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CHAPTER 15
Business Ethics and Social Responsibility
Learning Objective
After studying this chapter, students will be able to:
1. Define ethics.
3. Describe the process of rationalizing unethical behavior.
5. Describe the influence of group goals on ethics.
7. Define social responsibility.
8. Describe the process of whistleblowing.
Key Terms
Boss massaging: The practice of currying favor, or kissing up, with a manager to achieve
your own goals.
Categorical imperative: A principle developed by philosopher Immanuel Kant, which
asks the question, “What would the world—or my company—be like if everyone were to
do this?”
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Inner circle: A clique of trusted family members, tribal members, or friends (depending
on the culture), who are at the center of power or influence.
Morality: A system of conduct that covers all broadly based, mostly unwritten standards
of how people should behave and generally conform to cultural ideals of right and wrong.
Principle of individual rights: An ethical philosophy that holds that all decisions should
respect basic human rights and the dignity of the individual.
Principle of individualism: An ethical philosophy that holds that all primary goals
should achieve long-term self-interests, with the emphasis on long-term; self-interest
should not justify short-sighted actions.
Rationalize: To justify unethical behavior with excuses.
Social responsibility: The practice of acting ethically while understanding that your
actions are part of the larger, interactive picture of your workplace, community, and
world.
Stakeholders: Any group that a business interacts with, such as customers, competitors,
unions, suppliers, consumer groups, and government agencies.
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Lecture Outline
I. What is Ethics?
Ethics deals with the standards of conduct and morals in a particular society; in short,
ethics expresses the standards of right and wrong. However, ethics and morality are not
identical concepts. Morality deals with how behavior should generally conform to
cultural ideals of right and wrong. It represents broadly based, mostly unwritten standards
of how people should behave. Ethics is more precise and is often based on written
guidelines.
The practice of business brings many benefits to society. The business world has
provided jobs for millions, created a high standard of living, and given many people an
The following are other misperceptions that affect peoples’ understanding about ethics:
• All ethical problems have simple solutions in which right and wrong are always
obvious.
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A. Ethics and the Internet
Perhaps the stickiest ethical issue today is how to behave ethically on the Internet.
Every day companies monitor employee e-mails and track Internet usage, looking for
the personal misuse of company property.
The Internet has introduced enormous compliance risks and ethical issues. There’s the
potential for sexual harassment, improper contact with competitors, people using
[illicit] chat rooms, [viewing or downloading] pornography, and employees sending
out proprietary information over the Net.
II. Codes of Ethics
Some companies have developed specific ethical codes that are accepted and abided by
in all levels of the firm. Codes of ethics are usually based on one of the following ethical
approaches:
• The principle of justice focuses on making sure that all decisions are consistent,
unbiased, and based on fact.
• The principle of individual rights focuses on basic human rights and the dignity
of the individual.
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Additional principles are listed in Figure 15.3. Some choices are better and more popular
than others.
III. Rationalizing Unethical Behavior
Even people with a good knowledge of ethical principles can fall prey to the temptation
to rationalize unethical behavior. Management expert Saul Gellerman warns that
unethical behavior in the workplace often starts with one or more of four basic
rationalizations:
• A belief that the unethical behavior is within ethical and legal limits—because it is
more convenient to believe that it is.
Whenever people are expected to make a work-related decision, they should be aware of
these four rationalizations. When people are justifying a decision that seems unethical,
they should ask themselves whether they are being honest with themselves in the
rationalizing.
IV. Ethics in Context
It is important to use self-disclosure and be honest in one’s relationships with others. This
can become an ethical issue when people act insincerely in their relationships with other
people in order to achieve their own ends. Politics exists in any company, and gaining
political power isn’t in itself an unethical behavior.
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The employee wishing to rise above this disharmony can have trouble remaining
detached from it. If people find themselves in such a position, they should remember that
no one can force them to act unethically.
V. The Influence of Group Goals
When encountering someone in need, many people look the other way because other
people’s goals or a group’s pressures override the need. This creates an ethical conflict—
even when people have learned helping behavior in their families and communities, they
sometimes find themselves unable to transfer those behaviors to the workplace. Research
by social scientists shows that many people change their ethical standards between home
and work.
VI. Global Ethics Issues
As trade expands, people need to recognize differing ethical views among the nations of
the world and acknowledge these differences with an attitude of acceptance. American
values, beliefs, and practices are not the only ones in this world.
A. A Historical Perspective
The values and customs of other countries are not inferior, primitive, or degraded.
They have different origins, evolutions, and applications through history. They are
based on differing histories and cultural memories. If people do business with foreign
companies, especially in developing countries, they need to understand three
concepts—the inner circle, future favors, and the gift exchange—that seem to be
widely believed and practiced:
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B. The Inner Circle
Most communal societies make a strong distinction between insiders and outsiders.
C. Future Favors
Within the inner circles, one will find the assumption of future favors. The practice
can be found in nearly any culture that respects the inner circle concept. The trading
back of favors can go on for years, even generations.
D. Gift Exchange
Americans who witness a gift exchange in another country may suspect bribery, but
such an accusation would horrify most people who practice this custom. In some
VII. Social Responsibility
Social responsibility means putting ethical standards to work in all areas of the global
community in which you live. Social responsibility includes acting ethically with
customers, co-workers, suppliers, competitors, and the community in which you live.
Every workplace has an obligation to make choices or decisions about issues such as
environmental pollution, discrimination, employee safety and health, dishonesty, and
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• Traditional social responsibility says that a company or organization is responsible
only to itself and to making a profit.
A. A Few Cautions About Social Responsibility
Just as there are many difficult questions regarding ethics, there are also many difficult
questions regarding social responsibility. When a company can no longer afford to
support charities or organizations that have become dependent on them, a move to
protect the company’s economic health by cutting charitable funding may seem selfish
to outside observers.
VIII. Blowing the Whistle
When people find unethical conduct taking place in the company, they mostly use
strategies that involve whistleblowing—turning in the offending person or people and
exposing the truth.
The first law passed to protect whistleblowers was the Lloyd–La Follette Act of 1912,
which protected federal employees who gave information to Congress. Wider protection
for those who blow the whistle on dangerous, fraudulent, or unethical practices in their
workplace has been in existence since the 1970s. Although free speech rights are
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Some of the strategies available to the person who faces the moral choices of the
whistleblower include:
• Secretly threatening the offender with blowing the whistle unless the action is
stopped or corrected.
For reasons that remain unclear, people have traditionally looked down on the person
who “tells on” someone else, especially in some areas of life. For this reason and others,
even many otherwise moral and ethical people are afraid of blowing the whistle. After all,
one’s job might be at risk, or the whistleblower might be excluded from the informal
The best solution is the kind of leadership that makes whistleblowing unnecessary. The
ethical tone of an organization nearly always originates in top management and moves
downward. Thus, top management is in an ideal position to create an ethical environment
for everyone who works in the company.
Management can also create low ethical standards by any of the following managerial
mistakes:
• Favoritism occurs when one employee is given extra privileges and allowances.
• “Fudging” with the expense budget is a managerial mistake. Managers who allow
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Review Questions
1. Briefly define ethics. Give your own definition of ethics as the term applies to your
own values. Do you think it is a good idea to base your decisions on what “feels”
right? Are there any outside forces that influence your behavior?
2. What is a code of ethics? In your opinion, how effective are such codes?
3. Evaluate the Johnson & Johnson Company’s Code of Ethics in Figure 15.2. What is
the key to its popular appeal?
4. Define the term rationalizing. What role does rationalization play in making bad
ethical decisions? Thinking back, have you ever rationalized a bad ethical decision?
Explain.
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5. Explain the ethical problems involved in boss massaging. When is this practice a
good idea? When is this practice a bad idea? Explain what may occur when
employees are involved in boss massaging.
Answer: Boss massaging is the practice of currying favor with a manager to achieve
one’s own goals. There is a widespread belief that if one is agreeable and easy to get
6. What major ethical issues are likely to confront someone who is doing business in a
foreign country? Give some specific examples. What are some strategies for
becoming culturally aware of ethical conduct in foreign countries?
Answer: While doing business with foreign companies, these three issues are likely
to crop up:
• The Inner Circle—most communal societies make a strong distinction between
insiders and outsiders. Those who are in the inner circle are, depending on the
Some strategies to become culturally aware of ethical conduct in foreign countries
are to recognize differing ethical views among the nations of the world and
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7. How does the Internet create new ethical issues? Do you believe it is unethical for an
employee to use the Internet on a company computer for personal use during
company time? Is it unethical for the employer to monitor that usage? Explain.
Answer: Students’ answers will vary. Every day companies monitor employee e-
mails and track Internet usage, looking for the personal misuse of company property.
8. What is your attitude toward whistleblowing? Would you ever be a whistleblower if
the situation merited such action? Why or why not?
Critical Thinking Questions
9. There are times when people feel they must act unethically in the short term in order
to benefit the greater good in the long term. Can you think of a time or a situation
that you are familiar with in which this has happened? Is it ever acceptable to act
unethically?
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10. Ethical standards often are made into laws over time. In Oregon, children under age
16 must wear helmets when riding bicycles. Several years ago, this was only an
ethical standard that some parents chose and others did not. Do you think that all
ethical standards should have “teeth” in the way that laws do? Who would govern
codes of ethics? Or should some or all codes of ethics be made into laws so that they
carry more weight?
11. Consider the ethics of “hacktivism”: Is Army soldier Bradley Manning a hero for
trying to promote open, transparent government, or a traitor who gave military
secrets to a whistleblowing Web site? With regard to the Internet battle between
CyberBunker and Spamhaus—who was right or wrong in this case? And finally, who
is in charge of the Internet; that is, who is in charge of its content and for policing
unethical behavior
Answer: Students’ opinions may vary. Some of them may say that Bradley Manning
is a hero because he trying to promote open, transparent government. Others may say
Case Studies
Case Study 15.1: Life over Profit
Adapted from a classic ethics test by Lawrence Kohlberg about 50 years ago, the
situation has a woman in Europe dying of a rare kind of cancer which is cured only by a
type of radium sold by the developer of the drug. The druggist, while charging ten times
his production costs, refuses to undersell the drug despite the husband’s pleas. In
frustration, Heinz, the husband, breaks into the store to steal the drug to save his wife.
Chapter 15 Business Ethics and Social Responsibility
Questions
1. Was the husband’s behavior excusable under the circumstances?
2. If you were a police officer in the town, would you have arrested him for theft?
3. If you were Heinz, would you have stolen the drug? If not, why not? What would
you have done instead?
Suggested Answer: Student answers may vary. Some of them may say that instead
of stealing the drug, they would have asked the concerned authorities to intervene.
Case Study 15.2: Boss Massaging, or Just Good Politics?
After Kelli Nishikawa announced her retirement, Josh Ruiz and Denise Romano, both
assistant managers in a small technology firm, were the only candidates for the
replacement. In the following weeks, Denise notices Josh “kissing up” to Kelli with
casual talks and lunches together. Denise was also called to Kelli’s office three times for
her mistakes. Certain that Josh must have pointed these errors to Kelli, Denise confronts
Josh who innocently remarks that it was in the interest of the division’s success. Denise
reflects on the insincerity in Josh’s new friendship with Kelli.
Questions
1. Do you think Josh is really doing anything wrong? Why or why not?
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2. Why does Denise feel the way she does about Josh’s behavior? Is this just a case of
sour grapes on her part, or does she have a legitimate complaint? If she has a
legitimate complaint, to whom should she voice it?
3. What do you think will happen in this situation if it plays out to its logical
conclusion? What do you see as the long-term consequences in terms of the
relationship between Josh and Denise?