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Business Ethics SENIOR CONTRIBUTING AUTHORS STEPHEN M. BYARS, USC MARSHALL SCHOOL OF BUSINESS KURT STANBERRY, UNIVERSITY OF HOUSTON-DOWNTOWN OpenStax Rice University 6100 Main Street MS-375 Houston, Texas 77005 To learn more about OpenStax, visit https://openstax.org. Individual print copies and bulk orders ...
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PRINT BOOK ISBN-10 PRINT BOOK ISBN-13 PDF VERSION ISBN-10 PDF VERSION ISBN-13 10 9 8 7 6 5 4 3 2 1 1-947172-56-5 978-1-947172-56-2 1-947172-57-3 978-1-947172-57-9 OPENSTAX OpenStax provides free, peer-reviewed, openly licensed textbooks for introductory college and Advanced Placement® courses an...
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RICE UNIVERSITY OpenStax, OpenStax CNX, and OpenStax Tutor are initiatives of Rice University. As a leading research university with a distinctive commitment to undergraduate education, Rice University aspires to path-breaking research, unsurpassed teaching, and contributions to the betterment ...
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Ann and John Doerr Michelson 20MM Foundation Bill & Melinda Gates Foundation National Science Foundation Girard Foundation Google Inc. The Open Society Foundations Jumee Yhu and David E. Park III The William and Flora Hewlett Foundation Brian D. Patterson USA-International Foundation Rusty and John...
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Access. The future of education. openstax.org TABLE OF CONTENTS Preface 1 1 Why Ethics Matter 7 1.1 Being a Professional of Integrity 1.2 Ethics and Profitability 1.3 Multiple versus Single Ethical Standards 13 8 20 2 Ethics from Antiquity to the Present 27 2.1 The Concept of Ethical Business in Ancient Athen...
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72 83 68 78 4 Three Special Stakeholders: Society, the Environment, and Government 93 4.1 Corporate Law and Corporate Responsibility 4.2 Sustainability: Business and the Environment 4.3 Government and the Private Sector 117 94 103 5 The Impact of Culture and Time on Business Ethics 131 5.1 The Relationship ...
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212 207 218 8 Recognizing and Respecting the Rights of All 231 8.1 Diversity and Inclusion in the Workforce 232 8.2 Accommodating Different Abilities and Faiths 8.3 Sexual Identification and Orientation 8.4 Income Inequalities 8.5 Animal Rights and the Implications for Business 244 247 239 252 9 Professions un...
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11.1 Business Ethics in an Evolving Environment 11.2 Committing to an Ethical View 329 11.3 Becoming an Ethical Professional 11.4 Making a Difference in the Business World 332 326 336 A The Lives of Ethical Philosophers 341 This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 B Profiles...
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means that you can distribute, remix, and build upon the content, as long as you provide attribution to OpenStax and its content contributors. Because our books are openly licensed, you are free to use the entire book or pick and choose the sections that are most relevant to the needs of your course. Feel free to re...
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Art attribution in Business Ethics In Business Ethics, most art contains attribution to its title, creator or rights holder, host platform, and license within the caption. Because the art is openly licensed, anyone may reuse the art as long as they provide the same attribution to its original source. To maximize re...
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pedagogically necessary. If you have a correction to suggest, submit it through the link on your book page on openstax.org. Subject matter experts review all errata suggestions. OpenStax is committed to remaining transparent about all updates, so you will also find a list of past errata changes on your book page on ...
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which help instill in students a sense of ethical awareness and responsibility. The book provides an important opportunity for students to learn the core concepts of business ethics and understand how to apply those concepts to their professional lives. Coverage and scope Our Business Ethics textbook adheres to the...
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their graduation. We particularly emphasize the reality of today’s global business community and observe that geography, culture, and time contribute to ethical concepts and constructs. With awareness of these issues in mind, the content of this textbook has been developed and arranged to emphasize the necessity—and ...
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Engaging feature boxes Throughout Business Ethics, you will find features that engage students by taking selected topics a step further. Each feature box contains either a link to a deeper exploration of the topic at hand or critical thinking questions that may be geared toward class discussion, student projects, or...
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to put themselves into the shoes of ranking executives and balance a host of interests—some conflicting—as they make decisions for their businesses. Students provide an answer to a practical problem or ethical issue, as well as their reasoning. • Ethics across Time and Cultures. This feature considers how geography,...
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easily to some of the most important thought leaders and concepts in the field of business ethics. The This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Preface 3 purpose is to highlight the complexities of ethical decision-making. Module materials that reinforce key concepts • Learn...
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down to key, concise points addressed in the section. • Key Terms. Key terms are bold and are followed by a definition in context. Definitions of key terms are also listed in the glossary, which appears at the end of the chapter. • Assessments. Multiple-choice and short-answer review questions provide opportunities ...
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Technology partners As allies in making high-quality learning materials accessible, our technology partners offer optional low-cost tools that are integrated with OpenStax books. To access the technology options for your text, visit your book page on OpenStax.org. About the authors Senior contributing authors Ste...
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Preface Center within the Writing Program, and as director of the USC Marshall Consulting Program. His scholarly interests include business and professional ethics, the constructive mediation of disputes in the workplace, and those best practices that permit leaders to direct business in ways that engender community...
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negotiations, ethics, and other related topics. He also conducts continuing education seminars in topics such as negotiations, leadership, diversity, and ethics for CPAs, CFPs, attorneys, and business executives, through organizations such as the AICPA, FEI, and TSCPA at the state and national levels. He has publishe...
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Wade Chumney, California State University, Northridge Laura Dendinger, Wayne State College Bill Nantz, Houston Community College Mark Poepsel, Southern Illinois University Edwardsville David Shapiro, Pennsylvania State University Reviewers Justin Bateh, Florida State College at Jacksonville Ronald Berenbeim, New...
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5 Mehran Ferdowsian, Wilkes University Betty Fitte, Tidewater Community College Robert Freeborough, Berkeley College Martha Helland, University of Sioux Falls Amy Jordan, Loyola University Chicago Stephanie Jue, University of Texas Cheryl Keymer, North Arkansas College Nai Lamb, University of Tennessee at Chatt...
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Anne Snell, Tulane University Chris Suprenant, University of New Orleans Glen Taylor, Paradise Valley Community College Sonia Toson, Kennesaw State University Joel Webb, Loyola University New Orleans Andy Wible, Muskegon Community College Jeffrey Yoder, Fairfield University Preface This OpenStax book is availab...
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1.3 Multiple versus Single Ethical Standards Introduction Ethics consists of the standards of behavior to which we hold ourselves in our personal and professional lives. It establishes the levels of honesty, empathy, and trustworthiness and other virtues by which we hope to identify our personal behavior and our pu...
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is yes. Whatever hopes you have for your future, you almost certainly want to be successful in whatever career you choose. But what does success mean to you, and how will you know you have achieved it? Will you measure it in terms of wealth, status, power, or recognition? Before blindly embarking on a quest to achie...
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• Describe the role of ethics in a business environment • Explain what it means to be a professional of integrity • Distinguish between ethical and legal responsibilities • Describe three approaches for examining the ethical nature of a decision Whenever you think about the behavior you expect of yourself in your p...
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are pursuing profit in your business, you will not require that all the money on the table come your way. Instead, there might be some to go around to those who are important because they are affected one way or another by your business. These are your stakeholders. Acting with Integrity Clients, customers, supplie...
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donates 1 percent of all sales to help save the planet. In part because of this program, Patagonia has become a market leader in outdoor gear. This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Chapter 1 Why Ethics Matter 9 Figure 1.2 Stakeholders are the individuals and entities affe...
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the sense of pride we feel about engaging in honest transactions, not just because the law demands it but because we demand it of ourselves. It may lie in knowing the profit we make does not come from shortchanging others. Thus, business ethics guides the conduct by which companies and their agents abide by the law ...
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honesty. These foundational beliefs, in turn, prepare us for the codes of ethical behavior that serve as ideal guides for business and the professions. Still, we need not subscribe to any religious faith to hold that ethical behavior in business is still necessary. Just by virtue of being human, we all share obligati...
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we are all humans and in the same world, we should extend the same behavior to all. It is the right way to behave, but it also burnishes our own professional reputation as business leaders of integrity. Integrity—that is, unity between what we say and what we do—is a highly valued trait. But it is more than just con...
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Successful corporate leaders and the companies they represent will take pride in their enterprise if they engage in business with honesty and fair play. To treat customers, clients, employees, and all those affected by a firm with dignity and respect is ethical. In addition, laudable business practices serve the long...
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ambition were motivating factors (https://openstax.org/l/53MarkFaris) in his actions. He also discusses the human ability to rationalize our behavior to justify it to ourselves. Note his proposed solutions: practicing ethical leadership and developing awareness at an individual level via corporate training. Many peo...
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which a company conducts its business operations in accordance with applicable regulations, statutes, and laws. Yet this represents only a baseline minimum. Ethical observance builds on this baseline and reveals the principles of an individual business leader or a specific organization. Ethical acts are generally con...
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changing, however, as evidenced by the array of codes of conduct and mission statements many companies have adopted over the past century. These have many points in common, and their shared content may eventually produce a code universally claimed by business practitioners. What central point might constitute This O...
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society undergo. Often, ethical thought precedes and sets the stage for changes in the law. Behaving ethically requires that we meet the mandatory standards of the law, but that is not enough. For example, an action may be legal that we personally consider unacceptable. Companies today need to be focused not only on...
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53EthicalBus) according to their standards and research. Ends, Means, and Character in Business How, then, should we behave? Philosophy and science help us answer this question. From philosophy, three different perspectives help us assess whether our decisions are ethical on the basis of reason. These perspectives ...
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whether those ends are ethical. Variations on this approach include utilitarianism, teleology, and consequentialism. For example, utilitarianism suggests that an ethical action is one whose consequence achieves the greatest good for the greatest number of people. So if we want to make an ethical decision, we should ...
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Deontology contends that each of us owes certain duties to others (deon is a Greek word for duty or obligation) and that certain universal rules apply to every situation and bind us to these duties. In this view, whether our actions are ethical depends only on whether we adhere to these rules. Thus, the means we use ...
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Public Domain) The third normative approach, typically called virtue theory, focuses on the character of the decision- maker—a character that reflects the training we receive growing up. In this view, our ethical analysis of a decision is intimately connected with the person we choose to be. It is through the develo...
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to their care in brokerages. Virtue theory has its roots in the Greek philosophical tradition, whose followers sought to learn how to live a flourishing life through study, teaching, and practice. The cardinal virtues to be practiced were courage, self- control, justice, and wisdom. Socrates was often cited as a sag...
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Nonaka, a Japanese organizational theorist, and Hirotaka Takeuchi, a professor of Management Practice at Harvard Business School, discuss the gap between the theory and practice of ethics and which characteristics make a wise leader.1 The authors conclude that “the use of explicit and tacit knowledge isn’t enough; ch...
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defined as prudence, to be a key intellectual virtue. Phronesis enables people to make ethically sound judgments. According to the authors, phronetic leaders: • practice moral discernment in every situation, making judgments for the common good that are guided by their individual values and ethics; • quickly assess...
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In essence, the first question any company should ask itself is: “Do we have a moral purpose?” Having a moral purpose requires focusing on the common good, which precedes the accumulation of profit and results in economic and social benefits. If companies seek the common good, profits generally will follow. Critica...
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• Differentiate between stockholder and stakeholder • Discuss the relationship among ethical behavior, goodwill, and profit • Explain the concept of corporate social responsibility Few directives in business can override the core mission of maximizing shareholder wealth, and today that particularly means increasing...
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consumers’ demands, going green, being socially responsible, and acting above and beyond the basic requirements all take time and money. However, the extra cost and effort will result in profits in the long run. If we measure success from this longer perspective, we are more likely to understand the positive effect ...
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including, but not limited to, stockholders, or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially ov...
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world. The context within which they act is society, which permits and facilitates a firm’s existence. Thus, a company enters a social contract with society as whole, an implicit agreement among all members to cooperate for social benefits. Even as a company pursues the maximizing of stockholder profit, it must also ...
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L I N K T O L E A R N I N G What happens when a bank decides to break the social contract? This press conference held by the National Whistleblowers Center (https://openstax.org/l/53Birken) describes the events surrounding the $104 million whistleblower reward given to former UBS employee Bradley Birkenfeld by t...
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In addition to taking this more nuanced view of profits, managers must also use a different time frame for obtaining them. Wall Street’s focus on periodic (i.e., quarterly and annual) earnings has led many managers to adopt a short-term perspective, which fails to take into account effects that require a longer time ...
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This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Chapter 1 Why Ethics Matter 15 United States in 1957. For many years, Toyota was content to sell its cars at a slight loss because it was accomplishing two business purposes: It was establishing a long-term relationship of trust with th...
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reputation for treating customers and employees fairly and for engaging in business honestly. Companies that act in this way may emerge from any industry or country. Examples include Fluor, the large U.S. engineering and design firm; illycaffè, the Italian food and beverage purveyor; Marriott, the giant U.S. hotelier...
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including expert management teams, focused and happy employees, and worthwhile products and services that meet consumer demand. One more and very important reason is that they maintain a company philosophy and mission to do good for others. Year after year, the nation’s most admired companies are also among those th...
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company’s prospects. C A S E S F R O M T H E R E A L W O R L D Competition and the Markers of Business Success Perhaps you are still thinking about how you would define success in your career. For our purposes here, let us say that success consists simply of achieving our goals. We each have the ability to ...
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others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet. . . . You’ll have a much more rewarding life not only in terms of how much money you make, but how much fun you have out of life; you’ll make more friends the more interesting person you ar...
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Barack Obama and Warren Buffett in the Oval Office” by Pete Souza/Wikimedia Commons, Public Domain) The primary principle under which Buffett instructs managers to operate is: “Do nothing you would not be happy to have an unfriendly but intelligent reporter write about on the front page of a newspaper.”6 This is a v...
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For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch this interview (https://openstax.org/l/53Buffet) that appeared on the PBS NewsHour on June 6, 2017. Stockholders, Stakeholders, and Goodwill Earlier in this chapter, we explained that stakeholders are all the individuals and...
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This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Chapter 1 Why Ethics Matter 17 stakeholders must be considered and rationally assessed. Managers do sometimes focus predominantly on stockholders, especially those holding the largest number of shares, because these powerful individual...
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but rather to take into account a broad array of stakeholders and the long-term and short-term consequences for a course of action. Here is a simple strategy for considering all your stakeholders in practice. Divide your screen or page into three columns; in the first column, list all stakeholders in order of percei...
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stakeholders and evaluate your decision’s impact on their interests. If you would like to add a human dimension to your analysis, try assigning some of your colleagues to the role of stakeholders and reexamine your analysis. Figure 1.5 Imagine you are the CEO of a mid-sized firm—about five hundred employees—and you...
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and liabilities. Among other intangible assets, goodwill might include the worth of a business’s reputation, the value of its brand name, the intellectual capital and attitude of its workforce, and the loyalty of its established customer base. Even being socially responsible generates goodwill. The ethical behavior o...
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Internet (e.g., on public rating sites such as Yelp), management’s values are always subject to scrutiny and open debate. These values affect the environment outside and inside the company. The corporate culture, for instance, consists of shared beliefs, values, and behaviors that create the internal or organizationa...
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with a corporation known to cultivate a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. At the end of each year, the company donates to numerous social and environmental causes. The second job opportunity is with a nonprofit recognized for a very differen...
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nonmonetary benefits of the lower-paid position? Positive goodwill generated by ethical business practices, in turn, generates long-term business success. As recent studies have shown, the most ethical and enlightened companies in the United States consistently outperform their competitors.8 Thus, viewed from the pro...
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approximately the same. Yet one of these firms stands above the others because it has a reputation, which you discover is well earned, for telling clients the truth and recommending investments that seemed centered on the clients’ benefit and not on potential profit for the firm. Wouldn’t this be the one you would tr...
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19 it appears to be committed to building up the local community might be enough to persuade you to give it your business. This is exactly how a long-term investment in community goodwill can produce a long pipeline of potential clients and customers. C A S E S F R O M T H E R E A L W O R L D The Equifax D...
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expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity-theft protection. On September 15, 2017, t...
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situation look like? • How do you think this breach will affect Equifax’s position relative to those of its competitors? How might it affect the future success of the company? • Was it sufficient for Equifax to offer online privacy protection to those whose personal information was hacked? What else might it have d...
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and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the company’s culture and mission, above and beyond any mandatory legal standards. A business that practices CSR c...
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An additional perspective to take concerning CSR is that ethical business leaders opt to do good at the same 20 Chapter 1 Why Ethics Matter time that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate setting. The idea is that a corporation is entitled to make mone...
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L I N K T O L E A R N I N G U.S. entrepreneur Blake Mycoskie has created a unique business model (https://openstax.org/l/53TOMS) combining both for-profit and nonprofit philosophies in an innovative demonstration of corporate social responsibility. The company he founded, TOMS Shoes, donates one pair of shoes to...
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Business people sometimes apply different ethical standards in different contexts, especially if they are working in a culture different from the one in which they were raised or with coworkers from other traditions. If we look outside ourselves for ethical guidance, relying on the context in which we find ourselves,...
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interactions with others. Some people who adopt multiple ethical standards may choose to exhibit the highest standards with their families, because these are the people they most revere. In a business setting, however, this same person may choose to be an unethical actor whose sole goal is the ruthless accumulation ...
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traditions, broadly defined here to include religious and ethnic norms, the standard patterns of behavior within the context in which we live. Culture and family also influence each other because the family exists in This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Chapter 1 Why Ethics...
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to determine how to behave, it makes rational sense to abide by a single ethical code for all interactions with all persons in all contexts. By doing so, you maximize your ethical behavior no matter who the other party is. Furthermore, you have an internally consistent behavior for all family, friends, customers, cli...
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your actions, regardless of the parties with whom you interact. A utilitarian would say that any act you take should result in the greatest good for the greatest number. A virtue ethicist would state that you cannot be virtuous if you lack integrity in your behavior toward all. Adopting a consistent ethical standard...
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customer, because they always engage in honorable commercial practices. A single standard of business behavior that emphasizes respect and good service appeals to all. Normative ethics is about discovering right and delineating it from wrong; it is a way to develop the rules and norms we use to guide meaningful deci...
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loyalty, fairness, respect for law, and respect for others. Yet another reason to adopt a universal ethical standard is the transparent character it nurtures in us. If a company’s leadership insists that it stands for honest business transactions at every turn, it cannot prosecute those who defraud the company and l...
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the expense of customers, clients, or other stakeholders. Moving from theory to daily life, we can also look at the way our reputation is established by the implicit and explicit messages we send to others. If we adopt ethical relativism, friends, family, and coworkers will notice that we use different standards for...
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discount on a $100 purchase of clothes for himself. Critical Thinking • How would you handle this situation and why? • Would it matter if the relative were someone closer to you, perhaps a brother or sister? • If so, why? This OpenStax book is available for free at http://cnx.org/content/col25722/1.3 Chapter 1 W...
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which employees and managers interact corporate social responsibility (CSR) the practice in which a business views itself within a broader context, as a member of society with certain implicit social obligations and responsibility for its own effects on environmental and social well-being deontology a normative e...
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goodwill the value of a business beyond its tangible assets, usually including its reputation, the value of its brand, the attitude of its workforce, and customer relations integrity the adherence to a code of moral values implying trustworthiness and incorruptibility because there is unity between what we say and...
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a focus on the goal of maximizing periodic (i.e., quarterly and annual) profits social contract an implicit agreement among societal members to cooperate for social benefit; when applied specifically to a business, it suggests a company that responsibly gives back to the society that permits it to incorporate, bene...
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create the greatest good for the greatest number of people virtue theory a normative theory that focuses on proper conduct guided by the training we received growing up Summary 1.1 Being a Professional of Integrity Ethics sets the standards that govern our personal and professional behavior. To conduct business e...
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and beyond legal responsibilities. The three normative theories of ethical behavior allow us to apply reason to business decisions as we examine the result (utilitarianism), the means of achieving it (deontology), and whether our choice will help us develop a virtuous character (virtue ethics). 1.2 Ethics and Profit...
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effects on environmental and social well-being. 1.3 Multiple versus Single Ethical Standards The adoption of a single ethical code is the mark of a professional of integrity and is supported by the reasoned approach of each of the normative theories of business ethics. When we consistently maintain the same values ...
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5. Which of the following is not a stakeholder? A. B. C. D. the media corporate culture the environment customers 6. True or false? According to Milton Friedman, a company’s social responsibility consists solely of bettering the welfare of society. 7. What is corporate social responsibility (CSR)? 8. Descri...
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A. deontology B. utilitarianism C. virtue ethics D. none of the above 12. Describe the benefits of having a single ethical standard. Endnotes 1. 2. Ikujiro Nonaka and Hirotaka Takeuchi, “The Big Idea: The Wise Leader,” Harvard Business Review, May 2011. https://hbr.org/2011/05/the- big-idea-the-wise-leader. Ji...
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12/business/whistle-blower-awarded-104-million-by-irs.html. Jeffrey Liker, The Toyota Way: Fourteen Management Principles from the World’s Greatest Manufacturer (New York: McGraw-Hill, 2005). Zameena Mejia and Margaret Ward, “Warren Buffett Says This One Investment ‘Supersedes All Others,’” CNBC Make It, October 4, 201...
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Peter Georgescu, “Doing the Right Thing Is Just Profitable,” Forbes, July 26, 2017. https://www.forbes.com/sites/petergeorgescu/2017/07/ 26/doing-the-right-thing-is-just-profitable/#360853967488. Tyler Durden, “Massive Data Breach At Equifax: As Many As 143 Million Social Security Numbers Hacked,” Zero Hedge, September...
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10. Arezou Naeini, Auditee Dutt, James Angus, Sarkis Mardirossian, and Sebastian Bonfanti, “A Shoe for a Shoe, and a Smile,” Business Today, June 7, 2015. http://www.businesstoday.in/magazine/lbs-case-study/toms-shoes-shoes-for-free-cause-marketing-strategy-case-study/ story/219444.html; TOMS.com, Giving shoes, https:...
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ethics. (credit: modification of “Golden Lady Justice” by Emmanuel Huybrechts/Flickr, CC BY 2.0) Chapter Outline 2.1 The Concept of Ethical Business in Ancient Athens 2.2 Ethical Advice for Nobles and Civil Servants in Ancient China 2.3 Comparing the Virtue Ethics of East and West 2.4 Utilitarianism: The Greatest ...
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Ethics are the standards of behavior to which we hold ourselves accountable in our personal and professional lives. Laws and regulations set the minimal standards by which society lives out those ethical norms. Because laws are minimal standards, it is not uncommon for an act to be legal but generally deemed unethica...
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2.1 The Concept of Ethical Business in Ancient Athens Learning Objectives By the end of this section, you will be able to: • Identify the role of ethics in ancient Athens • Explain how Aristotelian virtue ethics affected business practices It would be hard to overstate the influence of ancient Athens on Western c...
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focus among the leaders of ancient Athens, particularly teachers like Socrates, Plato, and Aristotle. They taught that ethics was not merely what someone did but who someone was. Ethics was a function of being and, as the guiding principle for dealings with others, it naturally applied as well to the sensitive areas ...
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traveled there hoping to study with such brilliant teachers as the mathematicians Archimedes and Pythagoras; dramatists like Sophocles and Euripides; historians Herodotus and Thucydides; Hippocrates, the father of medicine; and, of course, the renowned but enigmatic philosopher Socrates. More than being the equivalen...
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