Why It Matters: Business Ethics

Why illustrate the importance of ethical behavior and corporate social responsibility in business?

Turning on the news often brings images and reports of unethical practices in business. Recently, General Motors' mishandling of safety recalls landed the CEO in front of a U.S. House subcommittee to answer questions about decisions inside the company that resulted in dozens of deaths and millions of recalls. How is it possible that highly educated corporate executives can make such unethical and sometimes criminal decisions?

Business psychologists use this (GM) case as an example of how managers can become blind to the morality of some of their decisions. Cognitive biases can distort ethical thinking and result in a situation the author Professor Ann Tenbrunsel calls “ethical fading.” It’s a condition that arises when decision-makers fail to recognize the moral and ethical components of their decisions. Tenbrunsel and her colleagues have concluded that we as a species are not nearly as ethical as we think we are. Some people will say ethics and morals are not things that can be taught. On the contrary, ethical decision-making requires deliberate thought and discipline ("Where were GM's Ethics?").
As you begin your study of ethical behavior and corporate social responsibility, consider the outcome of one of the largest corporate scandals in U.S. history shown in the video below:



Learning Outcomes

  • Differentiate moral, legal and ethical behaviors
  • Explain how ethical behavior impacts business decisions
  • Identify ethical issues faced by organizations
  • Define the process organizations use to establish a code of ethics to encourage ethical behavior
  • Identify how organizations demonstrate social responsibility
  • Explain how stakeholders shape a business's approach to corporate social responsibility


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