stages)
offer argued for observing a person’s level of
moral maturity.
 Level 1: Self orientation
 Stage 1: Punishment avoidance: avoiding
punishment by not breaking rules. The person
has little awareness of others’ needs.
 Stage 2: Reward seeking: acting to receive
rewards for self. The person has awareness of
others’ needs but not of right and wrong as
abstract concepts.
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Level 2: Other orientation
 Stage 3: good person: Acting “right” to be “good
person” and to be accepted by family and friends, not to
fulfill any moral ideal.
 Stage 4: law and order: Acting “right” and follows
the laws and made law & order situation good.
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Level 3: Universal, Humankind Orientation
Stage 5: social contract: Acting “right” to reach
consensus by due process and agreement. The person is
aware of relativity of value and tolerates differing views.
Stage 6: Universal ethical principles: Acting right
according to universal principles of justice & rights.