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Business Ethics



People's ethics are based on what they believe is right or wrong. Laws develop based on a society's code of ethics. Law and ethics differ in many ways, but the most important difference is that there are specific, codified punishments for violating laws but not for violating ethics. In business there are many ethical considerations, and one of the most important concerns pricing. Organizations that act unethically do so with high risks and short-term rewards. Most people agree that organizations have a corporate social responsibility to contribute to society in a positive way.

At A Glance

  • Law and ethics are different, largely because law imposes sanctions and ethics imposes other consequences for unethical behavior.
  • The main theories of ethics include relativism, idealism, utilitarianism, Kantianism, and Kohlberg's stages of individual moral reasoning.
  • There are six key ethical issues in pricing: price gouging, predatory pricing, price-fixing, price discrimination, failure to disclose full price, and bait-and-switch.
  • Businesses engaging in unethical behavior risk fines, layoffs, lawsuits, reparation of damages, decreased investor confidence, decreased employee morale, and economic destabilization. Examples of these consequences can be seen in subprime mortgages and the housing crisis.
  • Moral awareness, moral judgment, and moral disengagement are factors that contribute to individual ethics.
  • Corporate social responsibility, as illustrated by Carroll's pyramid, plays an important role by ensuring long-term benefits and care for society as well as the corporation.