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CHAPTER 10 • BUSINESS ETHICS/SOCIAL RESPONSIBILITY/ENVIRONMENTAL SUSTAINABILITY 311

May 2009, Disney formed a partnership with Hulu.com of Disneyland Park in Hong Kong with that city’s
to stream ABC’s full-episode television program- government.
ming online as well as many of titles for Disney’s televi-
Source: Geoff Colvin, “The World’s Most Admired Companies,”
sion and movie library. In July, Disney announced
Fortune (March 16, 2009): 76–86; http://www.reuters.com/article/
it would fund a 50/50, $452 million expansion marketsNews/idAFN0939621220090310?rpc=44.

Although the three sections of this chapter (Business Ethics, Social Responsibility, and
Sustainability) are distinct, the topics are quite related. Many people, for example, con-
sider it unethical for a firm to be socially irresponsible. Social responsibility refers to
actions an organization takes beyond what is legally required to protect or enhance the
well-being of living things. Sustainability refers to the extent that an organization’s
operations and actions protect, mend, and preserve rather than harm or destroy the nat-
ural environment. Polluting the environment, for example, is unethical, irresponsible,
and in many cases illegal. Business ethics, social responsibility, and sustainability
issues therefore are interrelated and impact all areas of the comprehensive strategic-
management model, as illustrated in Figure 10.1 on page 312.
A sample company that adheres to the highest ethical standards and that has
excelled during the recent weak economy is Walt Disney. Disney in March 2009 pub-
lished an elaborate corporate social responsibility/business ethics/sustainability report
that can be found online at http://disney.go.com/crreport/home.html. In that report, the
Disney CEO says:

Our Corporate Responsibility team has developed a cohesive strategy for the
company with that in mind, incorporating existing outreach, safety, nutrition, envi-
ronmental and labor programs and working with executives across Disney, ABC and
ESPN to coordinate and strengthen our company-wide efforts. They’ve organized
our approach around five broad areas—Children & Family, Content & Products,
Environment, Community and Workplaces—with the goal of further embedding
corporate responsibility into Disney’s business DNA, making sure it continues to be
taken into consideration in decisions big and small. 1

Business Ethics

Good ethics is good business. Bad ethics can derail even the best strategic plans. This
chapter provides an overview of the importance of business ethics in strategic manage-
ment. Business ethics can be defined as principles of conduct within organizations that
guide decision making and behavior. Good business ethics is a prerequisite for good strate-
gic management; good ethics is just good business!
A rising tide of consciousness about the importance of business ethics is sweeping the
United States and the rest of the world. Strategists such as CEOs and business owners are
the individuals primarily responsible for ensuring that high ethical principles are espoused
and practiced in an organization. All strategy formulation, implementation, and evaluation
decisions have ethical ramifications.
Newspapers and business magazines daily report legal and moral breaches of ethical
conduct by both public and private organizations. Being unethical can be very expensive.
For example, some of the largest payouts for class-action legal fraud suits ever were
against Enron ($7.16 billion), WorldCom ($6.16 billion), Cendant ($3.53 billion), Tyco
($2.98 billion), AOL Time Warner ($2.5 billion), Nortel Networks ($2.47 billion), and
Royal Ahold ($1.09 billion). A company named Coast IRB LLC in Colorado recently was
forced to close after the Food and Drug Administration (FDA) discovered in a sting
operation that the firm conducted a fake medical study. Coast is one of many firms paid