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.

There are three schools of thought about ethical standards:

1. According to the school of ethical universalism, the same standards of what's ethical and what's 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 country markets and cultural circumstances.

2. 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 culture or nation to another.

3. 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.

Three categories of managers stand out as concerns their prevailing beliefs in and commitments to ethical and moral principles in business affairs: the moral manager; the immoral manager, and the amoral manager. By some accounts, the population of managers is said to be distributed among all three types in a bell-shaped curve, with immoral managers and moral managers occupying the two tails of the curve, and the amoral managers, especially the intentionally amoral managers, occupying the broad middle ground.

The apparently large numbers of immoral and amoral businesspeople are one obvious reason why some companies resort to unethical strategic behavior. Three other main drivers of unethical business behavior also stand out:

1. Overzealous or obsessive pursuit of personal gain, wealth, and other selfish interests.

2. Heavy pressures on company managers to meet or beat earnings targets.

3. A company culture that puts the profitability and good business performance ahead of ethical behavior.

The stance a company takes in dealing with or managing ethical conduct at any given time can take any of four basic forms:

1. The unconcerned, or non-issue, approach.

2. The damage control approach.

3. The compliance approach.

4. The ethical culture approach.

There are two reasons why a company's strategy should be ethical: (1) because a strategy that is unethical in whole or in part is morally wrong and reflects badly on the character of the company personnel involved, and (2) because an ethical strategy is good business and in the self-interest of shareholders.

The term corporate social responsibility concerns a company's duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large. The menu of actions and behavior for demonstrating social responsibility includes:

1. Employing an ethical strategy and observing ethical principles in operating the business.

2. Making charitable contributions, donating money and the time of company personnel to community service endeavors, supporting various worthy organizational causes, and making a difference in the lives of the disadvantaged. Corporate commitments are further reinforced by encouraging employees to support charitable and community activities.

3. Protecting or enhancing the environment and, in particular, striving to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities.

4. Creating a work environment that makes the company a great place to work.

5. Employing a workforce that is diverse with respect to gender, race, national origin, and perhaps other aspects that different people bring to the workplace.

There is ample room for every company to tailor its social responsibility strategy to fit its core values and business mission, thereby making their own statement about “how we do business and how we intend to fulfill our duties to all stakeholders and society at large.”

The moral case for social responsibility boils down to a simple concept: It's the right thing to do. The business case for social responsibility holds that it is in the enlightened self-interest of companies to be good citizens and devote some of their energies and resources to the betterment of such stakeholders as employees, the communities in which it operates, and society in general.