Ethics involves concepts of right and wrong, fair and unfair, moral and immoral. Beliefs about what is ethical serve as a moral compass in guiding the actions and behaviors of individuals and organizations. Ethical principles in business are not materially different from ethical principles in general.

1. The three main drivers of unethical business behavior also stand out:



• Overzealous or obsessive pursuit of personal gain, wealth, and other selfish interests.
• Heavy pressures on company managers to meet or beat earnings targets.
• A company culture that puts profitability and good business performance ahead of ethical behavior.



2. Business ethics failures can result in Level 1 costs (fines, penalties, civil penalties arising from lawsuits, stock price declines), the administrative "clean-up" (or Level 2) costs, and Level 3 costs (customer defections, loss of reputation, higher turnover, harsher government regulations).



3. There are three schools of thought about ethical standards for companies with international operations:



• According to the school of ethical universalism, the same standards of what's ethical and unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of international markets and cultural circumstances. According to the school of ethical relativism, different societal cultures and customs have divergent values and standards of right and wrong—thus what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another.
• According to integrated social contracts theory, universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals in all situations have a duty to observe. Within the boundaries of this social contract, local cultures can specify other impermissible actions; however, universal ethical norms always take precedence over local ethical norms.



4. The concept of corporate social responsibility calls for companies to find balance between (1) their economic responsibilities to reward shareholders with profits, (2) legal responsibilities to comply with the laws of countries where they operate, (3) ethical responsibilities to abide by society's norms of what is moral and just, and (4) philanthropic responsibilities to contribute to the noneconomic needs of society.



5. Some companies use the terms corporate social responsibility and corporate citizenship interchangeably, but typically, corporate citizenship places expectations on companies to go beyond consistently demonstrating ethical strategies and business behavior by addressing unmet noneconomic needs of society.



6. Corporate sustainability involves strategic efforts to meet the needs of current customers, suppliers, shareholders, employees, and other stakeholders, while protecting, and perhaps enhancing, the resources needed by future generations.



7. The business case for corporate social responsibility is supported by the following benefits.



• It generates internal benefits (particularly concerning employee recruiting, workforce retention, and training costs)—Companies with good reputations for contributing time and money to the betterment of society are better able to attract and retain employees compared to companies with tarnished reputations. Other direct and indirect economic benefits include lower costs for staff recruitment and training.
• It reduces the risk of reputation-damaging incidents and can lead to increased buyer patronage—Firms may well be penalized by employees, consumers, and shareholders for actions that are not considered socially responsible. Consumer, environmental, and human rights activist groups are quick to criticize businesses whose behavior they consider to be out of line, and they are adept at getting their message into the media and onto the Internet. Pressure groups can generate widespread adverse publicity, promote boycotts, and influence like-minded or sympathetic buyers to avoid an offender's products.
• It is in the best interest of shareholders—Well-conceived social responsibility strategies help avoid or preempt legal and regulatory actions that could prove costly and otherwise burdensome. Taking the straight and narrow path has allowed the stock prices of companies rating high on social and environmental performance criteria to perform 35 to 45 percent better than the average of the 2,500 companies comprising the Dow Jones Global Index.²⁴