Ethics in business are not much different from ethics in general because business actions must be judged in the context of society's standards of right and wrong. There are no specific rules that business people apply to their own behavior. Business ethics involves the application of general ethical principles to the actions and decisions of companies and the behavior of their employees. Strategic managers must recognize conditions that lead to unethical business strategies and behavior.

While it is undoubtedly true that unethical business conduct can sometimes contribute to higher corporate profits, knowingly pursuing unethical strategies and tolerating unethical behavior are risky practices from both a shareholder and reputational perspective. Shareholders suffer great harm when a company's unethical behavior is discovered and punished. Remediation of unethical business conduct is costly and it takes years to restore a company's damaged reputation.

It is important for strategic managers to understand the costs of violating corporate ethics. Social responsibility refers to a company's duty to act in an honorable manner, provide good working conditions for employees, promote workforce diversity, be a good steward of the environment, and actively work to improve the quality of life in the local communities in which it operates and in society at large.

A company's corporate social responsibility strategy is defined by the specific combination of socially beneficial activities it supports with its contributions of time, money, and other resources. Companies that take corporate social responsibility seriously can improve their reputation and operational efficiency while reducing their risk exposure and encouraging loyalty and innovation.

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