Home Depot Implements Stakeholder Orientation

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The Importance of Business Ethics

This chapter provides an overview of the field of business ethics. It develops a definition of business ethics and discusses why it has become an important topic in business education. It also examines the evolution of business ethics in North America and explores the benefits of ethical decision making in business. Finally, the chapter provides a framework for examining business ethics in this text.

I.Business Ethics Defined
A.Business ethics is a complicated and controversial topic: 1.The field of business ethics concerns questions about whether specific business practices are acceptable. 2.Business ethics is controversial and there is no universally accepted approach for resolving ethical issues. 3.Values and judgments play a critical role in the making of ethical decisions. B.Some special aspects must be considered when applying ethics to business. 1.Businesses must earn a profit to survive.

2.Businesses must balance their desires for profits against the needs and desires of society. 3.Maintaining this balance often requires compromises or tradeoffs. C.Business ethics comprises values and standards that guide behavior in the world of business. D.Principles are specific and pervasive boundaries for behavior that are universal and absolute. E.Values are used to develop norms that are socially enforced. 1.Investors, employees, customers, interest groups, the legal system, and the community often determine whether a specific action is right or wrong and ethical or unethical. II.Why Study Business Ethics?

A.A Crisis in Business Ethics
1.Reports of unethical activities (accounting fraud, insider trading, falsifying documents, deceptive advertising, defective products, bribery, abusive behavior, harassment, and employee theft) are cited as evidence of declining ethical standards, not only in business, but also in government, science, and sports. 2.Regardless of what an individual believes about a particular action, if society judges it to be unethical or wrong, whether correctly or not, that judgment directly affects the organization’s ability to achieve its business goals. B.Reasons for Studying Business Ethics

1.Studying business ethics is valuable for several reasons. a.An individual’s personal values and moral philosophies are only one factor in the ethical decision-making process—a person’s personal values and business ethics are not the same thing. b.Being a good person and having sound personal ethics may not be sufficient to handle the ethical issues that arise in a business organization. c.Business strategy decisions involve complex and detailed discussions, and a high level of personal moral development may not prevent an individual from violating the law in an organizational context. d.The values people learn from family, religion, and school may not provide specific guidelines for complex business decisions. 2.Studying business ethics helps businesspeople begin to identify ethical issues, recognize the approaches available to resolve them, learn about the ethical decision-making process and ways to promote ethical behavior, and begin to understand how to cope with conflicts between personal values and organizational values. III.The Development of Business Ethics

A.Before 1960: Ethics in Business
1.Prior to 1960 the United States went through several agonizing phases, questioning the concept of capitalism. a.In the 1920s, the progressive movement defined a “living wage” as income sufficient for education, recreation, health, and retirement. Businesses were asked to check unwarranted price increases and any other practices that would hurt a family’s “living wage.” b.In the 1930s, the New Deal specifically blamed business for the country’s economic...
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