Business Ethics
principles, morals, and values of what is right and wrong
Why studying business ethics is important
Having good individual morals is not enough to stop unethical misconduct
Ethics training helps provide collective agreement in diverse organizations
Business ethics decisions can be complicated
Helps to identify ethical issues when they arise and recogniz
Sarbanes-Oxley Act
created tougher regulations on banking and financial industries
Federal Sentencing Guidelines for Organizations
Requires governing authorities to be informed of business ethics programs
Foreign Corrupt Practices Act
Law that made it illegal for U.S businesses to bribe government officials of other countries
Dodd-Frank
aimed at making the financial industry more transparent/responsible.
Social Responsibility
An organization's obligation to maximize its positive impact on stakeholders and minimize its negative impact
Why Managers nowadays need to be ethical
sets apart from group
Principles
foundation of what is right and wrong
Business Ethics Issues
insider trading, conflict of interests, privacy
Ethical Culture
-acceptable behavior as defined by the company and industry
Creates shared values and support for ethical decisions-driven by top management
Stakeholder orientation
the degree to which a firm understands and addresses stakeholder
demands
stakeholders and types of stakeholders
People who have a stake or claim in some part of the company,
Primary- customers, employees, investors, governments, communities
Secondary- Media, interest groups, competitors,
Four Levels of Social Responsibility
Philanthropic- giving back to society
Ethical-following standards of acceptable behavior as judged by stakeholders
Legal-abiding by all laws and government regulations
Economic-maximizing stakeholder wealth and/or value
Corporate Governance
The formal system of accountability and control of ethical and socially responsible behavior
Interlocking directorate
the concept of board members being linked to more than one company.
Corporate citizenship
the extent to which businesses strategically meet their economic, legal, ethical, and philanthropic responsibilities
� Four interrelated dimensions
o Strong sustained economic performance
o Rigorous compliance
o Ethical actions beyond what is legally requ
Ethical issue
is a problem, situation, or opportunity that requires an individual or group to choose among actions
Ethical dilemma
a problem, situation, or opportunity that requires an individual or group to choose among several wrong or unethical actions
Optimization
the tradeoff between equity and efficiency
Honesty
truthfulness or trustworthiness
Integrity
uncompromising adherence to ethical values
Conflicts of interest
Exist when an individual must choose whether to advance his/her personal interests, those of the organization, or some other group
Bribery
The practice of offering something in order to gain an illicit advantage
Discrimination
Race, color, religion, sex, marital status, sexual orientation, public assistance status, disability, age, national origin, or veteran status is illegal in the U.S.
Intellectual property rights
involves the legal protection of music, books, and movies
Fraud
Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression
Accounting Fraud
Misrepresentation of company's financial reports
o Dramatic changes in accounting field
o Increased competition and pressures to perform can create opportunities for misconduct
o Accountants should abide by a strict code of ethics
Marketing Fraud
The process of dishonestly creating, distributing, promoting, and pricing products
Consumer Fraud
When consumers attempt to deceive businesses for personal gain
o Price tag switching, item switching, or lying to obtain discounts
o Collusion- involves an employee who helps a consumer commit fraud
o Duplicity- involves a consumer duping a store
o Guile-
Lying
three types
� Joking without malice
� Commission lying- creating a false perception with words that deceive the receiver
o Creating noise
� Omission lying- intentionally not informing channel members of problems relating to a product that affects awarenes
Aspects of the institutionalization of social responsibility
� voluntary - Beliefs, values, and voluntary contractual obligations of a business
� Core - Documented best practices, often encouraged by legal and regulatory forces and trade associations
� mandated practices- Externally imposed boundaries of conduct (e
The institutionalization of ethics
involves embedding values, norms, and artifacts in organizations, industries, and society.
Criminal law
prohibits specific actions and imposes punishments for breaking the law
o State or nation enforces criminal laws
Civil laws
defines the rights and duties of individuals and organizations
Procompetitive legislation
Laws passed to prevent monopolies, inequitable pricing, and other practices that reduce or restrict competition
Strategic philanthropy
The synergistic and mutually beneficial use of core competencies and resources to deal with stakeholders, benefit the company and society
Cause-related marketing
Ties an organization's product(s) to a social concern through a marketing program
Six "spheres of influence
workplace, family, religion, legal system, community, profession
Ethical issue intensity
The perceived relevance or importance of an ethical issue to the individual, work group, and/or organization
Kohlberg's moral development model
Shows that individuals can change their values through moral development. Supports management's development of employee's moral principles
1. Punishment and obedience
2. Individual instrumental purpose and exchange
3. Mutual interpersonal expectations, re
Moral philosophy
The specific principles or values people use to decide right from wrong
Egoism
defines right or acceptable behavior in terms of consequences to the individual
Relativism
individuals and groups derive definitions of ethical behavior subjectively from experience
Individualism
refers to how self-oriented members of culture are in their behavior.
Utilitarianism
seeks the greatest good for the greatest number of people
Teleology
considers acts as morally right or acceptable if they produce a desired result
Deontology
- Moral philosophies focusing on the rights of individuals and on the intentions associated with a particular behavior
Distributive justice
an evaluation of the results of a business relationship
Procedural justice
considers the processes and activities that produce desired outcomes
Interactional justice
based on relationships between organizational members, including employees and managers
Characteristics of an ethical corporate culture
...
Compliance-based cultures
use a legalistic approach to ethics
Value-based cultures
rely on mission statements that define the firm and stakeholder relations
Types of organizational culture (Apathetic, Caring, Enacting, Integrative)
� Apathetic: Minimal concern for people or performance
� Caring: High concern for people; minimal concern for performance
� Exacting: Minimal concern for people; high concern for performance
� Integrative: High concern for people and performance
Codes of conduct
formal statements that describe what an organization expects of its employees
Expert power
derives from a person's knowledge and credibility with subordinates
Coercive power
penalizing negative behavior or actions
Democratic power
...
Legitimate power
the consensus that a person has the right to exert influence over others and certain others have an obligation to accept it.
Common mistakes when designing and implementing an ethics program
� Failure to understand and appreciate goals
� Setting unrealistic/immeasurable objectives
� Unsupportive top management
� Ineffective or incomprehensible content
� Transferring an "American" program to a firm's international operations
� Designing a prog
Elements of a strong ethics program
o Written codes of conducts
o Ethics officers to oversee the program
o Careful delegation of authority
o Formal ethics training
o rigorous auditing, monitoring, enforcement, and revision of program standards
Systems to monitor and enforce ethical standards
� Effective programs employ various methods to measure effectiveness
o Observing employees
o Internal audits and investigations
o Surveys
o Reporting systems
o External audits
� Consistent enforcement and necessary disciplinary action are essential to a f
Main goals of successful ethics programs
1. Identify key risk areas employees will face
2. Provide experience in dealing with hypothetical or disguised ethical issues within the industry through mini-cases, online challenges, DVDs, or other experiential learning opportunities
3. Let employees kn
Compliance orientation
o Requires employees identify with and commit to specific conduct
o Uses legal terms, statues, and contracts to teach the rules and penalties for noncompliance
Values orientation
o strives to develop shared values; focuses on ideals, such as accountability and commitment
o is more effective at creating ethical reasoning, the foundation of an organizational ethical culture
Six core values that code of ethics often contains
1. Trustworthiness
2. Respect
3. Responsibility
4. Fairness
5. Caring
6. Citizenship
Ethics audits
a systematic evaluation of an organizations ethics program and performance to determine whether it is effective
Triple Bottom Line factors
...
Steps in the auditing processes
� Secure management and board commitment
� Establish an ethics audit committee
� Define the scope of the audit
� Review the organizational mission, goals, and values
� Collect and analyze relevant information
� Verify the results through an outside agent
Rational economics
assumes that people are predictable and base their decisions on maximizing utility based on resources
Behavioral economics
assumes that humans do not always act rationally due to genetics, emotions and learned behavior
Dumping
the practice of charging high prices for products in domestic markets, while selling the same products in foreign markets at low prices; often below cost
Cultural dimensions identified by Geert Hofstede
o Individualism/collectivism
o Power distance
o Uncertainty avoidance
o Masculinity/femininity
Cultural relativism
the concept that morality varies from ne culture to another
Socialism
advocates that wealth and power be shared across society, based on the amount of work expended in production?karl marx
The UN Global Compact
a set of 10 principles promoting human rights, sustainability, and the eradication of corruption
Self-reference criterion (SRC)
the unconscious reference to one's own cultural values, experiences, and knowledge
Social democracy
Private ownership of property, but a large government
Global business
brings together people from countries with varying cultures, values, laws, and ethical standards
Consumerism
the belief that consumers should dictate the economic structure of society
World Trade Organization
Established in 1995 at the Uruguay round of the General Agreement on Tariffs and Trade (GATT); 159 member and observer nations
Types of leaders
� Coercive- demands instantaneous obedience and focuses on achievement, initiative, and self-control.
o Can be effective during times of crisis or during a turnaround, but otherwise it creates a negative climate for organizational performance
� Democratic
Corporate culture
- A set of values, norms, and artifacts including ways of solving problems shared by organizational members
Habits of ethical leaders
1 Ethical leaders have strong personal character.
� 2. Ethical leaders have a passion to do right.
� 3. Ethical leaders are proactive.
� 4. Ethical leaders consider all stakeholders' interests.
� 5. Ethical leaders are role models for the organization's v
Two major dimensions of ethical communication
Assertiveness is acting in one's own best interests
Cooperativeness means working toward the best interests of the other person
Conflicting management styles
...
� Internal locus of control
believe they can control events; are masters of their destinies and trust in their capacity to influence their environment
� External locus of control
- go with the flow because that's all they can do
Sustainability
the potential for the long-term well-being of the natural environment, including all biological entities. As well as the mutually beneficial interactions among nature and individuals, organizations, and business strategies
The Kyoto Protocol
an international treaty to address greenhouse gas emissions