Module 2

Defining Business
Ethics

1. Defining Business Ethics

2. Who are the Stakeholders?
3. An ethical crisis
4. Resolving ethical dilemma
5. Justifying unethical behavior

1. Defining Business Ethics: Afterwork Assessment

MODULE 2 – Defining Business Ethics 1|PAGE

 The application of ethical standards to business behavior.
refers to implementing appropriate business policies and practices with regard to
arguably controversial subjects. Some issues that come up in a discussion of ethics
include corporate governance, insider trading, bribery, discrimination, social
responsibility, and fiduciary responsibilities.
Business ethics has two distinctive perspectives:
1. A descriptive summation of the customs,
attitudes, and rules that are observed within
a business. As such, we are simply
documenting what is happening.
2. A normative (or prescriptive) evaluation of
the degree to which the observed customs,
attitudes, and rules can be said to be ethical.
Here we are more interested in
recommending what should be happening. Source:https://s3.amazonaws.com/blog.v-comply.com/wp-
content/uploads/2018/04/24054956/vc-blog-ethics.jpg

Someone with a share or interest in a business enterprise.

A stakeholder is a party that has an interest in a company and can either affect or be
affected by the business. The primary stakeholders in a typical corporation are its
investors, employees, customers and suppliers.

Figure 2.1 maps out the relevant

stakeholders for any organization and their
respective interests in the ethical operation
of that organization. Note very stakeholder
will be relevant in every business situation
Of greater concern is the involvement of
these stakeholders with the actions of the
organization and the extent to which they
would be impacted by unethical behavior.
As Figure 2.2 illustrates, the decision of an
organization such as WorldCom to hide the
extensive debt and losses it was
accumulating in its aggressive pursuit of
Source: https://ideas.darden.virginia.edu/sites/default/files/2019- growth and market share can be seen to
08/201908_Stakeholder-Theory-Collection%404x.png have impacted all of its stakeholders in
different ways.

MODULE 2 – Defining Business Ethics 2|PAGE

MODULE 2 – Defining Business Ethics 3|PAGE
 Source:https://diligent.com/en-gb/blog/uk-six-top-tips-effective-corporate-governance-framework/word-cloud-
corporate-governance/

Corporate Governance
The system by which business corporations are directed and controlled
Corporate governance is the structure of rules, practices, and processes used to direct
and manage a company. A company's board of directors is the primary force
influencing corporate governance.
The standard of corporate governance, the extent to which the officers of a corporation are
fulfilling the duties and responsibilities of their offices to the relevant stakeholders, appears to
be at the lowest level in business history:
Several prominent organizations have been found to have hidden the true state of their
precarious finances from their stakeholders.
Others have been found to have senior officers who appeared to regard the
organization’s funds as their personal bank accounts.
Financial reports are released that are then restated at a later date.
Products are rushed to market that have to be recalled due to safety problems at a later
date.
Organizations are being sued for monopolistic practices, race and gender
discrimination, and environmental contamination.
CEO salary increases far exceed those of the employees they lead.
CEO salaries have increased while shareholder returns have fallen
CEOs continue to receive bonuses while the stocks of their companies underperform
the market average and thousands of employees are being laid off.

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Oxymoron
The combination of two contradictory terms, such as “deafening silence” or “jumbo
shrimp.”
Code of Ethics
A company’s written standards of ethical
behavior that are designed to guide
managers and employees in making the
decisions and choices they face every day.
So, the code of ethics can be seen to serve a dual
function. As a message to the organization’s
stakeholders, the code should represent a clear
corporate commitment to the highest standards of
ethical behavior. As an internal document, the
code should represent a clear guide to managers
and employees in making the decisions and
Source:https://www.yourmembership.com/blog/code-ethics-important/
choices they face every day.

RESOLVING
ETHICAL
DILEMMAS
When employees observe unethical
behavior (for example, fraud, theft of
company property, or incentives being paid
under the table to suppliers or vendor
partners) or are asked to do something that
conflicts with their own personal values
Source:https://www.complianceweek.com/surveys-and- (selling customers products or services they
benchmarking/survey-with-ethical-dilemmas-aplenty-compliance-in-position- don’t need or that don’t fill their needs), the
to-lead/28690.article
extent of the guidance available to them is
often nothing more than a series of clichés:
 Consult the company code of ethics
 Do what’s right for the organization’s stakeholders.
 Do what’s legal.
 Do what you think is best (“use your best judgment”).
 Do the right thing.
However, in many cases, the scenario the employee faces are not a clear-cut case of right and
wrong, but a case of right versus right. In this scenario, the ethical dilemma involves a situation
that requires selecting between conflicting values that are important to the employee or the
organization.

MODULE 2 – Defining Business Ethics 5|PAGE

RESOLUTION
Resolution of an ethical dilemma can be achieved by first recognizing the type of conflict you
are dealing with:
Truth versus loyalty. Do you tell the truth or remain loyal to the person or organization
that is asking you not to reveal that truth?
Short term versus long term. Does
your decision have a short-term
consequence or a longer-term
consequence?
Justice versus mercy. Do you
perceive this issue as a question of
dispensing justice or mercy?
(Which one are you more
comfortable with?)
Source:https://www.insperity.com/blog/conflict-resolution/
Individual versus community. Will
your choice affect one individual or
a wider group or community?
Once you have reached a decision as to the type of conflict you are facing, three resolution
principles are available to you:
Ends-based. Which decision would provide the greatest good for the greatest number
of people?
Rules-based. What would happen if everyone made the same decision as you?
The Golden Rule. Do unto others as you would have them do unto you.
None of these principles can be said to offer a perfect solution or resolution to the problem
since you cannot possibly predict the reactions of the other people involved in the scenario.
However, the process of resolution at least offers something more meaningful than “going with
your gut feeling” or “doing what’s right.”

JUSTIFYING UNETHICAL BEHAVIOR

So how do supposedly intelligent,
and presumably experienced,
executives and employees manage
to commit acts that end up
inflicting such harm on their
companies, colleagues, customers,
and vendor partners? Saul
Gellerman identified “four
commonly held rationalizations
that can lead to misconduct”:

Source: https://esmt.berlin/knowledge/dirty-dozen-how-unethical-behaviour-creeps-your-
organisation

MODULE 2 – Defining Business Ethics 6|PAGE

 1. A belief that the activity is within reasonable ethical and legal limits—that is, that it is
not “really” illegal or immoral.
2. A belief that the activity is in the individual’s or the corporation’s best interests—that
the individual would somehow be expected to undertake the activity.
3. A belief that the activity is safe because it will never be found out or publicized—the
classic crime-and punishment issue of discovery.
4. A belief that because the activity helps the company, the company will condone it and
even protect the person who engages in it.

MODULE 2 – Defining Business Ethics 7|PAGE

 Republic of the Philippines
CAPIZ STATE UNIVERSITY
PONTEVEDRA CAMPUS
Bailan, Pontevedra, Capiz

College of Management
Module 2: Worksheet 1 in BA 314
Defining Business Ethics: Afterwork assessment
1st Semester, A.Y. 2020-2021

Exercise

Name: Course/Yr./Sec.:

Directions: These questions are for student evaluation to determine if you have understood the
lessons discussed in the module. Answer the following questions below and put your answers
on the space provided.
1. Explain the term business ethics.
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2. Explain the difference between a descriptive and prescriptive approach to business
ethics.
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3. Give four examples of how stakeholders could be negatively impacted by unethical
corporate behavior.
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4. Define the term oxymoron and provide three examples.
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 5. Is the term business ethics an oxymoron? Explain your answer.
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6. Explain the term code of ethics.
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If you have any comments, suggestions, or recommendations on how will the subject teacher
improve the discussion please write them on the space below. Thank you! ☺
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MODULE 2 – Defining Business Ethics 9|PAGE

 Republic of the Philippines
CAPIZ STATE UNIVERSITY
PONTEVEDRA CAMPUS
Bailan, Pontevedra, Capiz

College of Management
Module 2: Evaluation in BA 314
Defining Business Ethics: Short Case Study
1st Semester, A.Y. 2020-2021

Evaluation

Name: Course/Yr./Sec.:

Directions: Read the case study and analyze the situation carefully then answer the questions
related to the case study that was read. Write your answers on the space provided after the
questions.

BUSINESS TRIP: Short Case Study

You are returning from a business trip. As you wait in the departure lounge for your flight
to begin boarding, the gate personnel announce that the flight has been significantly
overbooked and that they are offering incentives for passengers to take later flights. After
several minutes, the offer is raised to a free round-trip ticket anywhere in the continental United
States plus meal vouchers for dinner while you wait for your later flight. You give the offer
serious consideration and realize that even though you’ll get home several hours later than
planned, the inconvenience will be minimal, so you give up your seat and take the free ticket
and meal vouchers.
1. Since you are traveling on company time, does the free ticket belong to you or your
company? Defend your choice.
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2. If the later flight was actually the next day (and the airline offered you an
accommodation voucher along with the meal vouchers) and you would be late getting
into work, would you make the same choice? Explain your answer.
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MODULE 2 – Defining Business Ethics 10 | P A G E

___________________________________________________________________________
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3. What if the offer only reached a $100 discount coupon on another ticket—would you
still take it? If so, would you hold the same opinion about whether the coupon belonged
to you or your company?
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4. Should your company offer a clearly stated policy on this issue, or should it trust its
employees to “do the right thing”? Explain your answer.
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MODULE 2 – Defining Business Ethics 11 | P A G E

Additional Readings and References

Additional Reading:
 https://www.southuniversity.edu/news-and-blogs/2017/07/ethical-principles-for-
business-38725
 https://berc.centerforethicsinpractice.org/importance-of-business-ethics/
 https://managementhelp.org/businessethics/index.htm

References:
 The Ethics and Compliance Officer Association, www.theecoa.org; The Ethics
Resource Center, www.ethics.org; and Society of Corporate Compliance and Ethics,
www.corporatecompliance.org.
 ERC, “Creating a Workable Company Code of Ethics,” www.ethics.org, 2003.
 Institute of Global Ethics, www.globalethics.org/bds/reading.html.
 Saul W. Gellerman, “Why ‘Good’ Managers Make Bad Ethical Choices,” Harvard
Business Review, July–August 1986.

Image Sources:
https://corporatefinanceinstitute.com/resources/knowledge/other/business-ethics/
https://s3.amazonaws.com/blog.v-comply.com/wp-content/uploads/2018/04/24054956/vc-blog-
ethics.jpg
https://ideas.darden.virginia.edu/sites/default/files/2019-08/201908_Stakeholder-Theory-
Collection%404x.png
https://diligent.com/en-gb/blog/uk-six-top-tips-effective-corporate-governance-framework/word-
cloud-corporate-governance/
https://www.yourmembership.com/blog/code-ethics-important/
https://www.complianceweek.com/surveys-and-benchmarking/survey-with-ethical-dilemmas-aplenty-
compliance-in-position-to-lead/28690.article
https://www.complianceweek.com/surveys-and-benchmarking/survey-with-ethical-
dilemmas-aplenty-compliance-in-position-to-lead/28690.article
https://www.insperity.com/blog/conflict-resolution/
https://esmt.berlin/knowledge/dirty-dozen-how-unethical-behaviour-creeps-your-organisation

MODULE 2 – Defining Business Ethics 12 | P A G E